UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2024

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

For the transition period from _________ to __________

Commission file number: 001-39153

Healthcare Trust, Inc.

(Exact name of registrant as specified in its charter)

Maryland	38-3888962
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

222 Bellevue Ave., Newport, RI	02840
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (212) 415-6500

Securities registered pursuant to section 12(b) of the Act:
Title of each class	Trading Symbol(s)	Name of each exchange on which registered
7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share	HTIA	The Nasdaq Global Market
7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, $0.01 par value per share	HTIBP	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

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

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

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☐
		Emerging growth company	☐

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

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

As of August 7, 2024, the registrant had 113,238,180 shares of common stock outstanding.

1

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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	Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of June 30, 2024 (Unaudited) and December 31, 2023	3
Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2024 and 2023 (Unaudited)	4
Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2024 (Unaudited)	5
Consolidated Statements of Changes in Equity for the Three and Six Months Ended June 30, 2023 (Unaudited)	6
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2024 and 2023 (Unaudited)	7
Notes to Consolidated Financial Statements (Unaudited)	9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	44
Item 3. Quantitative and Qualitative Disclosures About Market Risk.	65
Item 4. Controls and Procedures.	65
PART II - OTHER INFORMATION	67
Item 1. Legal Proceedings.	67
Item 1A. Risk Factors.	67
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.	68
Item 3. Defaults Upon Senior Securities.	68
Item 4. Mine Safety Disclosures.	68
Item 5. Other Information.	68
Item 6. Exhibits.	69
Signatures.	70

2

Part I — FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	June 30, 2024		December 31, 2023
ASSETS	(Unaudited)
Real estate investments, at cost:
Land	$	208,522	$	207,987
Buildings, fixtures and improvements	2,131,409		2,120,352
Acquired intangible assets	294,683		293,295
Total real estate investments, at cost	2,634,614		2,621,634
Less: accumulated depreciation and amortization	(720,254)		(681,977)
Total real estate investments, net	1,914,360		1,939,657
Cash and cash equivalents	29,461		46,409
Restricted cash	51,512		44,907
Derivative assets, at fair value	31,568		28,370
Straight-line rent receivable, net	26,171		26,325
Operating lease right-of-use assets	7,587		7,713
Prepaid expenses and other assets (including $46 due from related parties as of June 30, 2024)	35,804		35,781
Deferred costs, net	16,916		15,997
Total assets	$	2,113,379	$	2,145,159
LIABILITIES AND EQUITY
Mortgage notes payable, net	$	816,757	$	808,995
Credit facilities, net	365,101		361,026
Market lease intangible liabilities, net	7,211		8,165
Accounts payable and accrued expenses (including $98,334 and $295 due to related parties as of June 30, 2024 and December 31, 2023, respectively)	143,620		48,356
Operating lease liabilities	8,133		8,038
Deferred rent	6,474		6,500
Distributions payable	3,496		3,496
Total liabilities	1,350,792		1,244,576
Stockholders’ Equity
7.375% Series A cumulative redeemable perpetual preferred stock, $0.01 par value, 4,740,000 authorized; 3,977,144 issued and outstanding as of June 30, 2024 and December 31, 2023	40		40
7.125% Series B cumulative redeemable perpetual preferred stock, $0.01 par value, 3,680,000 authorized; 3,630,000 issued and outstanding as of June 30, 2024 and December 31, 2023	36		36
Common stock, $0.01 par value, 300,000,000 shares authorized, 113,238,180 shares and 111,545,018 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively	1,132		1,115
Additional paid-in capital	2,533,484		2,509,303
Accumulated other comprehensive income	24,468		23,464
Distributions in excess of accumulated earnings	(1,802,415)		(1,639,804)
Total stockholders’ equity	756,745		894,154
Non-controlling interests	5,842		6,429
Total equity	762,587		900,583
Total liabilities and equity	$	2,113,379	$	2,145,159

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

3

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Revenue from tenants	$	88,817	$	86,104	$	177,116	$	173,459
Operating expenses:
Property operating and maintenance	55,005		53,569		110,150		107,452
Impairment charges	2,409		—		2,669		—
Operating fees to related parties	6,424		6,369		12,790		12,756
Termination fees to related parties	98,241		—		98,241		—
Acquisition and transaction related	357		148		499		211
General and administrative	4,668		4,331		11,436		9,352
Depreciation and amortization	21,928		20,568		42,666		40,744
Total expenses	189,032		84,985		278,451		170,515
Operating (loss) income before loss on sale of real estate investments	(100,215)		1,119		(101,335)		2,944
Loss on sale of real estate investments	(225)		(306)		(225)		(191)
Operating (loss) income	(100,440)		813		(101,560)		2,753
Other income (expense):
Interest expense	(17,752)		(18,703)		(34,135)		(34,488)
Interest and other income	457		313		529		318
Gains on non-designated derivatives	882		286		2,833		104
Total other expenses	(16,413)		(18,104)		(30,773)		(34,066)
Loss before income taxes	(116,853)		(17,291)		(132,333)		(31,313)
Income tax expense	(65)		(41)		(135)		(87)
Net loss	(116,918)		(17,332)		(132,468)		(31,400)
Net loss attributable to non-controlling interests	452		22		452		31
Allocation for preferred stock	(3,450)		(3,449)		(6,900)		(6,899)
Net loss attributable to common stockholders	(119,916)		(20,759)		(138,916)		(38,268)
Other comprehensive income (loss):
Unrealized (loss) gain on designated derivatives	(1,276)		5,466		1,004		(1,965)
Comprehensive loss attributable to common stockholders	$	(121,192)	$	(15,293)	$	(137,912)	$	(40,233)
Weighted-average shares outstanding — Basic and Diluted (1)	113,185,753		113,086,488		113,167,155		113,086,488
Net loss per share attributable to common stockholders — Basic and Diluted (1)	$	(1.06)	$	(0.18)	$	(1.23)	$	(0.34)

____________

(1)Retroactively adjusted for the effects of the stock dividends (see Note 1).

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

4

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)

	Six Months Ended June 30, 2024
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income
	Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in excess of accumulated earnings		Total Stockholders Equity		Non-controlling Interests		Total Equity
Balance, December 31, 2023	3,977,144	40		3,630,000	$	36	111,545,018	$	1,115	$	2,509,303	$	23,464	$	(1,639,804)	$	894,154	$	6,429	$	900,583
Share-based compensation, net	—	—		—	—		—	—		460		—		—		460		—		460
Distributions declared in common stock, $0.21 per share	—	—		—	—		1,693,162	17		23,678		—		(23,695)		—		—		—
Distributions declared on Series A Preferred Stock, $0.92 per share	—	—		—	—		—	—		—		—		(3,668)		(3,668)		—		(3,668)
Distributions declared on Series B Preferred Stock, $0.90 per share	—	—		—	—		—	—		—		—		(3,232)		(3,232)		—		(3,232)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—		—		—		(92)		(92)
Net loss	—	—		—	—		—	—		—		—		(132,016)		(132,016)		(452)		(132,468)
Unrealized loss on designated derivatives	—	—		—	—		—	—		—		1,004		—		1,004		—		1,004
Rebalancing of ownership percentage	—	—		—	—		—	—		43		—		—		43		(43)		—
Balance, June 30, 2024	3,977,144	$	40	3,630,000	$	36	113,238,180	$	1,132	$	2,533,484	$	24,468	$	(1,802,415)	$	756,745	$	5,842	$	762,587

	Three Months Ended June 30, 2024
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income
	Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in excess of accumulated earnings		Total Stockholders Equity		Non-controlling Interests		Total Equity
Balance, March 31, 2023	3,977,144	$	40	3,630,000	$	36	113,238,180	$	1,132	$	2,533,232	$	25,744	$	(1,682,499)	$	877,685	$	6,362	$	884,047
Issuance of Preferred Stock, net	—	—		—	—		—	—		—		—		—		—		—		—
Share-based compensation, net	—	—		—	—		—	—		230		—		—		230		—		230
Distributions declared on Series A Preferred Stock, $0.46 per share	—	—		—	—		—	—		—		—		(1,834)		(1,834)		—		(1,834)
Distributions declared on Series B Preferred Stock, $0.45 per share	—	—		—	—		—	—		—		—		(1,616)		(1,616)		—		(1,616)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—		—		—		(46)		(46)
Net loss	—	—		—	—		—	—		—		—		(116,466)		(116,466)		(452)		(116,918)
Unrealized gain on designated derivatives	—	—		—	—		—	—		—		(1,276)		—		(1,276)		—		(1,276)
Rebalancing of ownership percentage	—	—		—	—		—	—		22		—		—		22		(22)		—
Balance, June 30, 2024	3,977,144	$	40	3,630,000	$	36	113,238,180	$	1,132	$	2,533,484	$	24,468	$	(1,802,415)	$	756,745	$	5,842	$	762,587

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

5

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share data)

(Unaudited)

				Six Months Ended June 30, 2023
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive (Loss) Income
	Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in Excess of Accumulated Earnings		Total Stockholders Equity		Non-controlling Interests		Total Equity
Balance, December 31, 2022	3,977,144	$	40	3,630,000	$	36	105,080,531	$	1,051	$	2,417,059	$	36,910	$	(1,462,457)	$	992,639	$	6,551	$	999,190
Share-based compensation, net	—	—		—	—		—	—		460		—		—		460		—		460
Distributions declared in common stock, $0.42 per share	—	—		—	—		3,203,903	31		44,952		—		(44,983)		—		—		—
Distributions declared on Series A Preferred Stock, $0.92 per share	—	—		—	—		—	—		—		—		(3,666)		(3,666)		—		(3,666)
Distributions declared on Series B Preferred Stock, $0.90 per share	—	—		—	—		—	—		—		—		(3,233)		(3,233)		—		(3,233)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—		—		—		(92)		(92)
Net loss	—	—		—	—		—	—		—		—		(31,369)		(31,369)		(31)		(31,400)
Unrealized gain on designated derivatives	—	—		—	—		—	—		—		(1,965)		—		(1,965)		—		(1,965)
Contributions from minority interests	—	—		—	—		—	—		—		—		—		—		284		284
Rebalancing of ownership percentage	—	—		—	—		—	—		52		—		—		52		(52)		—
Balance, June 30, 2023	3,977,144	$	40	3,630,000	$	36	108,284,434	$	1,082	$	2,462,523	$	34,945	$	(1,545,708)	$	952,918	$	6,660	$	959,578

				Three Months Ended June 30, 2023
	Series A Preferred Stock			Series B Preferred Stock			Common Stock					Accumulated Other Comprehensive Income
	Number of Shares	Par Value		Number of Shares	Par Value		Number of Shares	Par Value		Additional Paid-in Capital				Distributions in Excess of Accumulated Earnings		Total Stockholders Equity		Non-controlling Interests		Total Equity
Balance, March 31, 2023	3,977,144	$	40	3,630,000	$	36	106,668,245	$	1,066	$	2,439,662	$	29,479	$	(1,502,299)	$	967,984	$	6,441	$	974,425
Issuance of Preferred Stock, net	—	—		—	—		—	—		2		—		—		2		—		2
Share-based compensation, net	—	—		—	—		—	—		230		—		—		230		—		230
Distributions declared in common stock, $0.21 per share	—	—		—	—		1,616,189	16		22,632		—		(22,648)		—		—		—
Distributions declared on Series A Preferred Stock, $0.46 per share	—	—		—	—		—	—		—		—		(1,834)		(1,834)		—		(1,834)
Distributions declared on Series B Preferred Stock, $0.45 per share	—	—		—	—		—	—		—		—		(1,617)		(1,617)		—		(1,617)
Distributions to non-controlling interest holders	—	—		—	—		—	—		—		—		—		—		(46)		(46)
Net loss	—	—		—	—		—	—		—		—		(17,310)		(17,310)		(22)		(17,332)
Unrealized gain on designated derivatives	—	—		—	—		—	—		—		5,466		—		5,466		—		5,466
Contributions from minority interests	—	—		—	—		—	—		—		—		—		—		284		284
Rebalancing of ownership percentage	—	—		—	—		—	—		(3)		—		—		(3)		3		—
Balance, June 30, 2023	3,977,144	$	40	3,630,000	$	36	108,284,434	$	1,082	$	2,462,523	$	34,945	$	(1,545,708)	$	952,918	$	6,660	$	959,578

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

6

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities:
Net loss	$	(132,468)	$	(31,400)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	42,666		40,744
Amortization of deferred financing costs	1,661		5,210
(Accretion) amortization of terminated swap	(1,218)		(1,125)
Amortization of mortgage premiums and discounts, net	45		46
Accretion of market lease and other intangibles, net	(687)		(471)
Bad debt expense	796		695
Equity-based compensation	460		460
Gain on sale of real estate investments, net	225		191
Cash received from non-designated derivative instruments	3,565		2,301
Gain on non-designated derivative instruments	(2,833)		(104)
Impairment charges	2,669		—
Changes in assets and liabilities:
Straight-line rent receivable	98		(605)
Prepaid expenses and other assets	(1,824)		909
Termination fees payable to related parties	98,241		—
Accounts payable, accrued expenses and other liabilities	(2,854)		(5,728)
Deferred rent	393		(446)
Net cash provided by operating activities	8,935		10,677
Cash flows from investing activities:
Property acquisitions	(5,606)		(25,443)
Capital expenditures	(11,159)		(9,140)
Investments in non-designated interest rate caps	(1,709)		(4,580)
Proceeds from sales of real estate investments	2,896		4,803
Net cash used in investing activities	(15,578)		(34,360)
Cash flows from financing activities:
Payments on credit facilities	(2,885)		(197,717)
Proceeds from credit facilities	6,960		20,000
Proceeds from mortgage notes payable	—		240,000
Payments on mortgage notes payable	(584)		(565)
Proceeds from termination of derivative instruments	—		5,413
Payments of deferred financing costs	(199)		(7,774)
Contributions from non-controlling interests	—		284
Dividends paid on Series A Preferred stock	(3,668)		(3,666)
Dividends paid on Series B Preferred stock	(3,232)		(3,233)
Distributions to non-controlling interest holders	(92)		(92)
Net cash provided by (used in) financing activities	(3,700)		52,650
Net change in cash, cash equivalents and restricted cash	(10,343)		28,967
Cash, cash equivalents and restricted cash, beginning of period	91,316		76,538
Cash, cash equivalents and restricted cash, end of period	$	80,973	$	105,505

7

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2024		2023
Cash and cash equivalents, end of period	$	29,461	$	71,705
Restricted cash, end of period	51,512		33,800
Cash, cash equivalents and restricted cash, end of period	$	80,973	$	105,505
Supplemental disclosures of cash flow information:
Cash paid for interest	$	33,700	$	28,093
Cash paid for income and franchise taxes	410		415
Non-cash investing and financing activities:
Common stock issued through stock dividends	$	23,695	$	44,983
Mortgages issued with acquisition of real estate investments	$	7,500	$	—
Proceeds from real estate sales used to repay mortgage notes payable	$	—	$	2,663
Mortgage notes payable repaid with proceeds from real estate sales	$	—	$	(2,663)
Proceeds from real estate sales used to repay amounts outstanding under the Prior Credit Facility	$	—	$	5,167
Amounts outstanding under the Prior Credit Facility repaid with proceeds from real estate sales	$	—	$	(5,167)

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

8

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 1 — Organization

Healthcare Trust, Inc. (including, as required by context, Healthcare Trust Operating Partnership, L.P. (the “OP”) and its subsidiaries, the “Company”), is an externally managed entity that for U.S. federal income tax purposes has qualified as a real estate investment trust (“REIT”). The Company acquires, owns and manages a diversified portfolio of healthcare-related real estate, focused on medical office and other healthcare-related buildings (“MOBs”) and senior housing operating properties (“SHOPs”).

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

Substantially all of the Company’s business is conducted through the OP and its wholly-owned subsidiaries including taxable REIT subsidiaries. The Company’s advisor, Healthcare Trust Advisors, LLC (the “Advisor”) manages its day-to-day business with the assistance of its property manager, Healthcare Trust Properties, LLC (the “Property Manager”). The Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global” or the “Advisor Parent”), and these related parties receive compensation and fees for providing services to the Company. The Company also reimburses these entities for certain expenses they incur in providing these services to the Company. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in the Company through ownership of interests in the OP. As of June 30, 2024, the Company owned 45 SHOPs using the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure in its SHOP segment. Under RIDEA, a REIT may lease qualified healthcare properties on an arm’s length basis to a taxable REIT subsidiary (“TRS”) if the property is operated on behalf of such subsidiary by a person who qualifies as an eligible independent contractor.

The Company operates in two reportable business segments for management and internal financial reporting purposes: MOBs and SHOPs. All of the Company’s properties across both business segments are located throughout the United States. In its MOB operating segment, the Company owns, manages, and leases single- and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. The Property Manager or third-party managers manage the Company’s MOBs. In its SHOP segment, the Company invests in seniors housing properties through the RIDEA structure. As of June 30, 2024, the Company had four eligible independent contractors operating 45 SHOPs.

The Company declared quarterly dividends entirely in shares of its common stock from October 2020 through January 2024. Dividends payable entirely in shares of common stock are treated in a fashion similar to a stock split for accounting purposes specifically related to per-share calculations for the current and prior periods. Since October 2020, the Company has issued an aggregate of approximately 20.7 million shares as stock dividends. No other additional shares of common stock have been issued since October 2020. References made to weighted-average shares and per-share amounts in the accompanying consolidated statements of operations and comprehensive income have been retroactively adjusted to reflect the cumulative increase in shares outstanding resulting from the stock dividends since October 2020 and through January 2024, and are noted as such throughout the accompanying financial statements and notes. Please see Note 8 — Stockholder’s Equity for additional information on the stock dividends.

On March 27, 2024, the Company published a new estimate of per-share net asset value (“Estimated Per-Share NAV”) as of December 31, 2023. The Estimated Per-Share NAV published on March 27, 2024 has not been adjusted since publication and will not be adjusted until the Company’s board of directors (the “Board”) determines a new Estimated Per-Share NAV. Issuing dividends in additional shares of common stock will, all things equal, cause the value of each share to decline because the number of shares outstanding increases when shares of common stock are issued in respect of a stock dividend; however, because each stockholder will receive the same number of new shares, the total value of a common stockholder’s investment, all things equal, will not change assuming no sales or other transfers. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless the Company lists its common stock.

9

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Intent to Internalize Management

On July 1, 2024, the Company announced that, in anticipation of a potential future listing of the Company’s common stock on a national securities exchange, it provided notice to the Advisor in June 2024 of its intent to transition to self-management and internalize management functions. On August 6, 2024, the Company entered into a merger agreement (the “Internalization Agreement”) with HTI Merger Sub, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub”), the Advisor and the Advisor Parent. The transactions contemplated by the Internalization Agreement are referred to as the “Internalization.”

Consummation of the transactions contemplated by the Internalization Agreement will result in the internalization of the Company’s management immediately following consummation of the merger (the “Internalization Merger”) of the Advisor with and into Merger Sub, with the Advisor being the surviving entity (under the name “Healthcare Trust Advisors, LLC”), including by terminating (i) the Company’s existing arrangement for advisory management services provided by the Advisor pursuant to the Second A&R Advisory Agreement (as defined in Note 9 — Related Party Transactions and Arrangements), by and among the Company, the OP, and the Advisor and (ii) the Company’s existing arrangement for property management services provided by the Property Manager, pursuant to the A&R Property Management Agreement (as defined in Note 9 — Related Party Transactions and Arrangements). All assets, contracts (including leases) and employees necessary for the Company to conduct its business will be contributed by Advisor Parent (and/or its affiliates) to the Advisor, including all of the equity interests in the Property Manager, prior to the effective time of the Internalization Merger.

Pursuant to the Internalization Agreement, at closing of the Internalization (the “Closing”), the outstanding membership interest of the Advisor will be converted into the right to receive from the Company (i) a $98.2 million self-management termination fee pursuant to the formula set forth in the Second A&R Advisory Agreement, which was recommended and approved by a special committee of the Company’s board of directors, consisting entirely of independent directors, in February 2017, (ii) an asset management fee of $10.9 million, representing the aggregate Base Management Fee (as defined in the Second A&R Advisory Agreement) that the Company would have been required to pay to the Advisor during the six month notice period required to terminate the Second A&R Advisory Agreement (assuming the Closing occurs on or prior to December 25, 2024) which began on June 25, 2024 when the Company delivered notice to the Advisor of its intention to effect the Internalization, and (iii) a property management fee of $3.9 million, representing the aggregate Management Fees (as defined in the A&R Property Management Agreement) that the Company would have been required to pay to the Property Manager through the current term of the Property Management Agreement, subject to certain closing adjustments to the extent the amount of such asset management and property management fees exceed or are less than the amount required to be paid by Advisor Parent to employees placed with the Company pursuant to the Internalization prior to the Closing and the amounts due under the contracts acquired by the Company in the Internalization relating to the pre-Closing period (collectively, the “Closing Payments”). Advisor Parent will also deliver cash to the Company at Closing in order for the Company to pay any unpaid employee bonuses for calendar year 2023 and any accrued bonuses for calendar year 2024 to the extent that the Company has previously reimbursed Advisor Parent for, but Advisor Parent has not paid, such bonuses. To the extent the Closing Payments exceed the Company’s Available Cash (as defined in the Internalization Agreement), the Company has agreed to pay Advisor Parent aggregate cash consideration equal to at least $60.0 million (such cash amount, the “Closing Date Cash Consideration”), and the Company shall issue to Advisor Parent a promissory note in a principal amount equal to the difference between the Closing Date Cash Consideration and the Closing Payments, as may be adjusted for any post-Closing true-ups on the Closing Payments. The Company intends to fund the Closing Date Cash Consideration through a combination of cash on hand and the net proceeds from certain anticipated strategic dispositions. The Company expects the Internalization to close no later than the fourth quarter of 2024, subject to the satisfaction or waiver of certain conditions in the Internalization Agreement.

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

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

10

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 2 — Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to this Quarterly Report on Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair statement of results for the interim periods. The results of operations for the three and six months ended June 30, 2024 and 2023 are not necessarily indicative of the results for the entire year or any subsequent interim periods.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2023, which are included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission (the “SEC”) on March 15, 2024. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company’s significant accounting policies during the six months ended June 30, 2024.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity (“VIE”) for which the Company is the primary beneficiary. The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company’s assets and liabilities are held by the OP.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management makes significant estimates regarding revenue recognition, purchase price allocations to record investments in real estate, impairments, fair value measurements and income taxes, as applicable.

Adverse Economic Impacts Since the COVID-19 Pandemic

During the first quarter of 2020, the global COVID-19 pandemic commenced. The pandemic and its aftermath has had, and could continue to have, adverse impacts on economic and market conditions. The Company’s MOB segment has been less impacted than its SHOP segment, which continues to be challenged by the post-pandemic operating environment.

Further, recent and continuing increases in inflation brought about by labor shortages, supply chain disruptions and increases in interest rates have had, and may continue to have, adverse impacts on the Company’s results of operations. Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions and increases in interest rates may also impact the ability of the Company’s tenants to pay rent and hence the Company’s results of operations and liquidity.

SHOP Segment

In the Company’s SHOP segment, occupancy trended downward from March 2020 until March 2021 and has since stabilized and has begun recovering. The Company also experienced lower inquiry volumes and reduced in-person tours in post-pandemic periods as compared to pre-pandemic periods. In addition, beginning in March 2020, operating costs began to rise materially, including for services, labor and personal protective equipment and other supplies, as the Company’s operators took appropriate actions to protect residents and caregivers. At the SHOPs, the Company generally bears these cost increases.

In addition, wage expenses (including overtime, training and bonus wages) incurred by the Company from employees of its third party operators has increased due to, among other things, inflation raising the cost of labor generally, a lack of qualified personnel that the Company’s third party operators are able to employ on a permanent basis and training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor.

11

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

Revenue Recognition

The Company’s revenues, which are derived primarily from lease contracts, include rent received from tenants in its MOB segment. As of June 30, 2024, these leases had a weighted average remaining lease term of 4.5 years. Rent from tenants in the Company’s MOB operating segment (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, straight-line basis accounting requires the Company to record a receivable for, and include in revenue from tenants on a straight-line basis, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation. For new leases after acquisition, the commencement date is considered to be the date the tenant takes control of the space. For lease modifications, the commencement date is considered to be the date the lease modification is executed. The Company defers the revenue related to lease payments received from tenants in advance of their due dates. Tenant revenue also includes operating expense reimbursements which generally increase with any increase in property operating and maintenance expenses in our MOB segment. In addition to base rent, dependent on the specific lease, tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases. Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants.” For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.

The Company’s revenues also include resident services and fee income primarily related to rent derived from lease contracts with residents in the Company’s SHOP segment, held using a structure permitted under RIDEA. Rental income from residents in the Company’s SHOP segment is recognized as earned when services are provided. Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the leases are short term in nature, primarily month-to-month.

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

The following table presents future base rent payments on a cash basis due to the Company over the next five years and thereafter as of June 30, 2024. These amounts exclude tenant reimbursements and contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes, among other items. These amounts also exclude SHOP leases which are short term in nature.

(In thousands)	Future  Base Rent Payments
2024 (remainder)	$	55,578
2025	105,175
2026	98,034
2027	79,733
2028	60,743
Thereafter	229,660
Total	$	628,923

12

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

The Company continually reviews receivables related to rent and unbilled rent and determines collectability by taking into consideration the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. Under the leasing standards, the Company is required to assess, based on credit risk only, if it is probable that the Company will collect virtually all of the lease payments at lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual basis (i.e., straight-line). However, if the Company determines it is not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and a full reserve would be recorded on previously accrued amounts in cases where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in operating revenue from tenants in accordance with new accounting rules, on the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.

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

Investments in Real Estate

Investments in real estate are recorded at cost. Improvements and replacements are capitalized when they extend the useful life or improve the productive capacity of the asset. Costs of repairs and maintenance are expensed as incurred.

At the time an asset is acquired, the Company evaluates the inputs, processes and outputs of the asset acquired to determine if the transaction is a business combination or asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statements of operations and comprehensive loss. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized and subsequently amortized over the useful life of the acquired assets. See the “Purchase Price Allocation” section in this Note for a discussion of the initial accounting for investments in real estate.

Disposal of real estate investments that represent a strategic shift in operations that will have a major effect on the Company's operations and financial results are required to be presented as discontinued operations in the consolidated statements of operations. No properties were presented as discontinued operations during the six months ended June 30, 2024 and 2023. Properties that are intended to be sold are to be designated as “held for sale” on the consolidated balance sheets at the lesser of carrying amount or fair value less estimated selling costs when they meet specific criteria to be presented as held for sale, most significantly that the sale is probable within one year. The Company evaluates probability of sale based on specific facts including whether a sales agreement is in place and the buyer has made significant non-refundable deposits. Properties are no longer depreciated when they are classified as held for sale. There were no real estate investments held for sale as of June 30, 2024 or December 31, 2023.

Purchase Price Allocation

In both a business combination and an asset acquisition, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. Tangible assets may include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. Intangible assets may include the value of in-place leases and above- and below-market leases and other identifiable assets or liabilities based on lease or property specific characteristics. In addition, any assumed mortgages receivable or payable and any assumed or issued non-controlling interests (in a business combination) are recorded at their estimated fair values. In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates. In allocating the fair value to any assumed or issued non-controlling interests, amounts are recorded at their fair value at the close of business on the acquisition date. In a business combination, the difference between the purchase price and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain. In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets. All acquisitions during the six months ended June 30, 2024 were asset acquisitions. The Company acquired four properties during the six months ended June 30, 2024.

13

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

For acquired properties with leases classified as operating leases, the Company allocates the purchase price to tangible and identifiable intangible assets acquired and liabilities assumed, based on their respective fair values. In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.

Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. The Company estimates the fair value using data from appraisals, comparable sales, discounted cash flow analysis and other methods. Fair value estimates are also made using significant assumptions such as capitalization rates, fair market lease rates, discount rates and land values per square foot.

Identifiable intangible assets include amounts allocated to acquired leases for above- and below-market lease rates and the value of in-place leases. Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.

Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases.

The aggregate value of intangible assets related to customer relationships, as applicable, is measured based on the Company’s evaluation of the specific characteristics of each tenant’s lease and the Company’s overall relationship with the tenant. Characteristics considered by the Company in determining these values include the nature and extent of its existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. The Company did not record any intangible asset amounts related to customer relationships during the six months ended June 30, 2024 or 2023.

Accounting for Leases

Lessor Accounting

In accordance with the lease accounting standard, all of the Company’s leases as lessor prior to adoption were accounted for as operating leases. The Company evaluates new leases originated after the adoption date (by the Company or by a predecessor lessor/owner) pursuant to the new guidance where a lease for some or all of a building is classified by a lessor as a sales-type lease if the significant risks and rewards of ownership reside with the tenant. This situation is met if, among other things, there is an automatic transfer of title during the lease, a bargain purchase option, the non-cancelable lease term is for more than a major part of the remaining economic useful life of the asset (e.g., equal to or greater than 75%), the present value of the minimum lease payments represents substantially all (e.g., equal to or greater than 90%) of the leased property’s fair value at lease inception, or the asset is so specialized in nature that it provides no alternative use to the lessor (and therefore would not provide any future value to the lessor) after the lease term. Further, such new leases would be evaluated to consider whether they would be failed sale-leaseback transactions and accounted for as financing transactions by the lessor. As of June 30, 2024 and December 31, 2023, the Company had no leases as a lessor that would be considered as sales-type leases or financings under sale-leaseback rules.

As a lessor of real estate, the Company has elected, by class of underlying assets, to account for lease and non-lease components (such as tenant reimbursements of property operating and maintenance expenses) as a single lease component as an operating lease because (i) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (ii) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under the accounting guidance. Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed.

14

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Lessee Accounting

The Company is also the lessee under certain land leases which will continue to be classified as operating leases under transition elections unless subsequently modified. These leases are reflected on the balance sheets as of June 30, 2024 and December 31, 2023, and the rent expense is reflected on a straight-line basis over the lease term in the consolidated statements of operations and comprehensive loss for the six months ended June 30, 2024 and 2023.

For lessees, the accounting standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction. For additional information and disclosures related to the Company’s operating leases, see Note 16 — Commitments and Contingencies.

Impairment of Long-Lived Assets

When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If an impairment exists, due to the inability to recover the carrying value of a property, the Company would recognize an impairment loss in the consolidated statements of operations and comprehensive income to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held for use. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net loss because recording an impairment loss results in an immediate negative adjustment to earnings.

Reportable Segments

The Company has determined that it has two reportable segments, with activities related to investing in MOBs and SHOPs. Management evaluates the operating performance of the Company’s investments in real estate and seniors housing properties on an individual property level. For additional information see Note 15 — Segment Reporting.

Depreciation and Amortization

Depreciation is computed using the straight-line method over the estimated useful lives of up to 40 years for buildings, 15 years for land improvements, 7 to 10 years for fixtures and improvements, and the shorter of the useful life or the remaining lease term for tenant improvements and leasehold interests.

Construction in progress is not depreciated until the project has reached substantial completion. The value of certain other intangibles such as certificates of need in certain jurisdictions are amortized over the expected period of benefit (generally the life of the related building).

The value of in-place leases, exclusive of the value of above-market and below-market in-place leases, is amortized to expense over the remaining periods of the respective leases.

The value of customer relationship intangibles, if any, is amortized to expense over the initial term and any renewal periods in the respective leases, but in no event does the amortization period for intangible assets exceed the remaining depreciable life of the building. If a tenant terminates its lease, the unamortized portion of the in-place lease value and customer relationship intangibles is charged to expense.

Assumed mortgage premiums or discounts are amortized as an increase or reduction to interest expense over the remaining terms of the respective mortgages.

15

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Income Taxes

The Company elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ended December 31, 2013. If the Company continues to qualify for taxation as a REIT, it generally will not be subject to U.S. federal corporate income tax to the extent it distributes all of its REIT taxable income (which does not equal net income as calculated in accordance with GAAP) to its stockholders. REITs are subject to a number of organizational and operational requirements, including a requirement that the Company distribute annually at least 90% of the Company’s REIT taxable income to the Company’s stockholders.

If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal, state and local income taxes at regular corporate rates beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. The Company distributed to its stockholders 100% of its REIT taxable income for each of the years ended December 31, 2023, 2022 and 2021. Accordingly, no provision for U.S. federal or state income taxes related to such REIT taxable income was recorded in the Company’s financial statements. Even if the Company continues to qualify as a REIT, it may be subject to certain state and local taxes on its income and property, and U.S. federal income and excise taxes on its undistributed income.

Certain limitations are imposed on REITs with respect to the ownership and operation of seniors housing properties. Generally, to qualify as a REIT, the Company cannot directly or indirectly operate seniors housing properties. Instead, such facilities may be either leased to a third-party operator or leased to a TRS and operated by a third party on behalf of the TRS. Accordingly, the Company has formed a TRS that is wholly-owned by the OP to lease its SHOPs and the TRS has entered into management contracts with unaffiliated third-party operators to operate the facilities on its behalf.

As of June 30, 2024, the Company owned 45 seniors housing properties which are leased and operated through its TRS. The TRS is a wholly-owned subsidiary of the OP. A TRS is subject to U.S. federal, state and local income taxes. The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies (including modifying intercompany leases with the TRS) and recent financial operations. In the event the Company determines that it would not be able to realize the deferred income tax assets in the future in excess of the net recorded amount, the Company establishes a valuation allowance which offsets the previously recognized income tax asset. Deferred income taxes result from temporary differences between the carrying amounts of the TRS’s assets and liabilities used for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss carryforwards. Significant components of the deferred tax assets and liabilities as of June 30, 2024 and December 31, 2023 consisted of deferred rent and net operating loss carryforwards. During the year ended December 31, 2023, the Company modified 26 intercompany leases with the TRS which reduced intercompany rent.

Because of the TRS’s historical operating losses and the continuing adverse economic impacts since the COVID-19 pandemic on the results of operations of the Company’s SHOP assets, the Company is not able to conclude that it is more likely than not it will realize the future benefit of its deferred tax assets; thus the Company has provided a 100% valuation allowance of $9.0 million as of June 30, 2024. If and when the Company believes it is more likely than not that it will recover its deferred tax assets, the Company will reverse the valuation allowance as an income tax benefit in its consolidated statements of comprehensive loss. As of December 31, 2023, the Company had a deferred tax asset of $8.1 million with a full valuation allowance.

Recently Issued Accounting Pronouncements

Adopted as Required Through December 31, 2023:

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). Topic 848 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in Topic 848 is optional and may be elected over the period from March 12, 2020 through June 30, 2023 as reference rate reform activities occur. During the year ended December 31, 2020, the Company elected to apply the hedge accounting expedients related to (i) the assertion that the Company’s hedged forecasted transactions remain probable and (ii) the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of the Company’s derivatives, which will be consistent with the Company’s past presentation. The Company will continue to evaluate the impact of the guidance and may apply other elections, as applicable, as additional changes in the market occur.

16

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Not yet Fully Adopted as of June 30, 2024:

In November 2023, the FASB issued ASU 2023-07, Segment Reporting — Improvements to Reportable Segment Disclosures (Topic 280). The new standard requires a public entity to disclose significant segment expense categories and amounts for each reportable segment. A significant expense is an expense that (i) is significant to the segment, (ii) regularly provided or easily computed from information regularly provided to management and (iii) included in the reported measure of profit or loss. The ASU is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption of the ASU is permitted, including in an interim period. If a public entity elects to early adopt the ASU in an interim period, the guidance should be applied as of the beginning of the fiscal year that includes the interim period. The ASU should be adopted retrospectively unless it is impracticable to do so. The Company has not adopted this ASU as of June 30, 2024, but is currently evaluating the impact on its segment disclosures and intends to adopt ASU 2023-07 during the year ending December 31, 2024.

Note 3 — Real Estate Investments, Net

Property Acquisitions

The Company invests in healthcare-related facilities, primarily MOBs and seniors housing properties which expand and diversify its portfolio and revenue base. The Company owned 207 properties as of June 30, 2024. During the six months ended June 30, 2024 and 2023, the Company acquired four and five properties, respectively. All acquisitions in the six months ended June 30, 2024 and 2023 were considered asset acquisitions for accounting purposes.

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

	Six Months Ended June 30,
(In thousands)	2024		2023
Real estate investments, at cost:
Land	$	1,266	$	2,085
Buildings, fixtures and improvements	9,302		19,440
Total tangible assets	10,568		21,525
Acquired intangibles:
In-place leases and other intangible assets	2,388		3,912
Market lease and other intangible assets	150		33
Market lease liabilities	—		(27)
Total intangible assets and liabilities	2,538		3,918
Mortgage notes payable, net	(7,500)		—
Cash paid for real estate investments, including acquisitions	$	5,606	$	25,443
Number of properties purchased	4		5

Significant Concentrations

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

The following table lists the states where the Company had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of June 30, 2024 and 2023:

	June 30,
State	2024	2023
Florida	20.5%	19.7%
Pennsylvania	10.5%	10.7%

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Intangible Assets and Liabilities

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Amortization of in-place leases and other intangible assets (1)	$	3,585	$	3,500	$	6,669	$	6,960
Accretion of above -and below-market leases, net (2)	$	(284)	$	(300)	$	(784)	$	(551)
Amortization of above -and below-market ground leases, net (3)	$	57	$	40	$	96	$	80

________

(1)Reflected within depreciation and amortization expense.

(2)Reflected within rental income.

(3)Reflected within property operating and maintenance expense.

The following table provides the projected amortization expense and adjustments to revenues for the next five years:

(In thousands)	2024 (remainder)		2025		2026		2027		2028
In-place lease assets	$	5,768	$	10,439	$	8,926	$	5,688	$	4,254
Other intangible assets	5		10		10		10		10
Total to be added to amortization expense	$	5,773	$	10,449	$	8,936	$	5,698	$	4,264
Above-market lease assets	$	(212)	$	(376)	$	(342)	$	(254)	$	(213)
Below-market lease liabilities	618		1,172		1,018		696		626
Total to be added to revenue from tenants	$	406	$	796	$	676	$	442	$	413

Dispositions

Three and Six Months Ended June 30, 2024

The Company disposed of one held-for-use SHOP during the three and six months ended June 30, 2024 for a contract sales price of $3.3 million. This property was impaired during the six months ended June 30, 2024 by $0.3 million, and had been previously impaired by a cumulative total of $2.3 million in the years ended December 31, 2023 and 2022. The Company recorded a $0.2 million loss on the sale of this SHOP, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the three and six months ended June 30, 2024.

Subsequent to June 30, 2024, the Company disposed of seven MOBs in Illinois for a contract sales price of $50.5 million. For additional information, please see Note 17 — Subsequent Events.

Three and Six Months Ended June 30, 2023

During the three and six months ended June 30, 2023, the Company disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the four disposed SHOPs were previously impaired by $6.2 million in the year ended December 31, 2022. As a result, the Company recorded an aggregate loss on sale of $0.2 million, which is presented in the Company’s consolidated statement of operations and comprehensive loss for the six months ended June 30, 2023.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Assets Held for Sale

When assets are identified by management as held for sale, the Company reflects them separately on its balance sheet and stops recognizing depreciation and amortization expense on the identified assets and estimates the sales price, net of costs to sell, of those assets. If the carrying amount of the assets classified as held for sale exceeds the estimated net sales price, the Company records an impairment charge equal to the amount by which the carrying amount of the assets exceeds the Company’s estimate of the net sales price of the assets. For held-for-sale properties, the Company predominately uses the contract sale price as fair market value.

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

Assets Held for Use

When circumstances indicate the carrying value of a property classified as held for use may not be recoverable, the Company reviews the property for impairment. For the Company, the most common triggering events are (i) concerns regarding the tenant (i.e., credit or expirations) in the Company’s single-tenant properties or significant vacancy in the Company’s multi-tenant properties and (ii) changes to the Company’s expected holding period as a result of business decisions or non-recourse debt maturities. If a triggering event is identified, the Company considers the projected cash flows due to various performance indicators, and where appropriate, the Company evaluates the impact on its ability to recover the carrying value of the properties based on the expected cash flows on an undiscounted basis over its intended holding period. The Company makes certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessments of terminal values. Where more than one possible scenario exists, the Company uses a probability weighted approach in estimating cash flows. As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future. If the undiscounted cash flows over the expected hold period are less than the carrying value, the Company reflects an impairment charge to write the asset down to its fair value.

Property Damage and Insurance Recoveries

During the six months ended June 30, 2024, one MOB property sustained fire damages estimated at $2.9 million, which the Company anticipates will be completely recoverable through its property insurance policy during the remainder of 2024. Accordingly, the Company reduced the carrying value of the damaged property by $2.9 million and recorded a receivable of that amount due from the insurance carrier as of June 30, 2024.

Impairment Charges

There were no impairment charges recorded in the three or six months ended June 30, 2023. The following table presents impairment charges by segment recorded during the three and six months ended June 30, 2024:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
MOB Segment:
Sun City(1)	$	2,409	$	—	$	2,409	$	—
Total MOB impairment charges	2,409		—		2,409		—
SHOP Segment:
Copper Springs(2)	—		—		260		—
Total SHOP impairment charges	—		—		260		—
Total impairment charges	$	2,409	$	—	$	2,669	$	—

(1)This property was impaired to reduce its carrying value to its estimated fair value as determined by the Assets Held for Use approach described above. This property has been actively marketed for sale since September 2021. This property has been previously impaired by a cumulative total of $8.6 million in the years ended December 31, 2023 and 2021.

19

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

(2)This property was impaired to its contractual sales price of $3.3 million as determined by a purchase and sale agreement executed in the six months ended June 30, 2024. This property was previously impaired by a cumulative total of $2.3 million in the years ended December 31, 2023 and 2022. The property was sold during the three months ended June 30, 2024.

Note 4 — Mortgage Notes Payable, Net

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

		Outstanding Loan Amount as of				Effective Interest Rate (1) as of
Portfolio	Encumbered Properties	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023		Interest Rate		Maturity
		(In thousands)		(In thousands)
Fox Ridge Bryant - Bryant, AR	1	$	6,560	$	6,647	3.98	%	3.98	%	Fixed		May 2047
Fox Ridge Chenal - Little Rock, AR	1	15,039		15,242		2.95	%	2.95	%	Fixed		May 2049
Fox Ridge North Little Rock - North Little Rock, AR	1	9,332		9,458		2.95	%	2.95	%	Fixed		May 2049
Capital One MOB Loan (2)	41	378,500		378,500		3.71	%	3.71	%	Fixed	(2)	Dec. 2026
Multi-Property CMBS Loan	20	116,037		116,037		4.60	%	4.60	%	Fixed		May 2028
Shiloh - Illinois	1	12,577		12,745		4.34	%	4.34	%	Fixed		Jan. 2025
BMO CMBS Loan	9	42,750		42,750		2.89	%	2.89	%	Fixed		Dec. 2031
Barclays MOB Loan	62	240,000		240,000		6.45	%	6.45	%	Fixed		June 2033
BMO CPC Mortgage	4	7,500		—		6.84	%	—	%	Fixed		Mar. 2034
Gross mortgage notes payable	140	828,295		821,379		4.60	%	4.58	%
Deferred financing costs, net of accumulated amortization (3)		(10,310)		(11,111)
Mortgage premiums and discounts, net		(1,228)		(1,273)
Mortgage notes payable, net		$	816,757	$	808,995

_____________

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

(2)Variable rate loan, based on daily SOFR (as defined below) as of June 30, 2024 and December 31, 2023, which is fixed as a result of entering into “pay-fixed” interest rate swap agreements. The Company allocated $378.5 million of its “pay-fixed” interest rate swaps to this mortgage consistently as of June 30, 2024 and December 31, 2023.

(3)Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined that the financing will not close or result in a definitive agreement.

As of June 30, 2024, the Company had pledged $1.4 billion in total real estate investments, at cost, as collateral for its $828.3 million of gross mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties. The Company makes payments of principal and interest, or interest only, depending upon the specific requirements of each mortgage note, on a monthly basis.

Some of the Company’s mortgage note agreements require compliance with certain property-level financial covenants, including debt service coverage ratios. Notably, the Barclays MOB Loan Agreement requires the OP to comply with certain covenants, including, maintaining combined cash and cash equivalents totaling at least $12.5 million at all times. As of June 30, 2024, the Company was in compliance with these financial covenants.

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

20

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 5 — Credit Facilities

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

			Outstanding Facility Amount as of				Effective Interest Rate (4) (5)
Credit Facilities	Encumbered Properties (1)		June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023		Interest Rate	Maturity
			(In thousands)		(In thousands)
Fannie Mae Master Credit Facilities:
Capital One Facility	11	(2)	$	205,174	$	206,944	7.85	%	7.86	%	Variable	Nov. 2026
KeyBank Facility	10	(3)	138,219		139,334		7.90	%	7.91	%	Variable	Nov. 2026
Total Fannie Mae Master Credit Facilities	21		$	343,393	$	346,278
MOB Warehouse Facility	7		21,708		14,748		8.33	%	8.36	%	Variable	Dec. 2026
Total Credit Facilities	28		$	365,101	$	361,026	7.90	%	7.90	%

________

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

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

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

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

(5)The Company has eight active non-designated interest rate cap agreements with an aggregate notional amount of $369.2 million which limited one-month SOFR to 3.50%. The Company did not designate these derivatives as hedges and accordingly, the changes in value and any cash received from these derivatives are presented within gain (loss) on derivative instruments on the consolidated statements of operations and comprehensive income (see Note 7 — Derivatives and Hedging Activities for additional details). Inclusive of the impact of these non-designated derivatives, the economic interest rates on the Capital One Fannie Mae Facility, KeyBank Fannie Mae Facility and MOB Warehouse Facility were 5.89%, 5.95% and 6.50%, respectively, as of June 30, 2024 and December 31, 2023.

As of June 30, 2024, the carrying value of the Company’s real estate investments, at cost was $2.6 billion, with $1.4 billion secured as collateral for mortgage notes payable and $649.6 million secured under the credit facilities. All of the real estate assets pledged to secure mortgages or to secure borrowings under our credit facilities are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, unless, as applicable, the existing indebtedness associated with the property is satisfied or the property is removed from the pledged collateral.

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

Prior Credit Facility

The Prior Credit Facility consisted of two components, a revolving credit facility (the “Revolving Credit Facility”) and a term loan (the “Term Loan”). The Revolving Credit Facility and Term Loan were interest-only and would have matured on March 13, 2024. The Prior Credit Facility was fully repaid in May 2023 with net proceeds provided by the Barclays MOB Loan (see Note 4 — Mortgage Notes Payable, Net for details) and the Prior Credit Facility was terminated.

Amounts outstanding under the Prior Credit Facility bore interest at the Company’s option of either (i) Secured Overnight Financing Rate (“SOFR”), plus an applicable margin that ranges, depending on the Company’s leverage, from 2.10% to 2.85% or (ii) the Base Rate (as defined in the Prior Credit Facility), plus an applicable margin that ranged, depending on the Company’s leverage, from 0.85% to 1.60%. For the period from January 1, 2023 through the termination of the Prior Credit Facility in May 2023, the Company elected to use the SOFR option for all of its borrowings under the Prior Credit Facility. At termination, the Company wrote off the remaining deferred financing costs associated with the Prior Credit Facility of $2.6 million which is included in interest expense in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2023.

21

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

Fannie Mae Master Credit Facilities

On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement relating to a secured credit facility with KeyBank (the “KeyBank Facility”) and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the “Capital One Facility”; the Capital One Facility and the KeyBank Facility are referred to herein individually as a “Fannie Mae Master Credit Facility” and together as the “Fannie Mae Master Credit Facilities”). Advances made under these agreements were assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.

As of June 30, 2024, $343.4 million was outstanding under the Fannie Mae Master Credit Facilities. The Company may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Until June 30, 2023, borrowings under the Fannie Mae Master Credit Facilities bore annual interest at a rate that varied on a monthly basis and was equal to the sum of the current LIBOR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively). Effective July 1, 2023, the Fannie Mae Master Credit Facilities automatically transitioned to SOFR-based borrowings with monthly interest equal to the sum of the current SOFR for one-month denominated deposits and a spread of (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively). The Fannie Mae Master Credit Facilities mature on November 1, 2026.

In the year ended December 31, 2023, the Company provided cash deposits totaling $11.8 million to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below the minimum required amounts per the debt agreements. The Company provided an additional deposit of $0.3 million during the three months ended March 31, 2024, bringing the total deposits to $12.1 million as of March 31, 2024. These deposits are recorded as restricted cash on the Company’s consolidated balance sheets and are pledged as additional collateral for the Fannie Mae Master Credit Facilities. These deposits will be refunded the earlier of the Company’s achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities.

MOB Warehouse Facility

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

As of June 30, 2024, $21.7 million was outstanding under the MOB Warehouse Facility. The Company may request future advances under the MOB Warehouse Facility by adding eligible MOBs to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Borrowings under the MOB Warehouse Facility bear interest at a monthly rate equal to the sum of the current SOFR for one-month denominated deposits and a spread of 3.0%. Interest payments are due monthly, with no principal payments due until maturity in December 2026.

Non-Designated Interest Rate Caps

As of June 30, 2024 the Company had eight non-designated interest rate cap agreements with an aggregate current effective notional amount of $369.2 million which caps SOFR at 3.50% with terms through January 2027. The Company does not apply hedge accounting to these non-designated interest cap agreements, and changes in value as well as any cash received are presented within (loss) gain on non-designated derivatives in the Company’s consolidated statements of comprehensive loss. Please see Note 7 — Derivatives and Hedging Activities for additional information regarding the Company’s derivatives.

In connection with the Fannie Mae Master Credit Facilities, the Company was required to enter into interest rate cap agreements which the Company periodically renews upon their expiration. During the six months ended June 30, 2024, the Company paid total premiums of $1.7 million to renew one cap and to execute a new cap.

22

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Future Principal Payments

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

	Future Principal Payments
(In thousands)	Mortgage Notes Payable		Credit Facilities		Total
2024 (remainder)	$	595	$	2,885	$	3,480
2025	13,270		5,769		19,039
2026	379,393		356,447		735,840
2027	922		—		922
2028	116,908		—		116,908
Thereafter	317,207		—		317,207
Total	$	828,295	$	365,101	$	1,193,396

Note 6 — Fair Value of Financial Instruments

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring assets and liabilities at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity’s own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

Financial Instruments Measured at Fair Value on a Recurring Basis

Derivative Instruments

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of June 30, 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.

23

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

(In thousands)	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
June 30, 2024
Derivative assets, at fair value (non-designated)	$	—	$	7,087	$	—	$	7,087
Derivative assets, at fair value (designated)	—		24,481		—		24,481
Total	$	—	$	31,568	$	—	$	31,568
December 31, 2023
Derivative assets, at fair value (non-designated)	$	—	$	6,111	$	—	$	6,111
Derivative assets, at fair value (designated)	—		22,259		—		22,259
Total	$	—	$	28,370	$	—	$	28,370

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the six months ended June 30, 2024.

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

Real Estate Investments - Held for Use

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

As of June 30, 2024, the Company owned 11 held for use properties (eight MOBs, two SHOPs and one land parcel) for which the Company had reconsidered their expected holding periods, of which four properties (one MOB and two SHOPs and one land parcel) are being marketed for sale. As a result, the Company evaluated the impact on its ability to recover the carrying values of the respective properties, and has previously recorded impairment charges on nine properties (eight MOBs and one SHOP) to reduce the carrying values to their estimated fair values. One held for use property was impaired during the six months ended June 30, 2024.

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

Real Estate Investments - Held for Sale

Real estate investments held for sale are carried at net realizable value on a non-recurring basis and are generally classified in Level 3 of the fair value hierarchy. The Company did not have any real estate investments classified as held for sale as of June 30, 2024 and December 31, 2023.

Financial Instruments Not Measured at Fair Value

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of short-term financial instruments such as cash and cash equivalents, restricted cash, straight-line rent receivable, net, prepaid expenses and other assets, deferred costs, net, accounts payable and accrued expenses, deferred rent and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature.

24

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

		June 30, 2024				December 31, 2023
(In thousands)	Level	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Gross mortgage notes payable and mortgage premium and discounts, net	3	$	827,067	$	785,900	$	820,106	$	787,665
Credit facilities	3	365,101		365,478		361,026		361,792
Total debt		$	1,192,168	$	1,151,378	$	1,181,132	$	1,149,457

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor’s experience with similar types of borrowing arrangements, excluding the value of derivatives.

Note 7 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, collars, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings.

The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company’s operating and financial structure as well as to hedge specific anticipated transactions. Additionally, in using interest rate derivatives, the Company aims to add stability to interest expense and to manage its exposure to interest rate movements. The Company does not intend to utilize derivatives for speculative purposes or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company, and its affiliates, may also have other financial relationships. The Company does not anticipate that any of its counterparties will fail to meet their obligations.

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

(In thousands)	Balance Sheet Location	June 30, 2024		December 31, 2023
Derivatives designated as hedging instruments:
Interest rate “pay-fixed” swaps	Derivative assets, at fair value	$	24,481	$	22,259
Derivatives not designated as hedging instruments:
Interest rate caps	Derivative assets, at fair value	$	7,087	$	6,111

Cash Flow Hedges of Interest Rate Risk

As of June 30, 2024 and December 31, 2023, the Company had one derivative with a notional value of $378.5 million designated as a cash flow hedges of interest rate risk. The Company uses its interest rate swap as part of its interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for fixed-rate payments by the Company over the life of the agreement without exchange of the underlying notional amount. During the six months ended June 30, 2024 and the year ended December 31, 2023, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The remaining interest rate “pay-fixed” swap has a base interest rate of 1.61% and matures December 2026.

The changes in the fair value of derivatives designated and that qualify as cash flow hedges are recorded in AOCI and are subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings.

25

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Amount of gain (loss) recognized in accumulated other comprehensive income on interest rate derivatives	$	2,272	$	10,131	$	9,319	$	6,661
Amount of gain reclassified from accumulated other comprehensive income into income as interest expense	$	3,548	$	4,665	$	8,315	$	8,626
Total amount of interest expense presented in the consolidated statements of operations and comprehensive loss	$	(17,752)	$	(18,703)	$	(34,135)	$	(34,488)

Prior Credit Facility Swap Terminations

During the year ended December 31, 2023, the Company terminated two LIBOR-based interest rate swap agreements with an aggregate notional amount of $50.0 million and six SOFR-based interest rate swap agreements with an aggregate notional amount of $150.0 million. The swaps were terminated in asset positions, and the Company received $1.9 million in cash from the LIBOR-based swap terminations, and $3.5 million in cash from the SOFR-based swap terminations. These amounts were included in AOCI and will be amortized into earnings as a reduction to interest expense from the termination dates of the swaps through March 2024 (the original term of the swap and the Prior Credit Facility). For the six months ended June 30, 2024 and 2023, the Company reclassified $1.2 million and $1.1 million, respectively, from AOCI as decreases to interest expense, and no amounts remained in AOCI as of June 30, 2024.

Amounts reported in AOCI related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, from July 1, 2024 through June 30, 2025, the Company estimates that $12.4 million will be reclassified from AOCI as a decrease to interest expense or other comprehensive income relating to the “pay-fixed” swaps designated as derivatives.

Non-Designated Derivatives

The Company had the following outstanding interest rate derivatives with current effective notional amounts that were not designated as hedges in qualified hedging relationships as of June 30, 2024 and December 31, 2023:

	June 30, 2024			December 31, 2023
Interest Rate Derivatives	Number of Instruments	Notional Amount (1)		Number of Instruments	Notional Amount (1)
		(In thousands)			(In thousands)
Interest rate caps (2)	8	$	369,218	7	$	364,170

______________

(1)Notional amount represents the currently active interest rate cap contracts.

(2)All of the Company’s interest rate cap agreements limited one-month SOFR to 3.50% with terms through January 2027. The actual one-month SOFR rates during the six months ended June 30, 2024, exceeded the strike price rate of 3.50% and the Company received payments under these agreements. Changes in the fair market value of these non-designated derivatives, as well as any cash received, are presented within gain (loss) on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.

26

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

These derivatives are used to limit the Company’s exposure to interest rate movements for economic purposes, however, the Company has not elected to apply hedge accounting. As of June 30, 2024 and December 31, 2023, the Company had entered into eight and seven SOFR-based interest rate caps, respectively, with notional amounts of $369.2 million and $364.2 million, respectively, which limited one-month SOFR borrowings to 3.50% and have varying maturities through January 2027.

In the six months ended June 30, 2024, the Company paid total premiums of $1.7 million to renew one cap with an aggregate notional amount of $58.1 million and to execute a new cap of $7.0 million which matures in January 2027. Five interest rate caps with an aggregate notional amount of $289.4 million matures in 2025, which represents the next interest rate cap maturity.

Beginning in the year ended December 31, 2022, LIBOR exceeded 3.50% and the Company began receiving payments under these interest rate caps. While the Company does not apply hedge accounting for these interest rate caps, they are economically hedging the Capital One Facility and KeyBank Facility. Changes in the fair value of, and any cash received from, derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net loss and are presented within gain (loss) on non-designated derivatives in the Company’s consolidated statements of operations and comprehensive loss.

The gains on non-designated derivatives were $0.9 million and $2.8 million for the three and six months ended June 30, 2024, and were $0.3 million and $0.1 million for the three and six months ended June 30, 2023. During the six months ended June 30, 2024 and 2023, the Company received aggregate payments of $3.6 million and $2.3 million, respectively, related to its effective interest rate caps as LIBOR/SOFR exceeded the effective rates of the capped debt.

Offsetting Derivatives

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives (both designated and non-designated) as of June 30, 2024 and December 31, 2023. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the consolidated balance sheets.

									Gross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts of Recognized (Liabilities)		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
June 30, 2024	$	31,568	$	—	$	—	$	31,568	$	—	$	—	$	31,568
December 31, 2023	$	28,370	$	—	$	—	$	28,370	$	—	$	—	$	28,370

Credit-risk-related Contingent Features

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

As of June 30, 2024, there were no derivatives in a net liability position. The Company is not required to post any collateral related to these agreements and was not in breach of any agreement provisions.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 8 — Stockholders’ Equity

Common Stock

As of June 30, 2024 and December 31, 2023, the Company had 113,238,180 and 111,545,018 shares of common stock outstanding, respectively, including unvested restricted shares, shares issued pursuant to the Company’s distribution reinvestment plan (“DRIP”), net of share repurchases, and shares issued as stock dividends since October 2020. Since October 2020, the Company has issued an aggregate of approximately 20.7 million shares in respect to the stock dividends. Except for shares issued as dividends, no additional shares of common stock were issued during the three months ended June 30, 2024 or the year ended December 31, 2023. References made to weighted-average shares and per-share amounts in the consolidated statements of operations and comprehensive loss have been retroactively adjusted to reflect the cumulative increase in shares outstanding due to the stock dividends and are noted as such throughout the accompanying financial statements and notes. Please see Note 1 — Organization for additional information.

On March 27, 2024, the Company published a new Estimated Per-Share NAV as of December 31, 2023, which was approved by the Board on March 27, 2024. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless the Company lists its common stock.

Share Repurchase Program

Under the Company’s share repurchase program (the “SRP”), as amended from time to time, qualifying stockholders are able to sell their shares to the Company in limited circumstances. The SRP permits investors to sell their shares back to the Company after they have held them for at least one year, subject to significant conditions and limitations. Repurchases of shares of the Company’s common stock, when requested, are at the sole discretion of the Board.

Under the SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of the Company’s common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions are considered for repurchase. Additionally, pursuant to the SRP, the repurchase price per share equals 100% of the Estimated Per-Share NAV in effect on the last day of the fiscal semester, or the six-month period ending June 30 or December 31.

The Board suspended the SRP in August 2020 and rejected all repurchase requests made during the period from January 1, 2020 until the effectiveness of the suspension of the SRP. No further repurchase requests under the SRP may be made unless and until the SRP is reactivated. No assurances can be made as to when or if the SRP will be reactivated. Prior to the suspension of the SRP, the Company repurchased a cumulative total of 4,896,620 shares at an average price of $20.60 per share, without giving affect to repurchases through tender offers.

When a stockholder requests redemption and redemption is approved by the Board, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP have the status of authorized but unissued shares.

Distribution Reinvestment Plan

Pursuant to the DRIP, stockholders may elect to reinvest distributions paid in cash by the Company into shares of common stock. No dealer manager fees or selling commissions are paid with respect to shares purchased under the DRIP. The shares purchased pursuant to the DRIP have the same rights and are treated in the same manner as all of the other shares of outstanding common stock. The Board may designate that certain cash or other distributions be excluded from reinvestment pursuant to the DRIP. The Company has the right to amend the DRIP or terminate the DRIP with ten days’ notice to participants. Shares issued under the DRIP are recorded as equity in the accompanying consolidated balance sheets in the period distributions are declared. During the six months ended June 30, 2024 and the year ended December 31, 2023, the Company did not issue any shares of common stock pursuant to the DRIP. Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as the Company pays distributions in stock instead of cash.

Stockholder Rights Plan

In May 2020, the Company announced that the Board had approved a stockholder rights plan. In December 2020, the Company issued a dividend of one common share purchase right for each share of its common stock outstanding as authorized by its Board in its discretion. During the year ended December 31, 2023, The Company extended the expiration date of the stockholders rights plan from May 18, 2023 to May 18, 2026.

28

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Preferred Stock and Preferred Units

The Company is authorized to issue up to 50,000,000 shares of preferred stock. In connection with an underwritten offering in December 2019, the Company classified and designated 1,610,000 shares of its authorized preferred stock as authorized shares of its Series A Preferred Stock. In September 2020, the Board authorized the classification of 600,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the preferred stock purchase agreement and registration rights agreement with B. Riley Principal Capital, LLC, (the “Preferred Stock Equity Line”) and in May 2021, the Board authorized the classification of 2,530,000 additional shares of the Company’s preferred stock as Series A Preferred Stock in connection with the offering in May 2021. Also, in connection with an underwritten offering in October 2021, the Company classified and designated 3,680,000 shares of its authorized preferred stock on October 4, 2021 as authorized shares of its Series B Preferred Stock.

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

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

The Company also had 100,000 Series A Preferred Units outstanding as of June 30, 2024 and December 31, 2023, which were accounted for as a component of non-controlling interests. See Note 13 — Non-controlling Interests for additional information.

Distributions and Dividends

Common Stock

From March 1, 2018 until June 30, 2020, the Company paid monthly distributions to stockholders at a rate equivalent to $0.85 per annum per share of common stock.

On August 13, 2020, the Board changed the Company’s common stock distribution policy to preserve the Company’s liquidity and maintain additional financial flexibility. Under the policy, distributions authorized by the Board on the Company’s shares of common stock were issued on a quarterly basis in arrears in shares of the Company’s common stock valued at the Company’s Estimated Per Share NAV of common stock in effect on the applicable date:

Stock Dividend Declaration Date	Stock Dividend Issue Date	Quarterly Stock Dividend Rate (per share)
October 1, 2020	October 15, 2020	0.013492
January 4, 2021	January 15, 2021	0.013492
April 2, 2021	April 15, 2021	0.014655
July 1, 2021	July 15, 2021	0.014655
October 1, 2021	October 15, 2021	0.014655
January 3, 2022	January 15, 2022	0.014655
April 1, 2022	April 18, 2022	0.014167
July 1, 2022	July 15, 2022	0.014167
October 3, 2022	October 17, 2022	0.014167
January 3, 2023	January 18, 2023	0.014167
April 3, 2023	April 17, 2023	0.015179
July 3, 2023	July 17, 2023	0.015179
October 2, 2023	October 16, 2023	0.015179
January 3, 2024	January 16, 2024	0.015179

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

29

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Note 9 — Related Party Transactions and Arrangements

As of June 30, 2024 and December 31, 2023, the Special Limited Partner owned 10,873 and 10,710 shares (assuming conversion of its partnership interests), respectively, of the Company’s outstanding common stock. The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company. As of June 30, 2024 and December 31, 2023, the Advisor held 90 partnership units in the OP designated as “Common OP Units”.

The limited partnership agreement of the OP (as amended from time to time, the “LPA”) allows for the special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to the Advisor, a limited partner of the OP.  In connection with this special allocation, the Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP.

Fees Incurred in Connection with the Operations of the Company

The Second Amended and Restated Advisory Agreement by and among the Company, the OP and the Advisor (as amended the “Second A&R Advisory Agreement”) took effect on February 17, 2017 and is automatically renewable for another ten-year term upon each ten-year anniversary unless the Second A&R Advisory Agreement is terminated (i) with notice of an election not to renew at least 365 days prior to the applicable tenth anniversary, (ii) in accordance with a change of control (as defined in the Second A&R Advisory Agreement) or a transition to self-management, (iii) by 67% of the independent directors of the Board for cause, without penalty, with 45 days’ notice or (iv) with 60 days’ prior written notice by the Advisor for (a) a failure to obtain a satisfactory agreement for any successor to the Company to assume and agree to perform obligations under the Second A&R Advisory Agreement or (b) any material breach of the Second A&R Advisory Agreement of any nature whatsoever by the Company.

On July 25, 2019, the Company entered into Amendment No. 1 to the Second A&R Advisory Agreement (the “Advisory Agreement Amendment”) among the Company, the OP, and the Advisor. The Advisory Agreement Amendment was unanimously approved by the Company’s independent directors. Additional information on the Advisory Agreement Amendment is included later in this footnote under “Professional Fees and Other Reimbursements.”

On July 1, 2024, the Company announced that, in anticipation of a potential future listing of the Company’s common stock on a national securities exchange, it provided notice in June 2024 to the Advisor of its intent to transition to self-management. The Advisory Agreement will be terminated upon the effective date of the Internalization, which is expected to be no later than the fourth quarter of 2024. Certain expenses have been incurred as a result of the Company’s decision to terminate the Advisory Agreement, which are discussed below in the section “Intent to Internalize Management — Termination Fees”.

Acquisition Expense Reimbursements

The Advisor may be reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third-party acquisition expenses. Under the Second A&R Advisory Agreement, total acquisition expenses may not exceed 4.5% of the contract purchase price of the Company’s portfolio or 4.5% of the amount advanced for all loans or other investments. This threshold has not been exceeded through June 30, 2024.

Asset Management Fees

Under the LPA and the advisory agreement that was superseded by the original amended and restated advisory agreement and until March 31, 2015, for its asset management services, the Company issued the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the Board) to the Advisor partnership units of the OP designated as “Class B Units” (“Class B Units”). The Class B Units were intended to be profit interests and vest, and no longer are subject to forfeiture, at such time as: (x) the value of the OP’s assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the “Economic Hurdle”); (y) any one of the following occurs: (1) a listing; (2) another liquidity event or (3) the termination of the advisory agreement by an affirmative vote of a majority of the Company’s independent directors without cause; and (z) the Advisor is still providing advisory services to the Company (the “Performance Condition”).

Unvested Class B Units will be forfeited immediately if: (a) the advisory agreement is terminated for any reason other than a termination without cause; or (b) the advisory agreement is terminated by an affirmative vote of a majority of the Company’s independent directors without cause before the Economic Hurdle has been met.

30

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Subject to approval by the Board, the Class B Units were issued to the Advisor quarterly in arrears pursuant to the terms of the LPA. The number of Class B Units issued in any quarter was equal to: (i) the excess of (A) the product of (y) the cost of assets multiplied by (z) 0.1875% over (B) any amounts payable as an oversight fee (as described below) for such calendar quarter; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter, which was initially equal to $22.50 (the price in the Company’s initial public offering of common stock minus the selling commissions and dealer manager fees). The value of issued Class B Units will be determined and expensed when the Company deems the achievement of the Performance Condition to be probable. As of June 30, 2024, the Company determined that achieving the Performance Condition was not yet considered probable for accounting purposes. The Advisor receives cash distributions on each issued Class B Unit equivalent to the cash distribution paid, if any, on the Company’s common stock. These cash distributions on Class B Units are included in general and administrative expenses in the consolidated statements of operations and comprehensive loss until the Performance Condition is considered probable to occur. stock dividends do not cause the OP to issue additional Class B Units, rather, the redemption ratio to common stock is adjusted. The Board has previously approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. The Board determined in February 2018 that the Economic Hurdle had been satisfied, however none of the events have occurred, including a listing of the Company’s common stock on a national securities exchange, which would have satisfied the other vesting requirement of the Class B Units. Therefore, no expense has ever been recognized in connection with the Class B Units.

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

Effective February 17, 2017, the Second A&R Advisory Agreement requires the Company to pay the Advisor a base management fee, which is payable on the first business day of each month. The fixed portion of the base management fee is equal to $1.625 million per month, while the variable portion of the base management fee is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity (including convertible equity and certain convertible debt but excluding proceeds from the DRIP) issued by the Company and its subsidiaries subsequent to February 17, 2017 per month. There are no variable management fees earned from the issuance of common stock dividends. The base management fee is payable to the Advisor or its assignees in cash, Common OP Units or shares, or a combination thereof, the form of payment to be determined at the discretion of the Advisor and the value of any Common OP Unit or share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

In addition, the Second A&R Advisory Agreement requires the Company to pay the Advisor a variable management/incentive fee quarterly in arrears equal to (1) the product of fully diluted shares of common stock outstanding multiplied by (2) (x) 15.0% of the applicable prior quarter’s Core Earnings (as defined below) per share in excess of $0.375 per share plus (y) 10.0% of the applicable prior quarter’s Core Earnings per share in excess of $0.47 per share. Core Earnings is defined as, for the applicable period, net income or loss, computed in accordance with GAAP, excluding non-cash equity compensation expense, the variable management/incentive fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains or losses or other non-cash items recorded in net income or loss for the applicable period, regardless of whether such items are included in other comprehensive income or loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairments of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent and any associated bad debt reserves, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses (in each case after discussions between the Advisor and the independent directors and approved by a majority of the independent directors). The variable management/incentive fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate. No incentive fee was incurred for the six months ended June 30, 2024 or 2023.

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

31

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Professional Fees and Other Reimbursements

The Company reimburses the Advisor’s costs of providing administrative services including personnel costs, except for costs to the extent that the employees perform services for which the Advisor receives a separate fee. This reimbursement includes reasonable overhead expenses for employees of the Advisor or its affiliates directly involved in the performance of services on behalf of the Company, including the reimbursement of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor. During the three months ended June 30, 2024 and 2023, the Company incurred $3.0 million and $2.4 million, respectively of reimbursement expenses from the Advisor for providing administrative services. During the six months ended June 30, 2024 and 2023, the Company incurred $7.0 million and $4.8 million, respectively, of reimbursement expenses from the Advisor for providing administrative services. These reimbursement expenses are included in general and administrative expense on the consolidated statements of operations and comprehensive loss.

On July 25, 2019, the Company entered into the Advisory Agreement Amendment. Under the Advisory Agreement Amendment, including prior to the Advisory Agreement Amendment, the Company has been required to reimburse the Advisor for, among other things, reasonable salaries and wages, benefits and overhead of all employees of the Advisor or its affiliates, except for costs of employees to the extent that the employees perform services for which the Advisor receives a separate fee.

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

Further, under the Advisory Agreement Amendment, the aggregate amount of expenses relating to salaries, wages, severance and benefits, including for executive officers and all other employees of the Advisor or its affiliates (the “Capped Reimbursement Amount”), is limited to the greater of: (a) a fixed component (the “Fixed Component”) and (b) a variable component (the “Variable Component”). Initially, for the year ended December 31, 2019; (a) the Fixed Component was equal to $6.8 million and the Variable Component was equal to (i) the sum of the total real estate investments, at cost as recorded on the balance sheet dated as of the last day of each fiscal quarter (the “Real Estate Cost”) in the year divided by four, which amount was then (ii) multiplied by 0.29%.

Both the Fixed Component and the Variable Component increase by an annual cost of living adjustment equal to the greater of (x) 3.0% and (y) the CPI, as defined in the Advisory Agreement Amendment for the prior year ended December 31st. For the fiscal year ended December 31, 2024, the Fixed Component is $8.2 million and the Company expects the Variable Component to be approximately $9.3 million. During the three and six months ended June 30, 2024, the Company incurred $2.0 million and $4.9 million, respectively, of expenses subject to the Capped Reimbursement Amount.

If the Company sells real estate investments aggregating an amount equal to or more than 25.0% of Real Estate Cost, in one or a series of related dispositions in which the proceeds of the disposition(s) are not reinvested in Investments (as defined in the Advisory Agreement Amendment), then within 12 months following the disposition(s), the Advisory Agreement Amendment requires the Advisor and the Company to negotiate in good faith to reset the Fixed Component; provided that if the proceeds of the disposition(s) are paid to shareholders of the Company as a special distribution or used to repay loans with no intent of subsequently re-financing and re-investing the proceeds thereof in Investments, the Advisory Agreement Amendment requires these negotiations within 90 days thereof, in each case taking into account reasonable projections of reimbursable costs in light of the Company’s reduced assets.

Bonus Awards

Prior to the COVID-19 pandemic, the Advisor had awarded bonuses to its employees, or employees of its affiliates, in March of each year as an all-cash award, prorated for the amount of time spent providing administrative services relating to the Company. Such bonus amounts were paid by the Advisor to its employees, or employees of its affiliates, throughout the year subsequent to the year in which such services were rendered.

Reimbursements for the cash portion of 2023 bonuses paid by the Advisor to its employees, or employees of its affiliates, were expensed and reimbursed on a monthly basis during the year ended December 31, 2023 in accordance with estimates provided by the Advisor. These amounts were awarded in May 2024 and are scheduled to be paid by the Advisor to its employees from September 2024 to March 2025. To the extent that any amounts remain unpaid at the time of the Closing of the Internalization, the Company will receive such amounts from the Advisor as a credit to its Closing Payments.

32

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Reimbursements for the cash portion of 2024 bonuses paid by the Advisor to its employees, or employees of its affiliates, are being expensed and reimbursed on a monthly basis during the year ended December 31, 2024 in accordance with estimates provided by the Advisor. To the extent that any amounts remain unpaid at the time of the Closing of the Internalization, the Company will receive such amounts from the Advisor as a credit to its Closing Payments.

Property Management Fees

Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee on a monthly basis, equal to 1.5% of gross revenues from the Company’s stand-alone single-tenant net leased properties managed and 2.5% of gross revenues from all other types of properties managed, plus market-based leasing commissions applicable to the geographic location of the property. The Company also reimburses the Property Manager for property level expenses incurred by the Property Manager. The Property Manager may charge a separate fee for the one-time initial rent-up or leasing-up of newly constructed properties in an amount not to exceed the fee customarily charged in arm’s length transactions by others rendering similar services in the same geographic area for similar properties, and the Property Manager is allowed to receive a higher property management fee in certain cases if approved by the Company’s Board (including a majority of the independent directors).

If the Company contracts directly with third parties for such services, the Company will pay the third party customary market fees and will pay the Property Manager an oversight fee of 1.0% of the gross revenues of the property managed by the third party. In no event will the Company pay the Property Manager or any affiliate of the Property Manager both a property management fee and an oversight fee with respect to any particular property. If the Property Manager provides services other than those specified in the Property Management Agreement, the Company will pay the Property Manager a monthly fee equal to no more than that which the Company would pay to a third party that is not an affiliate of the Company or the Property Manager to provide the services.

On February 17, 2017, the Company entered into the Amended and Restated Property Management and Leasing Agreement (the “A&R Property Management Agreement”) with the OP and the Property Manager. The A&R Property Management Agreement automatically renews for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement. The Company provided the Property Manager with notice of its intent to self-manage during the three months ended June 30, 2024 and, as a result, the current term of the A&R Property Management Agreement will expire the earlier of the effective date of the Internalization or February 17, 2025. The Property Manager may assign the A&R Property Management Agreement to any party with expertise in commercial real estate which has, together with its affiliates, over $100.0 million in assets under management.

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

33

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Summary of Related Party Expenses and Payables

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

	Three Months Ended June 30,				Six Months Ended June 30,				Payable (Prepayments) as of
	2024		2023		2024		2023
(In thousands)	Incurred		Incurred		Incurred		Incurred		June 30, 2024		December 31, 2023
Non-recurring fees and reimbursements:
Acquisition cost reimbursements	$	—	$	—	$	20	$	21	$	20	$	—
Ongoing fees and reimbursements:
Asset management fees	5,458		5,458		10,916		10,916		—		—
Professional fees and other reimbursements (1)	3,021		2,373		6,980		4,759		(46)		198
Property management fees (2)	1,022		911		2,492		1,840		73		97
Termination fees (3)	98,241		—		98,241		—		98,241		—
Total related party operation fees and reimbursements	$	107,742	$	8,742	$	118,649	$	17,536	$	98,288	$	295

___________

(1)Included in general and administrative expenses in the consolidated statements of operations. Includes $2.0 million and $1.7 million for the three months ended June 30, 2024 and 2023, respectively, and $4.9 million and $3.2 million for the six months ended June 30, 2024 and 2023, respectively, subject to the Capped Reimbursement Amount.

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

(3)The three and six months ended June 30, 2024 includes an estimate for termination fees of $98.2 million, resulting from the Company’s intent to internalize its management functions, which is payable within 30 days of the effective date of the termination of the Advisory Agreement. Please see the below section “Intent to Internalize Management — Termination Fees” for additional information.

Intent to Internalize Management

On July 1, 2024, the Company announced that, in anticipation of a potential future listing of the Company’s common stock on a national securities exchange, it provided notice in June 2024 to the Advisor of its intent to transition to self-management and internalize management functions. On August 6, 2024, the Company entered into the Internalization Agreement with Merger Sub, the Advisor and the Advisor Parent.

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

The Company expects the Internalization to close no later than the fourth quarter of 2024. There can be no assurance that the Internalization will close within the anticipated time frame, or at all, or that the Company will be able to list its shares of common stock on a national securities exchange.

Closing Payments

Pursuant to the terms of the Internalization Agreement, the Company is required to pay the Advisor Payment certain fees in connection with the Internalization. All fees will be due within 30 days after the Closing. To the extent the Closing Payments exceed the Company’s Available Cash, the Company has agreed to pay the Advisor Parent the Closing Date Cash Consideration, and the Company shall issue to Advisor Parent a promissory note in a principal amount equal to the difference between the Closing Date Cash Consideration and the Closing Payments, as may be adjusted for any post-Closing true-ups on the Closing Payments. The Company intends to fund the Closing Date Cash Consideration through a combination of cash on hand and the net proceeds from certain anticipated strategic dispositions. The Company expects to pay the Advisor such fees in connection with the Closing, but there can be no assurance that the Internalization closes on its anticipated time frame, or subject to the terms described herein, or at all.

34

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Self-Management Termination Fee

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

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

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

Asset Management Fees, Property Management Fees and Other Closing Payments

Pursuant to the terms of the Internalization Agreement, the Company is required to pay to the Advisor Parent (i) an asset management fee of $10.9 million, representing the aggregate base management fees that the Company would have been required to pay to the Advisor during the six month notice period required to terminate the Second A&R Advisory Agreement (assuming the Closing occurs on or prior to December 25, 2024), and (ii) a property management fee of $3.9 million, representing the aggregate property management fees that the Company would have been required to pay to the Property Manager through the current term of the Property Management Agreement, in each case subject to certain closing adjustments. Advisor Parent will also deliver cash to the Company at Closing in order for the Company to pay any unpaid employee bonuses for calendar year 2023 and any accrued bonuses for calendar year 2024 to the extent that the Company has previously reimbursed Advisor Parent for, but Advisor Parent has not paid, such bonuses.

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

Fees Incurred in Connection with a Listing

If the common stock of the Company is listed on a national securities exchange, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive a subordinated incentive listing distribution from the OP equal to 15.0% of the amount by which the market value of all issued and outstanding shares of common stock plus distributions exceeds the aggregate capital contributed plus an amount equal to a 6.0% cumulative, pre-tax non-compounded annual return to investors in the Company’s initial public offering of common stock. No such distribution was incurred during the three or six months ended June 30, 2024 or 2023. If the Special Limited Partner or any of its affiliates receives the subordinated incentive listing distribution, the Special Limited Partner and its affiliates will no longer be entitled to receive the subordinated participation in net sales proceeds or the subordinated incentive termination distribution described below.

Subordinated Participation in Net Sales Proceeds

Upon a liquidation or sale of all or substantially all of the Company’s assets, including through a merger or sale of stock, the Special Limited Partner will be entitled to receive a subordinated participation in the net sales proceeds of the sale of real estate assets from the OP equal to 15.0% of remaining net sale proceeds after return of capital contributions to investors in the Company’s initial public offering of common stock plus payment to investors of a 6.0% cumulative, pre-tax non-compounded annual return on the capital contributed by investors. No such participation in net sales proceeds became due and payable during the three or six months ended June 30, 2024 or 2023. Any amount of net sales proceeds paid to the Special Limited Partner or any of its affiliates prior to the Company’s listing or termination or non-renewal of the advisory agreement with the Advisor, as applicable, will reduce dollar for dollar the amount of the subordinated incentive listing distribution described above and subordinated incentive termination distribution described below.

35

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Termination Fees

Under the operating partnership agreement of the OP, upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner will be entitled to receive a promissory note as evidence of its right to receive subordinated termination distributions from the OP equal to 15.0% of the amount by which the sum of the Company’s market value plus distributions exceeds the sum of the aggregate capital contributed plus an amount equal to a 6.0% cumulative, pre-tax, non-compounded annual return to investors in the Company’s initial public offering of common stock. The Special Limited Partner is able to elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs. If the Special Limited Partner or any of its affiliates receives the subordinated incentive termination distribution, the Special Limited Partner and its affiliates will no longer be entitled to receive the subordinated participation in net sales proceeds or the subordinated incentive listing distribution described above.

Note 10 — Economic Dependency

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

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

Note 11 — Equity-Based Compensation

Restricted Share Plan

The Company has adopted an employee and director incentive restricted share plan (as amended from time to time, the “RSP”), which provides the Company with the ability to grant awards of restricted shares of common stock (“restricted shares”) to the Company’s directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0% of the Company’s outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 4.2 million shares (as such number may be further adjusted for stock splits, stock dividends, combinations and similar events).

Restricted shares vest on a straight-line basis over periods of three to five years and may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock are subject to the same restrictions as the underlying restricted shares.

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

	Number of Shares of Common Stock	Weighted Average Issue Price
Unvested, December 31, 2023	51,643	$	16.94
Stock dividend	785	14.00
Unvested, June 30, 2024	52,428	$	16.90

As of June 30, 2024, the Company had $0.2 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP. This cost will be recognized over a weighted-average period of 0.1 years. Compensation expense related to restricted shares was $0.2 million and $0.5 million for the three and six months ended June 30, 2024 and 2023.

36

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Other Share-Based Compensation

The Company may issue common stock in lieu of cash to pay fees earned by the Company’s directors at the respective director’s election. There are no restrictions on shares issued in lieu of cash compensation since these payments in lieu of cash relate to fees earned for services performed. No such shares were issued during the six months ended June 30, 2024 or 2023.

Note 12 — Accumulated Other Comprehensive Income

The following table illustrates the changes in accumulated other comprehensive income as of and for the period presented:

(In thousands)	Unrealized Gain (loss) on Designated Derivative
Balance, December 31, 2023	$	23,464
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives	9,319
Amount of gain reclassified from accumulated other comprehensive income	(8,315)
Balance, June 30, 2024	$	24,468

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

Note 13 — Non-controlling Interests

Non-controlling interests on the Company’s consolidated balance sheets is comprised of the following:

	Balance as of
(In thousands)	June 30, 2024		December 31, 2023
Series A Preferred Units held by third parties	$	2,578	$	2,578
Common OP Units held by third parties	2,536		3,156
Total Non-controlling Interests in the OP	5,114		5,734
Non-controlling Interests in property owning subsidiaries	728		695
Total Non-controlling interests	$	5,842	$	6,429

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Income attributable to Series A Preferred Units held by third parties	$	(46)	$	(46)	$	(92)	$	(92)
Loss attributable to Common OP Units held by third parties	513		85		579		147
Net loss attributable to non-controlling interests in the OP	467		39		487		55
Income attributable to non-controlling interests in property-owning subsidiaries	(15)		(17)		(35)		(24)
Net loss attributable to non-controlling interests	$	452	$	22	$	452	$	31

Non-Controlling Interests in the OP

For preferred and common shares issued by the Company, the Company typically issues mirror securities with substantially equivalent economic rights between the Company and the OP. The securities held by the Company are eliminated in consolidation.

37

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

Series A Preferred Units

The Company is the sole general partner and holds substantially all of the Series A Preferred Units (except as discussed below). All common and preferred units in the OP held by the Company are eliminated in consolidation.

In September 2021, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 100,000 Series A Preferred Units to the unaffiliated third party, with a face value of $25.00 per unit, which were recorded at issuance at a then fair value of $2.6 million, or $25.78 per unit, to the unaffiliated third party.

A holder of Series A Preferred Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s Series A Preferred Stock, which earn dividends at a rate equal to 7.375% of its face value. After holding the Series A Preferred Units for a period of one year, a holder of Series A Preferred Units has the right to redeem Series A Preferred Units for, at the option of the OP, the corresponding number of shares of the Company’s Series A Preferred Stock, or the cash equivalent. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During both the three and six months ended June 30, 2024 and 2023, Series A Preferred Unit holders were paid $46,000 and $0.1 million, respectively.

Common OP Units

The Company is the sole general partner and holds substantially all of the Common OP Units. As of June 30, 2024 and December 31, 2023, the Advisor held 90 Common OP Units, which represents a nominal percentage of the aggregate ownership in the OP.

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

A holder of Common OP Units has the right to receive cash distributions equivalent to the cash distributions, if any, on the Company’s common stock in an amount retroactively adjusted to reflect the stock dividends, other stock dividends and other similar events. After holding the Common OP Units for a period of one year, a holder of Common OP Units has the right to redeem Common OP Units for, at the option of the OP, the corresponding number of shares of the Company’s common stock, as retroactively adjusted for the stock dividends, other stock dividends and other similar events, or the cash equivalent. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP’s assets. During the six months ended June 30, 2024 and 2023, Common OP Unit non-controlling interest holders were not paid any cash distributions.

Stock dividends do not cause the OP to issue additional Common OP Units, rather, the redemption ratio to common stock is adjusted. The 405,998 Common OP Units outstanding as of June 30, 2024 would be redeemable for 496,644 shares of common stock, giving effect to adjustments for the impact of the stock dividends through January 2024.

Non-Controlling Interests in Property Owning Subsidiaries

The Company also has investment arrangements with other unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company’s property-owning subsidiaries and are entitled to receive a proportionate share of the net operating cash flow derived from the subsidiaries’ property. Upon disposition of a property subject to non-controlling interest, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company’s involvement with these arrangements and the significance of its investment in relation to the investment of the third party, the Company has determined that it controls each entity in these arrangements and therefore the entities related to these arrangements are consolidated within the Company’s financial statements. A non-controlling interest is recorded for the investor’s ownership interest in the properties.

38

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

										Distributions
		Third Party Net Investment Amount		Non-Controlling Ownership Percentage		Net Real Estate Assets Subject to Investment Arrangement				Three Months Ended June 30,
Property Name (Dollar amounts in thousands)	Investment Date	June 30, 2024		June 30, 2024		June 30, 2024		December 31, 2023		2024	2023
Plaza Del Rio Medical Office Campus Portfolio (1)	May 2015	$	728	6.9	%	$	12,763	$	12,687	—	—

_______

(1)Of the six total properties in the Plaza Del Rio Medical Office Campus Portfolio, three properties were encumbered under the Capital One MOB Loan, two properties were pledged to the MOB Warehouse Facility and one property was encumbered under the Multi-Property CMBS Loan. Please see Note 4 — Mortgage Notes Payable, Net and Note 5 — Credit Facilities for additional information.

Note 14 — Net Loss Per Share

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net loss attributable to common stockholders (in thousands)	$	(119,916)	$	(20,759)	$	(138,916)	$	(38,268)
Basic and diluted weighted-average shares outstanding (1)	113,185,753		113,086,488		113,167,155		113,086,488
Basic and diluted net loss per share (1)	$	(1.06)	$	(0.18)	$	(1.23)	$	(0.34)

___________

(1)Retroactively adjusted for the effects of the stock dividends (see Note 1 — Organization and Note 8 — Stockholders’ Equity for additional information).

Diluted net loss per share assumes the conversion of all common stock equivalents into an equivalent number of shares of common stock, unless the effect is antidilutive. The Company considers unvested restricted shares, Common OP Units and Class B Units to be common share equivalents. Series A Preferred Units are non-participating.

39

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

The Company had the following common stock equivalents on a weighted-average basis that were excluded from the calculation of diluted net loss per share attributable to stockholders as their effect would have been antidilutive. The amounts in the table below have been retroactively adjusted to reflect the stock dividends (see Note 1 — Organization for additional details):

	Three Months Ended June 30,		Six Months Ended June 30,
	2024	2023	2024	2023
Unvested restricted shares (1)	52,428	103,704	52,419	103,704
Common OP Units (2)	496,644	496,644	496,644	496,644
Class B Units (3)	439,459	439,459	439,459	439,459
Total weighted average antidilutive common stock equivalents	988,531	1,039,807	988,522	1,039,807

________

(1)Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were 52,428 and 100,221 unvested restricted shares outstanding, respectively, as of June 30, 2024 and 2023.

(2)Weighted average number of antidilutive Common OP Units presented as shares outstanding for the periods presented, at the current redemption rate reflecting adjustments for the effect of the stock dividends (see Note 1 — Organization for additional details). There were 405,998 Common OP Units outstanding as of June 30, 2024 and 2023. The securities held by the Company are eliminated in consolidation.

(3)Weighted average number of antidilutive Class B Units presented as shares outstanding for the periods presented, at the current redemption rate reflecting adjustments for the effect of the stock dividends (see Note 1 — Organization for additional details). There were 359,250 Class B Units outstanding as of June 30, 2024 and 2023. These Class B Units were unvested as of June 30, 2024 and 2023 (see Note 9 — Related Party Transactions for additional information).

Note 15 — Segment Reporting

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

The Company evaluates performance and makes resource allocations based on its two business segments. The medical office building segment primarily consists of MOBs leased to healthcare-related tenants under long-term leases, which may require such tenants to pay a pro rata share of property-related expenses as well as seniors housing properties, hospitals, inpatient rehabilitation facilities and skilled nursing facilities under long-term leases, under which tenants are generally responsible to directly pay property-related expenses. The SHOP segment consists of direct investments in seniors housing properties, primarily providing assisted living, independent living and memory care services, which are operated through engaging independent third-party operators.

Segment Income

The Company evaluates the performance of the combined properties in each segment based on total revenues from tenants, less property operating costs. As such, this excludes all other items of expense and income included in the financial statements in calculating net loss. The Company uses segment income to assess and compare property level performance and to make decisions concerning the operation of the properties. The Company believes that segment income is useful as a performance measure because, when compared across periods, segment income reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net loss.

Segment income excludes certain components from net loss in order to provide results that are more closely related to a property’s results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. Segment income presented by the Company may not be comparable to segment income reported by other REITs that define segment income differently.

40

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
MOBs:
Revenue from tenants	$	34,671	$	33,920	$	69,270	$	67,530
Less: Property operating and maintenance	9,727		9,438		19,427		18,393
Segment income	$	24,944	$	24,482	$	49,843	$	49,137
SHOPs:
Revenue from tenants	$	54,146	$	52,184	$	107,846	$	105,929
Less: Property operating and maintenance	45,278		44,131		90,723		89,059
Segment income	$	8,868	$	8,053	$	17,123	$	16,870

Reconciliation to Consolidated Financial Information

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

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2024		2023		2024		2023
Revenue from tenants:
MOBs	$	34,671	$	33,920	$	69,270	$	67,530
SHOPs	54,146		52,184		107,846		105,929
Total consolidated revenue from tenants	$	88,817	$	86,104	$	177,116	$	173,459
Net loss attributable to common stockholders:
Segment income:
MOBs	$	24,944	24,482		$	49,843	49,137
SHOPs	8,868		8,053		17,123		16,870
Total segment income	33,812		32,535		66,966		66,007
Impairment charges	(2,409)		—		(2,669)		—
Operating fees to related parties	(6,424)		(6,369)		(12,790)		(12,756)
Termination fees to related parties	(98,241)		—		(98,241)		—
Acquisition and transaction related	(357)		(148)		(499)		(211)
General and administrative	(4,668)		(4,331)		(11,436)		(9,352)
Depreciation and amortization	(21,928)		(20,568)		(42,666)		(40,744)
Gain on sale of real estate investment	(225)		(306)		(225)		(191)
Interest expense	(17,752)		(18,703)		(34,135)		(34,488)
Interest and other income	457		313		529		318
Gain (loss) on non-designated derivatives	882		286		2,833		104
Income tax (expense) benefit	(65)		(41)		(135)		(87)
Net loss attributable to non-controlling interests	452		22		452		31
Preferred stock dividends	(3,450)		(3,449)		(6,900)		(6,899)
Net loss attributable to common stockholders	$	(119,916)	$	(20,759)	$	(138,916)	$	(38,268)

41

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

(In thousands)	June 30, 2024		December 31, 2023
ASSETS
Investments in real estate, net:
MOB Segment	$	1,102,146	$	1,114,963
SHOP Segment	812,214		824,694
Total investments in real estate, net	1,914,360		1,939,657
Cash and cash equivalents	29,461		46,409
Restricted cash	51,512		44,907
Derivative assets, at fair value	31,568		28,370
Straight-line rent receivable, net	26,171		26,325
Operating lease right-of-use assets	7,587		7,713
Prepaid expenses and other assets	35,804		35,781
Deferred costs, net	16,916		15,997
Total assets	$	2,113,379	$	2,145,159

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

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
MOB Segment	$	2,268	$	1,742	$	3,362	$	2,964
SHOP Segment	3,731		3,764		7,797		6,176
Total capital expenditures	$	5,999	$	5,506	$	11,159	$	9,140

Note 16 — Commitments and Contingencies

As of June 30, 2024, the Company had seven operating and six direct financing lease agreements. The seven operating leases have durations, including assumed renewals, ranging from 18.4 years to 83.2 years, excluding an adjacent parking lot lease with a term of 2.3 years. The Company did not enter into any additional ground leases during the six months ended June 30, 2024.

As of June 30, 2024, the Company had ROU assets and liabilities of $7.6 million and $8.1 million, respectively, which are included in operating lease right-of-use assets and operating lease liabilities, respectively on the Company’s consolidated balance sheets. In determining operating ROU assets and lease liabilities for the Company’s existing operating leases upon the adoption of the lease guidance issued in 2019, as well as for new operating leases in the current period, the Company was required to estimate an appropriate incremental borrowing rate on a fully-collateralized basis for the terms of the leases. Because the terms of the Company’s ground leases are significantly longer than the terms of borrowings available to the Company on a fully-collateralized basis, the Company’s estimate of this rate required significant judgment.

The Company’s ground operating leases have a weighted-average remaining lease term, including assumed renewals, of 33.2 years and a weighted-average discount rate of 7.38% as of June 30, 2024. For each of the three months ended June 30, 2024 and 2023, the Company paid cash of $0.2 million for amounts included in the measurement of lease liabilities and recorded expense of $0.2 million on a straight-line basis in accordance with the current accounting guidance. For each of the six months ended June 30, 2024 and 2023, the Company paid cash of $0.4 million and recorded expense of $0.4 million. The ground operating lease expense is recorded in property operating expenses in the Company’s consolidated statements of operations and comprehensive loss.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

(Unaudited)

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

	Future Base Rent Payments
(In thousands)	Operating Leases		Direct Financing Leases (1)
2024 (remainder)	$	324	$	45
2025	653		93
2026	649		95
2027	617		97
2028	619		100
Thereafter	21,324		7,115
Total minimum lease payments	24,186		7,545
Less: amounts representing interest	(16,053)		(2,714)
Total present value of minimum lease payments	$	8,133	$	4,831

_______

(1)The direct finance lease liability is included in accounts payable and accrued expenses on the balance sheet as of June 30, 2024. The direct financing lease asset is included as part of building and improvements as the land component was not required to be bifurcated under ASU 840.

Litigation and Regulatory Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company or its properties.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of June 30, 2024, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

Note 17 — Subsequent Events

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

Property Dispositions

Subsequent to June 30, 2024, the Company disposed of seven MOBs in Illinois for a contract sales price of $50.5 million. These proceeds are available for general and corporate uses, including for the potential partial payment of the Closing Payments when they become payable.

Internalization Agreement

On August 6, 2024, the Company entered into the Internalization Agreement with the Merger Sub, the Advisor and the Advisor Parent. A summary of the terms of the agreement can be found in Note 1 — Organization and Note 9 — Related Party Transactions and Agreements.

43

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

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Healthcare Trust, Inc. and the notes thereto. As used herein, the terms the “Company,” “we,” “our” and “us” refer to Healthcare Trust, Inc., a Maryland corporation, including, as required by context, Healthcare Trust Operating Partnership, LP (our “OP”), a Delaware limited partnership, and its subsidiaries. The Company is externally managed by Healthcare Trust Advisors, LLC (our “Advisor”), a Delaware limited liability company. Capitalized terms used herein, but not otherwise defined, have the meaning ascribed to those terms in “Part I — Financial Information” included in the notes to the consolidated financial statements and contained herein.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts may be forward-looking statements. Such forward-looking statements include the intent, belief or current expectations of Healthcare Trust, Inc. (“we,” “our” or “us”) and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as “may,” “will,” “seeks,” “anticipates,” “believes,” “estimates,” “expects,” “plans,”, “projects,” “potential,” “predicts,” “intends,” “would,” “could,” “should” or similar expressions, although not all forward-looking statements contain these identifying words. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

These forward-looking statements are subject to risks, uncertainties, and other factors, many of which are outside of our control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the risks associated with the geopolitical instability due to the ongoing military conflicts between Russia and Ukraine and Israel and Hamas, including related sanctions and other penalties imposed by the U.S. and European Union, and the related impact on us, our tenants, operators and the global economy and financial markets; that any potential future acquisitions by the Company is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all. Some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements are set forth in the Risk Factors section of our Annual Report on Form 10-K for the year ended December 31, 2023 (as amended) as well as Part II — Other Information, Item IA — Risk Factors below.

Overview

We are an externally managed entity that for U.S. federal income tax purposes has qualified as a real estate investment trust (“REIT”). We acquire, own and manage a diversified portfolio of healthcare-related real estate focused on medical office and other healthcare-related buildings and senior housing operating properties. As of June 30, 2024, we owned 207 properties located in 32 states and comprised of 9.0 million rentable square feet.

Substantially all of our business is conducted through the OP, a Delaware limited partnership, and its wholly-owned subsidiaries. Our Advisor manages our day-to-day business with the assistance of Healthcare Trust Properties, LLC (our “Property Manager”). Our Advisor and Property Manager are under common control with AR Global Investments, LLC (“AR Global”) and these related parties receive compensation and fees for providing services to us. We also reimburse these entities for certain expenses they incur in providing these services to us. Healthcare Trust Special Limited Partnership, LLC (the “Special Limited Partner”), which is also under common control with AR Global, also has an interest in us through ownership of interests in our OP.

We operate in two reportable business segments for management and financial reporting purposes: medical office and other health-care related buildings (“MOBs”) and senior housing operating properties (“SHOPs”). All of our properties across both business segments are located throughout the United States. In our MOB operating segment, we own, manage, and lease single- and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Our Property Manager or third-party managers manage our MOBs. In our SHOP segment, we invest in seniors housing properties through the REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structure. As of June 30, 2024, we had four eligible independent contractors operating 45 SHOPs.

We declared and issued quarterly dividends entirely in shares of our common stock from October 2020 through January 2024. We do not intend to declare any further stock dividends in the future.

44

On March 27, 2024, we published a new Estimated Per-Share NAV equal to $13.00 as of December 31, 2023. Our previous Estimated Per-Share NAV was equal to $14.00 as of December 31, 2022. The Estimated Per-Share NAV has not been adjusted since publication and will not be adjusted until the Board determines a new Estimated Per-Share NAV. Dividends paid in the form of additional shares of common stock will, all things equal, cause the value of each share of common stock to decline because the number of shares outstanding will increase when dividends paid in stock are issued; however, because each stockholder will receive the same number of new shares, the total value of our common stockholder’s investment, all things equal, will not change assuming no sales or other transfers. Since October 2020, we issued an aggregate of approximately 20.7 million shares as stock dividends. No other additional shares of common stock have been issued since October 2020. We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually unless and until we list our common stock.

Intent to Internalize Management

On July 1, 2024, we announced that, in anticipation of a potential future listing of our common stock on a national securities exchange, we provided notice to the Advisor in June 2024 of our intent to transition to self-management and internalize management functions (the “Internalization”). On August 6, 2024, we entered into the Internalization Agreement with the Merger Sub, the Advisor and the Advisor Parent (each of such terms as defined in Note 1 — Organization).

We expect the Internalization to take effect no later than the fourth quarter of 2024. There can be no assurance that the Internalization will close within the anticipated time frame, or at all, or that we will be able to list our shares of common stock on a national securities exchange. For additional information about the Internalization, including fees we expect to incur in connection therewith, please see Note 9 — Related Party Transactions and Arrangements.

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

During the first quarter of 2020, the global COVID-19 pandemic commenced. The pandemic and its aftermath has had, and could continue to have, adverse impacts on economic and market conditions. Our MOB segment has been less impacted than our SHOP segment, which continues to be challenged by the post-pandemic operating environment. Specifically, our SHOP segment has suffered challenges with its occupancy levels, cost incurred from labor and conceded rental revenue.

Further, the significant increase in the rate of inflation in recent years brought about by labor shortages, supply chain disruptions and increases in interest rates have had, and may continue to have, adverse impacts on our results of operations. Moreover, these increases in the rate of inflation, the ongoing wars in Ukraine, Israel and related sanctions, supply chain disruptions and increases in interest rates may also impact our tenants’ ability to pay rent and hence our results of operations and liquidity.

SHOP Segment

Occupancy

Beginning in March 2020, the COVID-19 pandemic and measures to prevent its spread began to affect us in a number of ways. Occupancy in our SHOP portfolio trended downward from 85.1% as of December 31, 2019 to a low of 72.0% as of March 31, 2021, and has since recovered to 76.4% as of June 30, 2024.

45

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

As of	Number of Properties(1)	Rentable Units	Percentage Leased
December 31, 2019	59	4,926	85.1%
March 31, 2020	63	5,198	84.4%
June 30, 2020	63	5,198	79.2%
September 30, 2020	67	5,350	77.4%
December 31, 2020	59	4,878	74.5%
March 31, 2021	55	4,682	72.0%
June 30, 2021	54	4,530	73.2%
September 30, 2021	54	4,494	74.3%
December 31, 2021	54	4,494	74.1%
March 31, 2022	50	4,378	75.9%
June 30, 2022	50	4,374	76.3%
September 30, 2022	50	4,374	75.8%
December 31, 2022	50	4,374	75.1%
March 31, 2023	50	4,374	73.3%
June 30, 2023 (2)	46	4,164	73.3%
September 30, 2023 (2)	46	4,164	74.1%
December 31, 2023 (2)	46	4,164	74.1%
March 31, 2024 (2)	46	4,164	75.3%
June 30, 2024 (2)	45	4,069	76.4%

________

(1)Exclusive of two land parcels.

(2)Includes one vacant SHOP with 39 rentable units which was closed in May 2023.

Contract Labor and Wage Expenses

Beginning with the second quarter of 2021, our occupancy and operating costs in our SHOP portfolio were relatively stable. During the year ended December 31, 2022, our third party operators needed to increase their use of temporary contract labor and agencies, and the amount paid for overtime, training and bonus wages, in response to a shortage of workers, the cost of labor generally, lack of qualified personnel that our third party operators are able to employ on a permanent basis and training hours and other onboarding costs for permanent staff which replaced previously utilized contract and agency labor. These contract and agency costs have declined since then. In particular, costs incurred from contract labor and agencies for care providers decreased in our SHOP segment by $0.3 million, from $0.6 million in the three months ended June 30, 2023, to $0.3 million as compared to the three months ended June 30, 2024.

However, these costs were offset by increased wage costs for direct employees of our third party operators of $1.0 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. Likewise, occupancy levels have not recovered to their pre-pandemic rates (as noted in the table above), thus the results of operations in our SHOP segment have been significantly adversely affected by the increase in labor costs even though resident fees have increased.

Significant Accounting Estimates and Critical Accounting Policies

For a discussion about our significant accounting estimates and critical accounting policies, see the “Significant Accounting Estimates and Critical Accounting Policies” section of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 15, 2024, as amended on March 22, 2024. Except for those required by new accounting pronouncements discussed below, there have been no material changes from these significant accounting estimates and critical accounting policies.

46

Recently Issued Accounting Pronouncements

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

Properties

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

Portfolio	Number of Properties		Rentable Square Feet	Percentage Leased(1)		Weighted Average Remaining Lease Term in Years (2)	Gross Asset Value (3)
							(In thousands)
MOB Segment	160		5,193,996	90.3%		4.5	$	1,478,570
SHOP Segment	47	(4)	3,801,806	76.4%	(5)	N/A	1,135,487
Total Portfolio	207		8,995,802				$	2,614,057

________

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

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

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

(4)Includes two parcels of land

(5)Weighted by unit count as of June 30, 2024. As of June 30, 2024, we had 4,069 rentable units in our SHOP segment. The SHOP segment includes one closed SHOP with 30 rentable units, and excludes land parcels.

N/A    Not applicable.

Same Store Properties

Information based on Same Store Properties, Acquired Properties and Disposed Properties (as each are defined below) allows us to evaluate the performance of our portfolio based on a consistent population of properties owned for the entire period of time covered. As of June 30, 2024, we owned 207 properties. There were 196 properties owned for the entire year ended December 31, 2023 and the six months ended June 30, 2024 (our “Same Store Properties”), including two vacant land parcels. Since January 1, 2023, we acquired 11 properties (our “Acquired Properties”) and disposed of six properties (our “Disposed Properties”).

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

	MOB	SHOP	Total
Number of properties, January 1, 2023	150	52	202
Acquisition activity during the year ended December 31, 2023	7	—	7
Disposition activity during the year ended December 31, 2023	(1)	(4)	(5)
Number of properties, December 31, 2023	156	48	204
Acquisition activity during the six months ended June 30, 2024	4	—	4
Disposition activity during the six months ended June 30, 2024	—	(1)	(1)
Number of properties, June 30, 2024	160	47	207
Number of Same Store Properties	149	47	196
Number of Acquired Properties	11	—	11
Number of Disposed Properties	1	5	6

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Results of Operations

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

Net loss attributable to common stockholders was $119.9 million and $20.8 million, respectively, for the three months ended June 30, 2024, and 2023. The following table shows our results of operations for the three months ended June 30, 2024 and 2023 and the period to period change by line item of the consolidated statements of operations:

	Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2024		2023		$
Revenue from tenants	$	88,817	$	86,104	$	2,713
Operating expenses:
Property operating and maintenance	55,005		53,569		1,436
Impairment charges	2,409		—		2,409
Operating fees to related parties	6,424		6,369		55
Termination fees to related parties	98,241		—		98,241
Acquisition and transaction related	357		148		209
General and administrative	4,668		4,331		337
Depreciation and amortization	21,928		20,568		1,360
Total expenses	189,032		84,985		104,047
Operating (loss) income before loss on sale of real estate investments	(100,215)		1,119		(101,334)
Loss on sale of real estate investments	(225)		(306)		81
Operating (loss) income	(100,440)		813		(101,253)
Other income (expense):
Interest expense	(17,752)		(18,703)		951
Interest and other income	457		313		144
Gain on non-designated derivatives	882		286		596
Total other expenses	(16,413)		(18,104)		1,691
Loss before income taxes	(116,853)		(17,291)		(99,562)
Income tax expense	(65)		(41)		(24)
Net loss	(116,918)		(17,332)		(99,586)
Net loss attributable to non-controlling interests	452		22		430
Allocation for preferred stock	(3,450)		(3,449)		(1)
Net loss attributable to common stockholders	$	(119,916)	$	(20,759)	$	(99,157)

Segment Results — Medical Office Buildings

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

	Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total (4)
	Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2024		2023				2024		2023				2024		2023				2024		2023
Revenue from tenants	$	34,144	$	33,866	$	278	$	527	$	—	$	527	$	—	$	54	$	(54)	$	34,671	$	33,920	$	751
Less: Property operating and maintenance	9,829		9,378		451		48		—		48		(150)		60		(210)		9,727		9,438		289
Segment income	$	24,315	$	24,488	$	(173)	$	479	$	—	$	479	$	150	$	(6)	$	156	$	24,944	$	24,482	$	462

_______________

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

(2)Our MOB segment included 11 Acquired Properties.

(3)Our MOB segment included one Disposed Property.

(4)Our MOB segment included 160 total properties.

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Revenue from tenants primarily reflects contractual rent received from tenants in our MOBs and operating expense reimbursements. These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.

Revenue from Tenants

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

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

Property Operating and Maintenance

Property operating and maintenance expenses reflect the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees. During the three months ended June 30, 2024, property operating and maintenance expenses increased by $0.3 million in our MOB segment as compared to the three months ended June 30, 2023. This increase was primarily driven by our Same Store Properties.

Segment Results — Seniors Housing Operating Properties

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

	Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total (4)
	Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)		Three Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2024		2023				2024		2023				2024		2023				2024		2023
Revenue from tenants	$	53,417	$	50,427	$	2,990	$	—	$	—	$	—	$	729	$	1,757	$	(1,028)	$	54,146	$	52,184	$	1,962
Less: Property operating and maintenance	44,202		42,074		2,128		—		—		—		1,076		2,057		(981)		45,278		44,131		1,147
Segment income	$	9,215	$	8,353	$	862	$	—	$	—	$	—	$	(347)	$	(300)	$	(47)	$	8,868	$	8,053	$	815

________

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

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

(3)Our SHOP segment included five Disposed Properties.

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

Revenue from tenants within our SHOP segment are generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services. Property operating and maintenance expenses relate to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third-party operators, and costs associated with maintaining the physical site.

Revenue from Tenants

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

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, as well as by marginally higher occupancy in the three months ended June 30, 2024 as compared to the three months ended June 30, 2023. Additionally, we offered more rent concessions to drive occupancy during the three months ended June 30, 2024, which amounted to $1.6 million as compared to $0.8 million during the three months ended June 30, 2023.

Property Operating and Maintenance

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

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Our Same Store Properties property operating and maintenance expenses increased in the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily from $1.4 million of increased costs for wages, including overtime, training and bonus wages paid to employees of our third party operators, $0.5 million of higher insurance expense and the effects of inflation which raised the general costs of food, supplies, and utilities generally. These increases to property operating and maintenance expenses were partially offset by decreased costs for contract labor of $0.3 million.

Other Results of Operations

Impairment Charges

We recorded $2.4 million of impairment charges during the three months ended June 30, 2024. This impairment was recorded to reduce the carrying value of a held-for-use MOB to its estimated fair value. This MOB has been marketed for sale since September 2021 and had been previously impaired by $8.6 million in the years ended December 31, 2023 and 2021. We did not record any impairment charges in the three months ended June 30, 2023.

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

Operating Fees to Related Parties

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

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis. We pay a fixed base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one-twelfth of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017. Asset management fees were $5.5 million for both the three months ended June 30, 2024 and 2023. Variable asset management fees will increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the three months ended June 30, 2024 or 2023.

Property management fees were consistent at $1.0 million for the three months ended June 30, 2024 and 2023. Property management fees increase or decrease in direct correlation with gross revenues of the properties managed and depending on the mix of properties managed, as the fee payable for different types of properties varies.

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

Termination Fees to Related Parties

We recorded $98.2 million of termination fees to related parties in the three months ended June 30, 2024 as a result of our intent to terminate the Second A&R Advisory Agreement with the Advisor and transition to self-management through the Internalization. Pursuant to the terms of the Second A&R Advisory Agreement, the termination fee will be payable to the Advisor within 30 days after the effective date of the termination, and such fee is a component of the Closing Payments contemplated by the Internalization Agreement. We expect the Closing to occur no later than the fourth quarter of 2024.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses increased by $0.3 million to $0.4 million for the three months ended June 30, 2024 as compared to $0.1 million for the three months ended June 30, 2023. This increase was due to $0.2 million of increased dead deal costs, as well as $0.1 million of legal costs specifically related to our Internalization.

General and Administrative Expenses

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

Depreciation and Amortization Expenses

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

Gain on Sale of Real Estate Investments

During the three months ended June 30, 2024 we disposed of one SHOP for a contract sales price of $3.3 million and recorded a loss on sale of $0.2 million. This SHOP had been previously impaired by $2.3 million.

During the three months ended June 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of these SHOPs were previously impaired by $6.2 million. As a result, we recorded an aggregate loss on sale of $0.3 million in the three months ended June 30, 2023.

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Interest Expense

Interest expense decreased by $1.0 million to $17.8 million for the three months ended June 30, 2024 from $18.7 million for the three months ended June 30, 2023. The decrease in interest expense mainly resulted from $2.9 million of increased deferred financing cost amortization recognized during the three months ended June 30, 2023 as a result of the termination of our Prior Credit Facility, partially offset by higher average rates and higher average balances of our indebtedness during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023 and by $0.9 million of terminated swap amortization recognized during the three months ended June 30, 2023.

As of June 30, 2024, our outstanding debt obligations were $1.2 billion at a weighted average interest rate of 5.61% per year. As of June 30, 2023, we had total borrowings of $1.2 billion, at a weighted average interest rate of 5.49% per year. The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings, among other factors (including the impact of variable rates to the extent such borrowings are not hedged). Recent and continuing increases in interest rates may adversely impact the terms on which we may borrow in the future and thus our results of operations.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.5 million and $0.3 million, respectively, for the three months ended June 30, 2024 and 2023. Interest and other income increased in the three months ended June 30, 2024 due to $0.4 million of excess insurance reimbursement, as well as higher interest rates on, and balances of, our cash accounts.

Gains on Non-Designated Derivatives

The gains in the three months ended June 30, 2024 and 2023 on non-designated derivative instruments related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our credit facilities, which have floating interest rates. The relevant amounts in each period represent the change in value and any cash received on the non-designated derivatives.

Income Tax Expense

Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded negligible income tax expense for the three months ended June 30, 2024 and 2023.

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

Net Loss Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $0.5 million for the three months ended June 30, 2024 and net loss attributable to non-controlling interests was approximately $22,000 for the three months ended June 30, 2023. These amounts represent the portion of our net loss that is related to the Series A Preferred Units held by third parties, Common OP Units held by third parties, and non-controlling interest holders in our subsidiaries that own certain properties.

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

Allocation for Preferred Stock Dividends

Allocation for preferred stock was $3.5 million for the three months ended June 30, 2024 and 2023. These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

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

Information based on Same Store, Acquisitions and Dispositions allows us to evaluate the performance of our portfolio based on a consistent population of properties. Net loss attributable to common stockholders was $138.9 million and $38.3 million, respectively, for the six months ended June 30, 2024 and 2023. The following table shows our results of operations for the six months ended June 30, 2024 and 2023 and the period to period change by line item of the consolidated statements of operations:

	Six Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2024		2023		$
Revenue from tenants	$	177,116	$	173,459	$	3,657
Operating expenses:
Property operating and maintenance	110,150		107,452		2,698
Impairment charges	2,669		—		2,669
Operating fees to related parties	12,790		12,756		34
Termination fees to related parties	98,241		—		98,241
Acquisition and transaction related	499		211		288
General and administrative	11,436		9,352		2,084
Depreciation and amortization	42,666		40,744		1,922
Total expenses	278,451		170,515		107,936
Operating (loss) income before loss on sale of real estate investments	(101,335)		2,944		(104,279)
Loss on sale of real estate investments	(225)		(191)		(34)
Operating (loss) income	(101,560)		2,753		(104,313)
Other income (expense):
Interest expense	(34,135)		(34,488)		353
Interest and other income	529		318		211
Gain on non-designated derivatives	2,833		104		2,729
Total other expenses	(30,773)		(34,066)		3,293
Loss before income taxes	(132,333)		(31,313)		(101,020)
Income tax expense	(135)		(87)		(48)
Net loss	(132,468)		(31,400)		(101,068)
Net loss attributable to non-controlling interests	452		31		421
Allocation for preferred stock	(6,900)		(6,899)		(1)
Net loss attributable to common stockholders	$	(138,916)	$	(38,268)	$	(100,648)

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Segment Results — Medical Office Buildings

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

	Same Store(1)						Acquisitions(2)						Dispositions(3)						Segment Total
	Six Months Ended June 30,				Increase (Decrease)		Six Months Ended June 30,				Increase (Decrease)		Six Months Ended June 30,				Increase (Decrease)		Six Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2024		2023		$		2024		2023		$		2024		2023		$		2024		2023		$
Revenue from tenants	$	67,373	$	66,815	$	558	$	1,897	$	654	$	1,243	$	—	$	61	$	(61)	$	69,270	$	67,530	$	1,740
Less: Property operating and maintenance	19,405		18,248		1,157		172		59		113		(150)		86		(236)		19,427		18,393		1,034
Segment income	$	47,968	$	48,567	$	(599)	$	1,725	$	595	$	1,130	$	150	$	(25)	$	175	$	49,843	$	49,137	$	706

_______________

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

(2)Our MOB segment included 11 Acquisition properties.

(3)Our MOB segment included one Disposition property.

(4)Our MOB segment included 160 properties.

Revenue from tenants primarily reflects contractual rent received from tenants in our MOBs and operating expense reimbursements. These reimbursements generally increase in proportion with the increase in property operating and maintenance expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors, in addition to base rent.

Revenue from Tenants

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

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

Property Operating and Maintenance

Property operating and maintenance expenses reflect the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, and unaffiliated third-party property management fees. During the six months ended June 30, 2024, property operating and maintenance costs in our MOB segment increased by $1.0 million as compared to the same period last year, primarily as a result of increased costs from our Same Store Properties of $1.2 million and our Acquired Properties of $0.1 million, partially offset by a decrease from our Disposed Properties of $0.2 million.

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

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Segment Results — Seniors Housing - Operating Properties

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

	Same Store (1)						Acquisitions (2)						Dispositions (3)						Segment Total
	Six Months Ended June 30,				Increase (Decrease)		Six Months Ended June 30,				Increase (Decrease)		Six Months Ended June 30,				Increase (Decrease)		Six Months Ended June 30,				Increase (Decrease)
(Dollars in thousands)	2024		2023		$		2024		2023		$		2024		2023		$		2024		2023		$
Revenue from tenants	$	106,209	$	101,391	$	4,818	$	—	$	—	$	—	$	1,637	$	4,538	$	(2,901)	$	107,846	$	105,929	$	1,917
Less: Property operating and maintenance	88,367		84,202		4,165		—		—		—		2,356		4,857		(2,501)		90,723		89,059		1,664
Segment income	$	17,842	$	17,189	$	653	$	—	$	—	$	—	$	(719)	$	(319)	$	(400)	$	17,123	$	16,870	$	253

_______________

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

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

(3) Our SHOP segment included five Disposed Properties.

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

Revenues from tenants within our SHOP segment are generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services. Property operating and maintenance expenses relate to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third-party operators, and costs associated with maintaining the physical site.

Revenue from Tenants

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

The increase to our Same Store properties revenue from tenants was primarily driven by higher leasing rates during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, as well as by marginally higher occupancy in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. These increases were partially offset by $2.1 million of increased rent concessions offered during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023

Property Operating and Maintenance

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

Our Same Store properties operating and maintenance expenses increased in the six months ended June 30, 2024 compared to the same period last year, primarily from (i) $2.6 million of increased costs for overtime, training and bonus wages paid to employees of our third party operators, (ii) $1.3 million of increased management fees paid to our third party operators, (iii) $1.2 million of higher insurance expense, (iv) the effects of inflation which raised the general costs of food, supplies, and utilities generally. These increases to property operating and maintenance expenses were partially offset by decreased costs for contract labor of $0.5 million.

Other Results of Operations

Impairment Charges

We recorded $2.7 million of impairment charges during the six months ended June 30, 2024 on one held-for-use MOB and one SHOP which was disposed in the six months ended June 30, 2024. The held-for-use MOB was impaired by $2.4 million and the disposed SHOP was impaired by $0.3 million. We did not record any impairment charges during the six months ended June 30, 2023.

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

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Operating Fees to Related Parties

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

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis (see — Results of Operations — Comparison of the Three Months Ended June 30, 2024 and 2023 for additional information). Asset management fees were $10.9 million for both the six months ended June 30, 2024 and 2023. Variable asset management fees will further increase if we issue additional equity securities in the future. There were no incentive fees incurred in either of the six months ended June 30, 2024 or 2023.

Property management fees were consistent at $1.9 million and $1.8 million, respectively, for the six months ended June 30, 2024 and 2023. Property management fees increase or decrease in direct correlation with gross revenues of the properties managed and depending on the mix of properties managed, as the fee payable for different types of properties varies.

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

Termination Fees to Related Parties

We recorded $98.2 million of termination fees to related parties in the six months ended June 30, 2024 as a result of our intent to terminate the Second A&R Advisory Agreement with the Advisor and transition to self-management through the Internalization. Pursuant to the terms of the Second A&R Advisory Agreement, the termination fee is payable to the Advisor within 30 days after the effective date of the termination, and such a fee is a component of the Closing Payments contemplated by the Internalization Agreement. We expect the Closing to occur no later than the fourth quarter of 2024. We anticipate funding the Closing Payments primarily with net proceeds from strategic dispositions of MOBs, SHOPs and land parcels.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses increased by $0.3 million, to $0.5 million for the six months ended June 30, 2024 from $0.2 million for the six months ended June 30, 2023. This increase was due to $0.2 million of increased dead deal costs and $0.1 million of legal costs specifically related to our Internalization.

General and Administrative Expenses

General and administrative expenses increased $2.1 million to $11.4 million for the six months ended June 30, 2024 compared to $9.4 million for the six months ended June 30, 2023, which includes $7.0 million and $4.8 million, respectively, for the six months ended June 30, 2024 and 2023, incurred in expense reimbursements. The increase in general and administrative expenses was primarily attributable to $0.7 million of severance payments incurred in the six months ended June 30, 2024 made to former employees of the Advisor.

Depreciation and Amortization Expenses

Depreciation and amortization expense increased by $2.0 million to $42.7 million for the six months ended June 30, 2024 as compared with $40.7 million for the six months ended June 30, 2023.

Gain (Loss) on Sale of Real Estate Investments

During the six months ended June 30, 2024, we disposed of one SHOP for a contract sales price of $3.3 million. This SHOP had been previously impaired by $2.3 million. As a result, the Company recorded an aggregate loss on sale of $0.2 million in the six months ended June 30, 2024.

During the six months ended June 30, 2023, we disposed of four SHOPs and one MOB for an aggregate contract sales price of $13.8 million. Two of the SHOPs were previously impaired by $6.2 million. As a result, we recorded an aggregate loss of $0.2 million in the six months ended June 30, 2023.

Interest Expense

Interest expense decreased $0.4 million to $34.1 million for the six months ended June 30, 2024 from $34.5 million for the six months ended June 30, 2023. The increase in interest expense mainly resulted from the acceleration of deferred financing costs of $2.6 million from the termination of our Prior Credit Facility, as well as from higher average rates and higher average balances of amounts outstanding under our indebtedness during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023.

As of June 30, 2024, our outstanding debt obligations were $1.2 billion, at a weighted average interest rate of 5.61% per year. As of June 30, 2023, we had total borrowings of $1.2 billion, at a weighted average interest rate of 5.49% per year. The weighted-average interest rates include the impact of our “pay-fixed” interest rate swaps which are designated as hedges on a portion of our variable-rate borrowings.

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Our interest expense in future periods will vary based on our level of future borrowings and the cost of borrowings, among other factors (including the impact of variable rates to the extent such borrowings are not hedged). Recent and continuing increases in interest rates may adversely impact the terms on which we may borrow in the future and thus our results of operations.

Interest and Other Income

Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period. Interest and other income was approximately $0.5 million for the six months ended June 30, 2024 and approximately $0.3 million for the six months ended June 30, 2023. Interest and other income increased in the six months ended June 30, 2024 from $0.4 million of excess insurance reimbursement as well as higher interest rates on, and balances of, our cash accounts.

Gain (Loss) on Non-Designated Derivatives

Gain (loss) on non-designated derivative instruments for the six months ended June 30, 2024 and 2023 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with the Fannie Mae Master Credit Facilities, which have floating interest rates.

Income Tax Benefit (Expense)

Income taxes generally relate to our SHOPs, which are leased to our TRS. We recorded an income tax expense of approximately $0.1 million for the six months ended June 30, 2024 and 2023.

Because of our TRS’s recent operating history of losses and the impacts of the COVID-19 pandemic on the results of operations of our SHOP assets, in the third quarter of 2020, we were not able to conclude that it is more likely than not we will realize the future benefit of our deferred tax assets and recorded a full valuation allowance. Since that time, our TRS’s operating performance has not significantly improved and thus we have recorded a 100% valuation allowance on our net deferred tax assets through June 30, 2024. If and when we believe it is more likely than not that we will recover our deferred tax assets, we will reverse the valuation allowance as an income tax benefit in our consolidated statements of comprehensive income (loss).

Net Loss (Income) Attributable to Non-Controlling Interests

Net loss attributable to non-controlling interests was approximately $0.5 million for the six months ended June 30, 2024 and net loss attributable to non-controlling interests was approximately $31,000 for the six months ended June 30, 2023, which represents the portion of our net income that is related to the Series A Preferred Units held by third parties (issued in connection with a property acquisition in September, 2021), Common OP Units held by third parties, and other non-controlling interest holders in our subsidiaries that own certain properties.

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

Allocation for Preferred Stock

Allocation for preferred stock was $6.9 million for the six months ended June 30, 2024 and 2023. These amounts represent the allocation of our net loss that is attributable to holders of Series A Preferred Stock and holders of Series B Preferred Stock.

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Cash Flows from Operating Activities

The following table presents a reconciliation of our net cash provided by operations from our net loss for the six months ended June 30, 2024 and 2023:

(in thousands)	Six Months Ended June 30,
Cash flows from operating activities:	2024		2023
Net loss	$	(132,468)	$	(31,400)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	42,666		40,744
Amortization of deferred financing costs	1,661		5,210
(Accretion) amortization of terminated swap	(1,218)		(1,125)
Amortization of mortgage premiums and discounts, net	45		46
Accretion of market lease and other intangibles, net	(687)		(471)
Bad debt expense	796		695
Equity-based compensation	460		460
Gain on sale of real estate investments, net	225		191
Cash received from non-designated derivative instruments	3,565		2,301
Gain on non-designated derivative instruments	(2,833)		(104)
Impairment charges	2,669		—
Changes in assets and liabilities:
Straight-line rent receivable	98		(605)
Prepaid expenses and other assets	(1,824)		909
Termination fees payable to related parties	98,241		—
Accounts payable, accrued expenses and other liabilities	(2,854)		(5,728)
Deferred rent	393		(446)
Net cash provided by operating activities	$	8,935	$	10,677

The level of cash flows used in or provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses.

Cash Flows from Investing Activities

The following table presents our net cash used in investing activities for the six months ended June 30, 2024 and 2023:

(in thousands)	Six Months Ended June 30,
Cash flows from investing activities:	2024		2023
Property acquisitions	$	(5,606)	$	(25,443)
Capital expenditures	(11,159)		(9,140)
Investments in non-designated interest rate caps	(1,709)		(4,580)
Proceeds from sales of real estate investments	2,896		4,803
Cash used in investing activities	$	(15,578)	$	(34,360)

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Cash Flows from Financing Activities

The following table presents our net cash provided by financing activities for the six months ended June 30, 2024 and 2023:

(in thousands)	Six Months Ended June 30,
Cash flows from financing activities:	2024	2023
Payments on credit facilities	(2,885)	(197,717)
Proceeds from credit facilities	6,960	20,000
Proceeds from mortgage notes payable	—	240,000
Payments on mortgage notes payable	(584)	(565)
Proceeds from termination of derivative instruments	—	5,413
Payments of deferred financing costs	(199)	(7,774)
Contributions from non-controlling interests	—	284
Dividends paid on Series A Preferred stock	(3,668)	(3,666)
Dividends paid on Series B Preferred stock	(3,232)	(3,233)
Distributions to non-controlling interest holders	(92)	(92)
Net cash (used in) provided by financing activities	(3,700)	52,650

Liquidity and Capital Resources

Our existing principal demands for cash are to fund acquisitions, capital expenditures, the payment of our operating and administrative expenses, debt service obligations (including principal repayment), and dividends to holders of our Series A Preferred Stock and holders of our Series B Preferred Stock. We closely monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity to meet our financial obligations for at least the next twelve months. Our future liquidity requirements, and available liquidity, however, depend on many factors, such as recent and continuing increases in inflation, labor shortages, supply chain disruptions and higher property insurance, property tax and interest rates, all of which have and may continue to have adverse impacts on our results of operations and thus ultimately our liquidity. Moreover, these adverse impacts, as well as the ongoing wars in Ukraine, Israel and related sanctions, may also impact our tenant and residents’ ability to pay rent and thus our cash flows.

We expect to fund our future short-term operating liquidity requirements, including dividends to holders of Series A Preferred Stock and holders of Series B Preferred Stock, through a combination of current cash on hand, net cash provided by our operating activities, potential future advances under our Fannie Mae Master Credit Facilities and MOB Warehouse Facility, net cash provided by our property dispositions and potential new financings utilizing certain of our currently unencumbered properties.

As of June 30, 2024, we had $29.5 million of cash and cash equivalents. The Barclays MOB Loan Agreement requires us to maintain a minimum balance of cash and cash equivalents of $12.5 million at all times.

Intent to Internalize Management

On July 1, 2024, we announced that, in anticipation of a potential future listing of our common stock on a national securities exchange, we provided notice in June 2024 to the Advisor of our intent to Internalize. On August 6, 2024, we entered into the Internalization Agreement with the Merger Sub, the Advisor and the Advisor Parent. We expect the Internalization to take effect no later than the fourth quarter of 2024. For additional information about the Internalization, please see Note 9 — Related Party Transactions and Arrangements.

Following our transition to self-management, we would no longer be required to pay asset management and property management fees to the Advisor Parent. We paid total asset management fees of $5.5 million and $10.9 million, respectively, during the three and six months ended June 30, 2024 (which includes a monthly base asset management fee of $1.625 million per month and a monthly variable asset management fee of one-twelfth of 1.25% of the cumulative net proceeds of our equity offerings subsequent to February 17, 2017). We paid total property management fees, including capitalized leasing commissions, of $1.0 million and $2.5 million, respectively, during the three and six months ended June 30, 2024 which is equal to 1.5% of gross revenues from the our stand-alone single-tenant net leased properties managed and 2.5% of gross revenues from all other types of properties managed.

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Certain costs are incurred as a result of our decision to transition to self-management; including, upon a termination of the Second A&R Advisory Agreement by us in connection with a transition to self-management, we would be required to pay the Advisor a transition fee of $98.2 million. We would also be required to pay six-months of base asset management fees, which began on June 25, 2024 when we delivered notice to the Advisor of our intention to effect the Internalization, of $10.9 million, and property management fees of $3.9 million, representing the costs we would incur through the current term of the Property Management Agreement. A portion each of the asset management fees and property management fees have been paid as we continue to pay our monthly operating expense to the Advisor and Property Manager. Collectively, these payments to the Advisor Parent described above are referred to herein as “Closing Payments”.

To the extent the Closing Payments exceed our Available Cash (as defined in the Internalization Agreement), we have agreed to pay the Advisor Parent aggregate cash consideration equal to at least $60.0 million (such cash amount, the “Closing Date Cash Consideration”), and we will issue to the Advisor Parent a promissory note in a principal amount equal to the difference between the Closing Date Cash Consideration and the Closing Payments, as may be adjusted for any post-Closing true-ups on the Closing Payments. We intend to fund the Closing Date Cash Consideration through a combination of cash on hand and the net proceeds from certain anticipated strategic dispositions. The Company expects the Internalization to close no later than the fourth quarter of 2024, subject to the satisfaction or waiver of certain conditions in the Internalization Agreement. There can be no assurance, however, that we will generate enough net proceeds through these expected strategic dispositions to fully fund the Closing Payments before they are payable, or that these strategic dispositions will occur at all.

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

Financings

As of June 30, 2024, our total debt leverage ratio (total debt divided by total gross asset value) was approximately 44.5%. Net debt totaled $1.2 billion, which represents gross debt ($1.2 billion) less cash and cash equivalents ($29.5 million). Gross asset value totaled $2.6 billion, which represents total real estate investments, at cost ($2.6 billion) net of gross market lease intangible liabilities ($21.0 million). Cumulative impairment charges are reflected within gross asset value.

As of June 30, 2024, we had total gross borrowings of $1.2 billion, at a weighted-average interest rate of 5.61% and a weighted-average remaining term of 4.6 years. The weighted-average interest rate includes the impact of “pay-fixed” swaps that are designated as hedging instruments on a portion of our variable-rate debt, but does not include the impact of our non-designated interest rate caps (discussed below). Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our total gross borrowings was 5.01% as of June 30, 2024.

As of June 30, 2024, the carrying value of our real estate investments, at cost was $2.6 billion, with $1.4 billion of this asset value pledged as collateral for mortgage notes payable and $649.6 million of this asset value pledged to secure advances under our credit facilities. These real estate assets are not available to satisfy other debts and obligations, or to serve as collateral with respect to new indebtedness, as applicable, unless the existing indebtedness associated with the property is satisfied or the property is removed from the borrowing base of the credit facilities, which would impact availability thereunder.

Unencumbered real estate investments, at cost as of June 30, 2024 was $621.0 million. There can be no assurance as to the amount of liquidity we would be able to generate from leveraging these unencumbered real estate investments, if we are able to leverage them at all.

Mortgage Notes Payable

As of June 30, 2024, we had $828.3 million in mortgage notes payable outstanding, all of which is either fixed-rate or effectively fixed through our interest rate swap at a weighted-average annual interest rate of 4.60% and a weighted-average remaining term of 5.6 years. Future scheduled principal payments on our mortgage notes payable for the remainder of 2024 and 2025 are $0.6 million and $13.3 million, respectively.

During the three months ended June 30, 2024, we entered into the CPC Mortgage Loan in connection with a four-property acquisition also completed in the three months ended June 30, 2024. The mortgage has a principal balance of $7.5 million, bears interest at an annual fixed rate of 6.84% and matures in February 2034 with no principal amounts due until that time.

Credit Facilities

As of June 30, 2024, $365.1 million was outstanding under our credit facilities, which bore interest at a weighted-average annual rate of 7.90% and had a weighted-average remaining term of 2.3 years. Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on our credit facilities was 5.95% as of June 30, 2024.

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Fannie Mae Master Credit Facilities

As of June 30, 2024, $343.4 million was outstanding under our Fannie Mae Master Credit Facilities which bore interest at a weighted-average annual rate of 7.87%. Inclusive of our non-designated interest rate caps, the weighted-average economic interest rate on the Fannie Mae Master Credit Facilities was 5.91% as of June 30, 2024.

We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. We do not expect to draw any further amounts on the Fannie Mae Master Credit Facilities. Borrowings under the Fannie Mae Master Credit Facilities bear annual interest at a rate that varies on a monthly basis and is equal to the sum of the current SOFR for one month U.S. dollar-denominated deposits and a spread (2.41% and 2.46% for the Capital One Facility and the KeyBank Facility, respectively) with a combined floor of 2.62%. The Fannie Mae Master Credit Facilities mature on November 1, 2026. Future scheduled principal payments on our Fannie Mae Master Credit Facilities for the remainder of 2024 and 2025 are $2.9 million and $5.8 million, respectively.

In the year ended December 31, 2023, we provided cash deposits totaling $11.8 million to Fannie Mae because the debt service coverage ratios of the underlying properties of each facility were below the minimum required amounts per the debt agreements. We provided an additional deposit of $0.3 million during the three months ended March 31, 2024, bringing the total deposit to $12.1 million as of March 31, 2024. These deposits are recorded as restricted cash on our consolidated balance sheet, and are pledged as additional collateral for the Fannie Mae Master Credit Facilities. These deposits will be refunded the earlier of the our achievement of a debt service coverage ratio above the minimum required amount of 1.40 or the maturity of the Fannie Mae Master Credit Facilities.

MOB Warehouse Facility

On December 22, 2023, we entered into a loan agreement with Capital One to provide up to $50.0 million of variable-rate financing.

As of June 30, 2024, $21.7 million was outstanding under the MOB Warehouse Facility which bore interest at an annual rate of 8.33%. Inclusive of our non-designated interest rate caps, the economic interest rate on our MOB Warehouse Facility was 6.50% as of June 30, 2024.

We may request future advances under the MOB Warehouse Facility by adding eligible MOBs to the collateral pool subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Borrowings under the MOB Warehouse Facility bear interest at a monthly rate equal to the sum of the current SOFR for one-month denominated deposits and a spread of 3.0%. Interest payments are due monthly, with no principal payments due until maturity in December 2026.

Non-Designated Interest Rate Caps

Our interest rate caps are used to limit our exposure to interest rate movements on our Fannie Mae Master Credit Facilities for economic purposes, however, we do not elect to apply hedge accounting to these instruments. As of June 30, 2024, we had eight SOFR-based interest rate caps with an aggregate notional amount of $369.2 million, which limits one-month SOFR to 3.50% and have varying maturities through January 2027. Although these interest rate caps are not designated hedging instruments, we consider them economically related to our variable-rate credit facility borrowings.

As SOFR has increased beyond 3.50%, we received cash payments of $3.6 million in the three months ended June 30, 2024. We received $2.3 million of cash payments in the three months ended June 30, 2023.

We paid total premiums of $1.7 million to renew one cap with an aggregate notional amount of $58.1 million which matures in April 2024, and to execute a new cap of $7.0 million, which matures in January 2027. We have five interest rate caps with a notional amount of $289.4 million which mature in 2025, which represents the next maturing interest rate caps. During the year ended December 31, 2023, we paid premiums of $10.0 million to renew expiring interest rate cap contracts.

Capital Expenditures

During the six months ended June 30, 2024, our capital expenditures were $11.2 million, of which $3.4 million related to our MOB segment and $7.8 million related to our SHOP segment. We anticipate this rate of capital expenditures for the MOB and SHOP segments throughout the remainder of 2024.

Acquisitions — Six Months Ended June 30, 2024

During the six months ended June 30, 2024, we acquired four single-tenant MOBs for an aggregate contract purchase price of $12.6 million. These acquisitions were funded with $7.5 million of new mortgage debt from our CPC Mortgage Loan and the remainder with cash on hand.

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Acquisitions — Subsequent to June 30, 2024

We have not acquired any properties subsequent to June 30, 2024.

Dispositions — Six Months Ended June 30, 2024

We disposed of one SHOP during the six months ended June 30, 2024 for a contract sales price of $3.3 million. These proceeds are available for general corporate purposes.

Dispositions — Subsequent to June 30, 2024

We disposed of seven MOBs in Illinois subsequent to June 30, 2024 for a contract sales price of $50.5 million. These proceeds are available for general and corporate uses, including for the potential partial payment of the Closing Payments at the Closing. We have also signed a letter of intent to dispose of one SHOP in California for a contract sales price of $21.0 million. There can be no assurance that this signed letter of intent will close on its contemplated terms, or at all.

To fund the amounts necessary to pay the Closing Payments, we anticipate primarily using net proceeds from strategic dispositions to occur before the end of the fourth quarter of 2024. There can be no assurance that we will generate enough net proceeds through these strategic dispositions to fully fund the Closing Payments before the fee is payable, or that these strategic dispositions will occur at all.

Share Repurchase Program

We did not repurchase any shares during the six months ended June 30, 2024 and 2023.

Non-GAAP Financial Measures

This section discusses the non-GAAP financial measures we use to evaluate our performance including Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”). A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net loss attributable to common stockholders, are provided below.

We consider FFO and AFFO to be useful supplemental measures for reviewing comparative operating and financial performance because, by excluding the applicable items listed above, FFO and AFFO can help investors compare our operating performance between periods or as compared to other companies. While FFO and AFFO are relevant and widely used measures of operating performance of REITs, they do not represent, nor are they meant to replace, cash flows from operations and net income or loss as defined by GAAP, and should not be considered alternatives to those measures in evaluating our liquidity or operating performance. Rather, FFO and AFFO should be reviewed in conjunction with these and other GAAP measurements. FFO and AFFO also do not consider the costs associated with capital expenditures and leasing commissions, nor do they purport to be indicative of cash available to fund our future cash requirements, including our ability to pay dividends and other distributions to our stockholders. Additionally, our computation of FFO and AFFO may not be comparable to FFO and AFFO reported by other REITs that do not define FFO in accordance with the current NAREIT definition, or that interpret the current NAREIT definition or define AFFO differently than we do.

Prior to the quarter ended June 30, 2024, we presented another non-GAAP metric in place of AFFO, Modified Funds From Operations (“MFFO”). Historically, we calculated MFFO as FFO as defined by NAREIT adjusted for (i) acquisition and transaction related costs, (ii) amortization of market-lease intangible assets and liabilities, (iii) adjustments for straight-line rent, (iv) mark-to-market gains and losses from our non-designated derivatives, (v) net amortization of our mortgage discounts and premiums, (vi) valuation reserves against our deferred tax assets and (vii) similar adjustments for non-controlling interests and unconsolidated entities. We believe that AFFO is a more meaningful non-GAAP metric to assess our operating performance than MFFO, and as such we intend to present AFFO for each reporting period beginning with the quarter ended June 30, 2024 and each comparable period thereafter.

Funds from Operations

Our consolidated financial statements are presented in accordance with GAAP, utilizing historical cost accounting which, among other things, requires depreciation of real estate investments. As a result, our operating results imply that the value of our real estate investments will decrease predictably over a set time period. However, we believe that the value of our real estate investments will fluctuate over time based on various market conditions and as such, depreciation under historical cost accounting may be less informative. FFO is a standard REIT industry metric defined by the National Association of Real Estate Investment Trusts (“NAREIT”), which was most recently restated in a White Paper effective in December 2018 (the “White Paper”). NAREIT defines FFO as net income or loss (computed in accordance with GAAP), adjusted for (i) real estate-related depreciation and amortization, (ii) impairment charges on depreciable real property, (iii) gains or losses from sales of depreciable real property and (iv) similar adjustments for non-controlling interests and unconsolidated entities.

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We believe that the use of FFO provides a more complete understanding of our operating performance to investors and to management, and when compared year-over-year reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses and interest costs, which may not be immediately apparent from net loss.

Adjusted Funds from Operations

We also believe that AFFO is a meaningful supplemental non-GAAP measure of our operating results. We calculate AFFO by further adjusting FFO to reflect the performance of our portfolio for items we believe are not directly attributable to our operations. We believe that AFFO is a beneficial indicator of our ongoing portfolio performance and isolates the financial results of our operations. Our adjustments to FFO to arrive at AFFO include removing the impacts of (i) acquisition and transaction related costs, (ii) amortization of market-lease intangible assets and liabilities, (iii) adjustments for straight-line rent, (iv) termination fees to related parties (v) equity-based compensation expense, (vi) depreciation and amortization related to non-real estate related assets, (vii) mark-to-market gains and losses from our non-designated derivatives, (viii) non-cash components of interest expense and (ix) similar adjustments for non-controlling interests and unconsolidated entities. We believe that AFFO is a recognized measure of sustainable operating performance by the REIT industry and is useful in comparing the sustainability of our operating performance with the sustainability of the operating performance of other real estate companies.

The table below reflects the items deducted from or added to net loss attributable to stockholders in our calculation of FFO and AFFO for the periods indicated:

	Three Months Ended June 30,				Six Months Ended June 30,
(In thousands)	2024		2023		2024		2023
Net loss attributable to common stockholders (in accordance with GAAP)	$	(119,916)	$	(20,759)	$	(138,916)	$	(38,268)
Depreciation and amortization related to real estate assets	20,903		19,915		40,651		39,523
Impairment charges	2,409		—		2,669		—
(Gain)/loss on sale of real estate investments	225		306		225		191
Adjustments for non-controlling interests (1)	(120)		(108)		(221)		(201)
FFO (as defined by NAREIT) attributable to stockholders	(96,499)		(646)		(95,592)		1,245
Accretion of market lease and other intangibles, net	(228)		(260)		(687)		(471)
Straight-line rent adjustments	(90)		(388)		98		(605)
Acquisition and transaction related	357		148		499		211
Termination fees to related parties (2)	98,241		—		98,241		—
Equity-based compensation	230		230		460		460
Depreciation and amortization on non-real estate assets	1,025		655		2,015		1,223
Mark-to-market (gains)/losses from derivatives (3)	910		1,089		732		2,197
Non-cash components of interest expense (4)	862		2,983		488		4,131
Adjustments for non-controlling interests (1)	(451)		19		(449)		14
AFFO attributable to stockholders	$	4,357	$	3,830	$	5,805	$	8,405

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(1)Represents the portion of the adjustments allocable to non-controlling interests.

(2)We provided notice to the Advisor in June 2024 of our intent to transition to self-management, and executed the Internalization Agreement in August 2024. Upon the Closing of the Internalization, we have agreed to pay the Closing Payments, a component of which is a self-management termination fee, which is payable within 30 days thereof. We do not consider such termination fees to be indicative of our performance given its unique and non-recurring nature, and accordingly, we have included it as an adjustment to FFO.

(3)Presented as total gains or losses from our non-designated derivatives net of cash received.

(4)Non-cash components of interest expense include (i) deferred financing cost amortization, (ii) mortgage discount and premium amortization and (iii) amortized gains or losses from terminated hedging instruments.

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Dividends and Other Distributions

Dividends on our Series A Preferred Stock are declared quarterly in an amount equal to $1.84375 per share each year ($0.460938 per share per quarter) to holders of Series A Preferred Stock, which is equivalent to 7.375% of per annum in the $25.00 liquidation preference per share of Series A Preferred Stock. Dividends on the Series A Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.

Dividends on our Series B Preferred Stock are declared quarterly in an amount equal to $1.78125 per share each year ($0.445313 per share per quarter) to holders of Series B Preferred Stock, which is equivalent to 7.125% of per annum in the $25.00 liquidation preference per share of Series B Preferred Stock. Dividends on the Series B Preferred Stock are cumulative and payable quarterly in arrears on the 15th day of January, April, July and October of each year or, if not a business day, the next succeeding business day to holders of record on the close of business on the record date set by our board of directors and declared by us.

Since mid-2020, we have not paid cash dividends on our shares of common stock but we issued stock dividends to the holders from October 2020 until January 2024. The stock dividends were declared quarterly using a rate of $0.85 per share per year. The number of shares issued with each dividend is based on the estimated per share asset value in effect on the applicable date. We do not intend to declare further stock dividends in the future.

The amount of dividends and other distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986 (the “Code”). Distribution payments are dependent on the availability of funds. The Board may reduce the amount of dividends or distributions paid or suspend dividend or distribution payments at any time and therefore dividend and distribution payments are not assured. Any accrued and unpaid dividends payable with respect to the Series A Preferred Stock or Series B Preferred Stock become part of the liquidation preference thereof.

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The following table shows the sources for the payment of distributions to preferred stockholders, including distributions on unvested restricted shares and Common OP Units, but excluding distributions related to Class B Units as these distributions are recorded as an expense in our consolidated statements of operations and comprehensive loss, for the periods indicated. No cash distributions were made to common stockholders, restricted shareholders, holders of Common OP Units or holders of Class B Units in the three months ended June 30, 2024.

	Three Months Ended						Year-To-Date
	March 31, 2024			June 30, 2024			June 30, 2024
(In thousands)	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions	Amounts		Percentage of Distributions
Distributions:
Dividends to holders of Series A Preferred Stock	$	1,834	52.5%	$	1,834	52.5%	$	3,668	52.6%
Dividends to holders of Series B Preferred Stock	1,616		46.2%	1,616		46.2%	3,232		46.2%
Distributions paid to holders of Series A Preferred Units	46		1.3%	46		1.3%	92		1.3%
Total cash distributions	$	3,496	100.0%	$	3,496	100.0%	$	6,992	100.1%
Source of distribution coverage:
Cash flows provided by operations (1)	$	2,543	72.7%	$	3,496	100.0%	$	6,992	100.0%
Available cash on hand	953		27.3%	—		—%	—		—%
Total source of distribution coverage	$	3,496	100.0%	$	3,496	100.0%	$	6,992	100.0%
Cash flows provided by operations (in accordance with GAAP)	$	2,543		$	6,392		$	8,935
Net loss (in accordance with GAAP)	$	(15,550)		$	(116,918)		$	(132,468)

______

(1)Assumes the use of available cash flows from operations before any other sources.

(2)Year-to-date total does not equal the sum of the quarters. Each quarter and year-to-date period is evaluated separately for purposes of this table.

For the six months ended June 30, 2024, cash flows provided by operations were $8.9 million. We had not historically generated sufficient cash flows from operations to fund the payment of dividends and other distributions at the current rate prior to switching from paying cash dividends to stock dividends on our common stock. As shown in the table above, we funded dividends to holders of Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units with cash flows provided by operations and with available cash on hand. Because shares of common stock are only offered and sold pursuant to the DRIP in connection with the reinvestment of distributions paid in cash, participants in the DRIP will not be able to reinvest in shares thereunder for so long as we pay distributions in stock instead of cash.

Our ability to pay dividends on our Series A Preferred Stock, Series B Preferred Stock and Series A Preferred Units and other distributions depends on our ability to increase the amount of cash we generate from property operations which in turn depends on a variety of factors, including but not limited to our ability to complete acquisitions of new properties and our ability to improve operations at our existing properties. There can be no assurance that we will complete acquisitions on a timely basis or on acceptable terms and conditions, if at all. Our ability to improve operations at our existing properties is also subject to a variety of risks and uncertainties, many of which are beyond our control, and there can be no assurance we will be successful in achieving this objective.

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Election as a REIT 

We elected to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. Commencing with that taxable year, we have been organized and operated in a manner so that we qualify as a REIT under the Code. We intend to continue to operate in such a manner but we can provide no assurances that we will operate in a manner so as to remain qualified for taxation as a REIT. To continue to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding net capital gains, and comply with a number of other organizational and operational requirements. If we continue to qualify as a REIT, we generally will not be subject to U.S. federal corporate income tax on the portion of our REIT taxable income that we distribute to our stockholders. Even if we continue to qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties as well as U.S. federal income and excise taxes on our undistributed income.

Inflation

We may be adversely impacted by inflation on the leases with tenants in our MOB segment that do not contain indexed escalation provisions, or those leases which have escalations at rates which do not exceed or approximate current inflation rates. As of June 30, 2024, the increase to the 12-month CPI for all items, as published by the Bureau of Labor Statistics, was 3.0%. To help mitigate the adverse impact of inflation, most of our leases with our tenants in our MOB segment contain rent escalation provisions which increase the cash that is due under these leases over time. These provisions generally increase rental rates during the terms of the leases either at fixed rates or indexed escalations (based on the Consumer Price Index or other measures). Although most of our leases with tenants in our MOB segment contain rent escalation provisions, these rates are generally below the current rate of inflation.

In addition to base rent, depending on the specific lease, MOB tenants are generally required to pay either (i) their pro rata share of property operating and maintenance expenses, which may be subject to expense exclusions and floors or (ii) their share of increases in property operating and maintenance expenses to the extent they exceed the properties’ expenses for the base year of the respective leases. Property operating and maintenance expenses include common area maintenance costs, real estate taxes and insurance. Increased operating costs paid by our tenants under these net leases could have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenue, which may adversely affect our tenants’ ability to pay rent owed to us or property expenses to be paid, or reimbursed to us, by our tenants. Renewals of leases or future leases for our net lease properties may not be negotiated on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, in which event we may have to pay those costs. If we are unable to lease properties on a triple-net basis or on a basis requiring the tenants to pay all or some of such expenses, or if tenants fail to pay required tax, utility and other impositions, we could be required to pay those costs.

Leases with residents at our SHOPs typically do not have rent escalations, however, we are able to renew leases at market rates as they mature due to their short-term nature. As inflation rates increase or persist at high levels, the cost of providing medical care at our SHOPs, particularly labor costs, will increase. If we are unable to admit new residents or renew resident leases at market rates, while bearing these increased costs from providing services to our residents, our results of operations may be affected.

Related-Party Transactions and Agreements

Please see Note 9 — Related Party Transactions and Arrangements to our consolidated financial statements included in this Quarterly Report on Form 10-Q for a discussion of the various related party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There has been no material change in our exposure to market risk during the six months ended June 30, 2024. For a discussion of our exposure to market risk, refer to Item 7A, “Quantitative and Qualitative Disclosures about Market Risk,” contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (as amended), filed with the SEC on March 15, 2024 (and as amended March 22, 2024).

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective.

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Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended June 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

Except as set forth in this Item 1A, there have been no material changes to the risk factors disclosed in Part I — Item 1A “Risk Factors” of our Annual Report on Form 10-K (as amended) for the year ended December 31, 2023, filed with the SEC on March 22, 2024 and as amended on March 22, 2024, and we direct your attention to those risk factors.

There can be no assurance that we could become “internalized” or “self-managed” without the Internalization Merger.

There can be no assurance that we could internalize or otherwise become self-managed if the Internalization Merger (as defined in Note 1 – Organization) is not consummated. We would be required to terminate the Second A&R Advisory Agreement, which we can only do for cause. Further, the agreement does not provide us the right to solicit persons employed by Advisor Parent or its affiliates (including all the person presently providing services to us) to become employees. Advisor Parent would also be under no obligation to transfer any assets or licenses that we may need to internalize the management functions. Lastly, some of our loan agreements governing the indebtedness of our subsidiaries require lender consents to replace the property manager. There is no assurance the applicable parties would consent.

We may not manage the Internalization Merger efficiently, effectively or realize the anticipated benefits.

We may not be able to successfully internalize our management in a manner that permits us to realize the anticipated benefits of the Internalization Merger. We may not be able to retain all of the current employees of our Advisor that we expect will become our employees as a result of the Internalization Merger. The failure to manage the Internalization Merger efficiently and effectively, including the failure to smoothly transition services or retain employees, could result in the anticipated benefits of the Internalization Merger not being realized in the timeframe currently anticipated or at all.

The Internalization Merger may not be financially beneficial to us and our stockholders.

There is no assurance that the Internalization Merger will be financially beneficial to us and our stockholders. If the expenses we assume as a result of the Internalization Merger are higher than the fees that we have historically paid to the Advisor and its affiliates or otherwise higher than we anticipate, we may not realize the anticipated cost savings and other benefits from the Internalization Merger, which could have a material adverse effect on our business, financial condition, and results of operations.

The Internalization Merger is expected to be a time-consuming and costly process and the expenses arising from the Internalization Merger could exceed our current estimates. Further, transactions involving the internalization by a REIT of an external manager affiliated with the REIT’s sponsor have, in some cases, been the subject of litigation. If such litigation arose in connection with the Internalization Merger, we could be forced to spend significant amounts of money and management resources defending the claims (even if such claims were without merit), which would reduce the amount of funds available for us to invest in properties or other investments or to pay distributions. Additionally, while we will no longer effectively bear the costs of the various fees currently paid to the Advisor and its affiliates following the Internalization Merger, our expenses following the Internalization Merger will include the compensation and benefits of our executive officers and employees, as well as overhead currently paid by the Advisor or its affiliates in managing our business and operations. There are no assurances that, following the Internalization Merger, these employees will be able or incentivized to provide services at the same level or for the same costs as are currently provided to us by the Advisor. There may also be other unforeseen costs, expenses and difficulties associated with operating as an internally managed company.

The pendency of the Internalization Merger could adversely affect our business and operations.

Between the date that the Internalization Agreement was executed and the date that the Internalization Merger is consummated, the attention of our management may be diverted from our day-to-day operations, regardless of whether or not the Internalization Merger is ultimately consummated. The pendency of the Internalization Merger could have an adverse impact on our relationships with unaffiliated third parties, which parties may delay or decline entering into agreements with us as a result of the announcement of our entry into the Internalization Agreement. In addition, due to covenants in the Internalization Agreement, we may be unable during the pendency of the Internalization Merger to pursue certain transactions or pursue certain other actions that are not in the ordinary course of business, even if such actions would prove beneficial.

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There can be no certainty that the Internalization Merger will be consummated and our inability to consummate the Internalization Merger may materially adversely affect our business, financial condition and results of operations.

Consummation of the Internalization Merger is subject to the satisfaction or waiver of a number of conditions and receipt of third-party consents. There can be no guarantee that all of these closing conditions will be satisfied or waived and the Internalization Merger will be consummated. If the Internalization Merger is not consummated, we may be subject to a number of material risks that could materially adversely affect our strategy, business, financial condition, and results of operations.

There may be unexpected delays in the consummation of the pending Internalization Merger.

The consummation of the Internalization Merger may be delayed by a variety of events, including those that are not within our control. Events that could delay the consummation of the Internalization Merger include delays and difficulties in satisfying any closing conditions to which the Internalization Merger is subject. The Internalization Agreement may be terminated, subject to certain limitations set forth in the Internalization Agreement, (i) by mutual written agreement by the parties thereto, (ii) by any party if a final and non-appealable order is entered that permanently restrains or otherwise prohibits the Internalization, or (iii) by any party should the Effective Time (as defined in the Internalization Agreement) not have occurred on or before June 28, 2025.

Item 2. Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Trading Plans

During our last fiscal quarter, no director or officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.

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Item 6. Exhibits.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024 (and are numbered in accordance with Item 601 of Regulation S-K):

Exhibit No.	Description
3.1 (1)	Articles of Amendment and Restatement for Healthcare Trust, Inc.
3.2 (2)	Second Amended and Restated Bylaws of Healthcare Trust, Inc.
3.3 (3)	Articles Supplementary of Healthcare Trust, Inc. relating to election to be subject to Section 3-803 of the Maryland General Corporation Law, dated November 9, 2017.
3.4 (4)	Articles Supplementary relating to the designation of shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated December 6, 2019.
3.5 (5)	Articles Supplementary designating additional shares of 7.375% Series A Cumulative Redeemable Perpetual Preferred Stock, dated September 15, 2020.
3.6 (6)	Articles Supplementary relating to the designation of shares of 7.125% Series B Cumulative Redeemable Perpetual Preferred Stock, dated October 4, 2021.
4.1 (6)	Sixth Amendment, dated October 4, 2021, to the Agreement of Limited Partnership of Healthcare Trust Operating Partnership, L.P., dated February 14, 2013.
31.1 *	Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *	Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 +	Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH *	Inline XBRL Taxonomy Extension Schema Document.
101.CAL *	Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *	Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *	Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *	Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104 *	Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

______

*    Filed herewith.

+    Furnished herewith

(1)Filed as an exhibit to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 filed with the SEC on March 11, 2016, and incorporated by reference herein.

(2)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 filed with the SEC on August 11, 2023, and incorporated by reference herein.

(3)Filed as an exhibit to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 filed with the SEC on November 14, 2017, and incorporated by reference herein.

(4)Filed as an exhibit to the Company’s Registration Statement on Form 8-A filed with the SEC on December 6, 2019, and incorporated by reference herein.

(5)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on September 15, 2020, and incorporated by reference herein.

(6)Filed as an exhibit to the Company’s Current Report on Form 8-K filed with the SEC on October 4, 2021, and incorporated by reference herein.

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Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HEALTHCARE TRUST, INC.
By:	/s/ Michael Anderson
	Michael Anderson
	Chief Executive Officer (Principal Executive Officer)
By:	/s/ Scott M. Lappetito
	Scott M. Lappetito
	Chief Financial Officer, Treasurer and Secretary (Principal Financial Officer and Principal Accounting Officer)

Dated: August 9, 2024

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