UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

~~FORM 10-Q~~

☒
FORM 10-Q
☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2017~~

2023

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

For the transition period from ______ to

______

Commission file number: 000-54685

~~CNL Healthcare Properties, Inc.~~

~~(Exact name of registrant as specified in its charter)~~

~~Maryland~~		~~27-2876363~~
CNL Healthcare Properties, Inc. (Exact name of registrant as specified in its charter)


Maryland						27-2876363
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)
CNL Center at City Commons 450 South Orange Avenue Orlando, Florida						32801
(Address of principal executive offices)						(Zip Code)
Registrant’s telephone number, including area code (407) 650-1000

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

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒ ~~(Do not check if a smaller reporting company)~~

Smaller reporting company

☐

Emerging growth company

☐

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

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

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
None	N/A	N/A

The number of shares of common stock of the registrant outstanding as of ~~October 31, 2017~~November 8, 2023 was ~~174,687,796.~~

175,292,459.

CNL HEALTHCARE PROPERTIES, INC.AND SUBSIDIARIES

INDEX

	~~Page~~
		Page
PART I. FINANCIAL INFORMATION

Item 1.		Condensed Consolidated Financial Information (unaudited):
		Condensed Consolidated Balance Sheets	2
		Condensed Consolidated Statements of Operations	3
		Condensed Consolidated Statements of Comprehensive ~~Loss~~Income (Loss)	4
		Condensed Consolidated Statements of Stockholders’ Equity ~~and Redeemable Noncontrolling Interest~~	5
		Condensed Consolidated Statements of Cash Flows	6 7
		Notes to Condensed Consolidated Financial Statements	7 8
Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	24 14
Item 3.		Quantitative and Qualitative Disclosures about Market ~~Risk~~Risks	44 30
Item 4.		Controls and Procedures	45 30

PART II. OTHER INFORMATION

Item 1.		Legal Proceedings	45 32
Item 1A.		Risk Factors	45 32
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	45 32
Item 3.		Defaults Upon Senior Securities	47 32
Item 4.		Mine Safety Disclosures	47 32
Item 5.		Other Information	47 32
Item 6.		Exhibits	47 32

~~Exhibits~~Exhibit Index		48 33
Signatures		49 34
Exhibits

PART I. FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial ~~Statements~~

Information

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

September 30,

December 31,

ASSETS

2017

2016

Real estate assets:

Real estate investment properties, net (including VIEs $216,181 and $112,929, respectively)

$
2,496,885

$
2,419,815

Real estate under development, including land (including VIEs $0 and $80,473, respectively)

4,856

97,164

Total real estate assets, net

2,501,741

2,516,979

Intangibles, net (including VIEs $2,129 and $2,891, respectively)

106,752

130,609

Cash (including VIEs $2,660 and $916, respectively)

72,470

58,517

Deferred rent and lease incentives (including VIEs $5,421 and $3,061, respectively)

40,956

31,045

Other assets (including VIEs $2,547 and $1,130, respectively)

23,633

24,470

Assets held for sale, net

52,469

53,351

Restricted cash (including VIEs $56 and $20, respectively)

9,493

12,721

Total assets

$
2,807,514

$
2,827,692

LIABILITIES AND EQUITY

Liabilities:

Mortgages and other notes payable, net (including VIEs $151,785 and $104,890, respectively)

$
1,035,114

$
936,723

Credit facilities

619,835

641,989

Accounts payable and accrued liabilities (including VIEs $3,946 and $16,830, respectively)

48,408

51,752

Other liabilities (including VIEs $1,426 and $976, respectively)

29,160

38,946

Due to related parties (including VIEs $113 and $107, respectively)

4,090

3,465

Total liabilities

1,736,607

1,672,875

Commitments and contingencies (Note 11)

Redeemable noncontrolling interest

399

472

Stockholders' equity:

Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued or outstanding

―

―

Excess shares, $0.01 par value per share, 300,000 shares authorized; none issued or outstanding

―

―

Common stock, $0.01 par value per share, 1,120,000 shares authorized, 183,374 and 180,188 shares issued, and 174,688 and 175,070 shares outstanding, respectively

1,747

1,751

Capital in excess of par value

1,524,804

1,528,435

Accumulated loss

(209,208
)

(182,813
)
Accumulated distributions

(243,954
)

(186,551
)
Accumulated other comprehensive loss

(4,077
)

(7,863
)
Total stockholders' equity

1,069,312

1,152,959

Noncontrolling interest

1,196

1,386

Total equity

1,070,907

1,154,817

Total liabilities and equity

$
2,807,514

$
2,827,692

The abbreviation VIEs above means variable interest entities.

~~See accompanying notes to condensed consolidated financial statements~~


ASSETS	September 30, 2023		December 31, 2022
Real estate investment properties, net (including VIEs $30,267 and $30,906, respectively)	$	1,286,207	$	1,313,438

Cash (including VIEs $507 and $646, respectively)	53,501		69,504
Restricted cash (including VIEs $1 and $9, respectively)	2,196		4,070
Other assets (including VIEs $143 and $554, respectively)	30,004		36,868
Deferred rent, lease incentives and intangibles, net	11,694		13,423
Total assets	$	1,383,602	$	1,437,303
LIABILITIES AND EQUITY
Liabilities:
Mortgages and other notes payable, net (including VIEs $20,752 and $21,142, respectively)	$	36,824	$	61,773
Credit facilities	547,127		546,100
Accounts payable and accrued liabilities (including VIEs $1,014 and $533, respectively)	30,409		30,270
Other liabilities (including VIEs $196 and $91, respectively)	7,573		7,469
Due to related parties	1,362		1,397
Total liabilities	623,295		647,009
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued or outstanding	―		—
Excess shares, $0.01 par value per share, 300,000 shares authorized; none issued or outstanding	―		—
Common stock, $0.01 par value per share, 1,120,000 shares authorized, 186,626 shares issued and 173,960 shares outstanding	1,740		1,740
Capital in excess of par value	1,516,926		1,516,926
Accumulated income	83,828		100,408
Accumulated distributions	(842,667)		(829,307)
Accumulated other comprehensive loss	(9)		(16)
Total stockholders' equity	759,818		789,751
Noncontrolling interest	489		543
Total equity	760,307		790,294
Total liabilities and equity	$	1,383,602	$	1,437,303

The abbreviation VIEs above means variable interest entities.

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)~~

~~(in thousands, except per share data)~~

Quarter Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Revenues:

Rental income from operating leases

$
32,039

$
31,047

$
97,382

$
92,742

Resident fees and services

64,548

59,271

182,557

174,594

Other revenues

5,100

5,193

15,226

15,176

Total revenues

101,687

95,511

295,165

282,512

Operating expenses:

Property operating expenses

49,978

47,163

142,944

139,637

General and administrative

3,529

2,705

9,811

9,653

Acquisition fees and expenses

―

126

―

277

Asset management fees

7,562

6,240

22,197

18,606

Property management fees

4,832

4,800

14,110

13,965

Financing coordination fees

2,748

―

2,748

―

Contingent purchase price consideration adjustments

―

528

77

(222
)
Loss on lease terminations

―

―

―

785

Depreciation and amortization

26,768

30,289

81,054

94,428

Total operating expenses

95,417

91,851

272,941

277,129

Operating income

6,270

3,660

22,224

5,383

Other income (expense):

Interest and other income (expense)

(450
)

9

(348
)

54

Interest expense and loan cost amortization

(17,059
)

(15,820
)

(48,453
)

(43,857
)
Equity in earnings of unconsolidated entity

98

194

230

108

Total other expense

(17,411
)

(15,617
)

(48,571
)

(43,695
)

Loss before income taxes

(11,141
)

(11,957
)

(26,347
)

(38,312
)
Income tax expense

(90
)

(66
)

(344
)

(241
)
Net loss

(11,231
)

(12,023
)

(26,691
)

(38,553
)
Less: Net loss attributable to noncontrolling interest

(61
)

(31
)

(296
)

(47
)
Net loss attributable to common stockholders

$
(11,170
)

$
(11,992
)

$
(26,395
)

$
(38,506
)

Net loss per share of common stock (basic and diluted)

$
(0.06
)

$
(0.07
)

$
(0.15
)

$
(0.22
)

Weighted average number of shares of common stock outstanding (basic and diluted)

175,190

175,033

175,229

175,068

Distributions declared per share of common stock

$
0.1164

$
0.1058

$
0.3280

$
0.3174

See accompanying notes to condensed consolidated financial statements.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~COMPREHENSIVE LOSS~~OPERATIONS (UNAUDITED)

(in ~~thousands)~~

thousands, except per share data)

Quarter Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Net loss

$
(11,231
)

$
(12,023
)

$
(26,691
)

$
(38,553
)

Other comprehensive income (loss):

Unrealized gain (loss) on derivative financial instruments, net

1,183

4,000

3,607

(5,914
)
Reclassification of cash flow hedges upon derecognition

132

―

186

―

Reclassification of cash flow hedges due to ineffectiveness

(7
)

(23
)

(7
)

(1
)
Unrealized loss on derivative financial instruments of equity method investments

―

―

―

(1
)
Total other comprehensive income (loss)

1,308

3,977

3,786

(5,916
)

Comprehensive loss

(9,923
)

(8,046
)

(22,905
)

(44,469
)
Less: Comprehensive loss attributable to noncontrolling interest

(61
)

(31
)

(296
)

(47
)
Comprehensive loss attributable to common stockholders

$
(9,862
)

$
(8,015
)

$
(22,609
)

$
(44,422
)


	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenues:
Rental income and related revenues	$	6,730	$	6,668	$	20,166	$	20,240
Resident fees and services	79,483		74,824		234,892		220,888
Total revenues	86,213		81,492		255,058		241,128
Operating expenses:
Property operating expenses	59,395		57,297		175,687		169,148
General and administrative expenses	2,015		2,730		6,569		7,802
Asset management fees	3,476		3,496		10,427		10,598
Property management fees	3,881		3,680		11,543		11,024
Financing coordination fees	—		—		163		—
Depreciation and amortization	12,471		13,232		38,741		40,765
Total operating expenses	81,238		80,435		243,130		239,337
Gain on sale of real estate	—		6,282		—		6,282
Operating income	4,975		7,339		11,928		8,073
Other income (expense):
Interest and other income	506		70		2,510		4,064
Interest expense and loan cost amortization	(10,762)		(6,076)		(30,680)		(14,678)
Gain on change of control of a joint venture	—		—		—		8,376

Total other expense	(10,256)		(6,006)		(28,170)		(2,238)
(Loss) income before income taxes	(5,281)		1,333		(16,242)		5,835
Income tax expense	(118)		(71)		(321)		(221)


Net (loss) income	(5,399)		1,262		(16,563)		5,614

Less: Amounts attributable to noncontrolling interests	15		940		17		988
Net (loss) income attributable to common stockholders	$	(5,414)	$	322	$	(16,580)	$	4,626


Net (loss) income per share of common stock (basic and diluted)	$	(0.03)	$	—	$	(0.10)	$	0.03

Weighted average number of shares of common stock outstanding (basic and diluted)	173,960		173,960		173,960		173,960

See accompanying notes to condensed consolidated financial statements.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 AND 2016~~COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in ~~thousands, except per share data)~~

thousands)

Accumulated

Redeemable

Common Stock

Capital in

Other

Total

Non-

Noncontrolling

Number

Par

Excess of

Accumulated

Accumulated

Comprehensive

Stockholders'

controlling

Total

Interest

of Shares

Value

Par Value

Loss

Distributions

Income (Loss)

Equity

Interest

Equity

Balance at December 31, 2016

$
472

175,070

$
1,751

1,528,435

$
(182,813
)

$
(186,551
)

$
(7,863
)

$
1,152,959

$
1,386

$
1,154,817

Subscriptions received for common stock through reinvestment plan

―

3,186

32

31,957

―

―

―

31,989

―

31,989

Redemptions of common stock

―

(3,568
)

(36
)

(35,588
)

―

―

―

(35,624
)

―

(35,624
)
Net loss

(73
)

―

―

―

(26,395
)

―

―

(26,395
)

(223
)

(26,691
)
Other comprehensive income

―

―

―

―

―

―

3,786

3,786

―

3,786

Distribution to holder of noncontrolling interest

―

―

―

―

―

―

―

―

(27
)

(27
)
Cash distributions declared ($0.3280 per share)

―

―

―

―

―

(57,403
)

―

(57,403
)

―

(57,403
)
Contribution from noncontrolling interests

―

―

―

―

―

―

―

―

60

60

Balance at September 30, 2017

$
399

174,688

$
1,747

$
1,524,804

$
(209,208
)

$
(243,954
)

$
(4,077
)

$
1,069,312

$
1,196

$
1,070,907

Balance at December 31, 2015

$
551

174,430

$
1,744

$
1,528,781

$
(151,146
)

$
(112,543
)

$
(9,747
)

$
1,257,089

$
1,462

$
1,259,102

Subscriptions received for common stock through reinvestment plan

―

3,281

33

31,957

―

―

―

31,990

―

31,990

Redemptions of common stock

―

(2,656
)

(26
)

(25,819
)

―

―

―

(25,845
)

―

(25,845
)
Net income (loss)

(52
)

―

―

―

(38,506
)

―

―

(38,506
)

5

(38,553
)
Other comprehensive loss

―

―

―

―

―

―

(5,916
)

(5,916
)

―

(5,916
)
Distribution to holder of noncontrolling interest

―

―

―

―

―

―

―

―

(29
)

(29
)
Distributions to holders of promoted interest

―

―

―

(6,650
)

―

―

―

(6,650
)

―

(6,650
)
Cash distributions declared ($0.3174 per share)

―

―

―

―

―

(55,488
)

―

(55,488
)

―

(55,488
)
Balance at September 30, 2016

$
499

175,055

$
1,751

$
1,528,269

$
(189,652
)

$
(168,031
)

$
(15,663
)

$
1,156,674

$
1,438

$
1,158,611


	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net (loss) income	$	(5,399)	$	1,262	$	(16,563)	$	5,614
Other comprehensive income (loss):
Unrealized gain (loss) on derivative financial instruments, net	56		(145)		7		1,702

Total other comprehensive income (loss)	56		(145)		7		1,702
Comprehensive (loss) income	(5,343)		1,117		(16,556)		7,316
Less: Comprehensive income attributable to noncontrolling interest	15		940		17		988
Comprehensive (loss) income attributable to common stockholders	$	(5,358)	$	177	$	(16,573)	$	6,328

See accompanying notes to condensed consolidated financial statements.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS' EQUITY

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023 (UNAUDITED)

(in ~~thousands)~~

thousands, except per share data)

Nine Months Ended

September 30,

2017

2016

Operating activities:

Net cash flows provided by operating activities

$
56,942

$
58,111

Investing activities:

Acquisition of unimproved land

(1,050
)

―

Development of properties

(46,254
)

(60,820
)
Issuance of note receivable

(443
)

―

Capital expenditures

(7,789
)

(5,825
)
Payment of leasing costs

(1,121
)

(2,423
)
Collection of contingent purchase price consideration

407

―

Deposits on real estate

―

275

Net cash used in investing activities

(56,250
)

(68,793
)

Financing activities:

Payment of stock issuance and offering costs

―

(32
)
Distributions to stockholders, net of distribution reinvestments

(25,415
)

(23,498
)
Distributions to holders of promoted interest

(2,000
)

(4,650
)
Contributions from noncontrolling interest

60

―

Distributions to holder of noncontrolling interest

(27
)

(29
)
Redemptions of common stock

(31,984
)

(20,298
)
Draws under credit facilities

42,000

80,113

Repayments on credit facilities

(64,863
)

(90,250
)
Proceeds from mortgage and other notes payable

164,548

111,309

Principal payments on mortgage and other notes payable

(66,098
)

(48,947
)
Payment of contingent purchase price consideration

(3,645
)

(2,770
)
Purchase of interest rate cap

(59
)

(587
)
Lender deposits

―

(15
)
Payment of loan costs

(2,484
)

(1,615
)
Payment on extinguishment of debt

―

(1,127
)
Net cash flows provided by (used in) financing activities

10,033

(2,396
)

Net increase (decrease) in cash and restricted cash

10,725

(13,078
)
Cash and restricted cash at beginning of period

71,238

79,209

Cash and restricted cash at end of period

$
81,963

$
66,131

Supplemental disclosure of non-cash investing and financing activities:

Amounts incurred but not paid (including amounts due to related parties):

Accrued development costs

$
648

$
21,336

Redemptions payable

$
14,037

$
8,285

Contingent purchase price consideration

$
1,000

$
4,867

Distribution to holder of promoted interest

$
—

$
2,000


										Accumulated
	Common Stock			Capital in						Other		Total		Non-
	Number	Par		Excess of		Accumulated		Accumulated		Comprehensive		Stockholders'		controlling		Total
	of Shares	Value		Par Value		Income		Distributions		Income (Loss)		Equity		Interest		Equity
Balance at June 30, 2023	173,960	$	1,740	$	1,516,926	$	89,242	$	(838,213)	$	(65)	$	769,630	$	487	$	770,117
Net (loss) income	—	—		—		(5,414)		—		—		(5,414)		15		(5,399)
Other comprehensive income	—	—		—		—		—		56		56		—		56
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(13)		(13)
Cash distributions declared ($0.0256 per share)	—	—		—		—		(4,454)		—		(4,454)		—		(4,454)
Balance at September 30, 2023	173,960	$	1,740	$	1,516,926	$	83,828	$	(842,667)	$	(9)	$	759,818	$	489	$	760,307

Balance at December 31, 2022	173,960	$	1,740	$	1,516,926	$	100,408	$	(829,307)	$	(16)	$	789,751	$	543	$	790,294
Net (loss) income	—	—		—		(16,580)		—		—		(16,580)		17		(16,563)
Other comprehensive income	—	—		—		—		—		7		7		—		7
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(71)		(71)
Cash distributions declared ($0.0768 per share)	—	—		—		—		(13,360)		—		(13,360)		—		(13,360)
Balance at September 30, 2023	173,960	$	1,740	$	1,516,926	$	83,828	$	(842,667)	$	(9)	$	759,818	$	489	$	760,307

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2022 (UNAUDITED)

(in thousands, except per share data)


										Accumulated
	Common Stock			Capital in						Other		Total		Non-
	Number	Par		Excess of		Accumulated		Accumulated		Comprehensive		Stockholders'		controlling		Total
	of Shares	Value		Par Value		Income		Distributions		Income (Loss)		Equity		Interest		Equity
Balance at June 30, 2022	173,960	$	1,740	$	1,516,926	$	106,165	$	(820,399)	$	1,857	$	806,289	$	1,765	$	808,054
Net income	—	—		—		322		—		—		322		940		1,262
Other comprehensive loss	—	—		—		—		—		(145)		(145)		—		(145)
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(2,134)		(2,134)
Cash distributions declared ($0.0256 per share)	—	—		—		—		(4,454)		—		(4,454)		—		(4,454)
Balance at September 30, 2022	173,960	$	1,740	$	1,516,926	$	106,487	$	(824,853)	$	1,712	$	802,012	$	571	$	802,583

Balance at December 31, 2021	173,960	$	1,740	$	1,516,926	$	101,861	$	(811,493)	$	10	$	809,044	$	1,717	$	810,761
Net income	—	—		—		4,626		—		—		4,626		988		5,614
Other comprehensive income	—	—		—		—		—		1,702		1,702		—		1,702
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(2,134)		(2,134)
Cash distributions declared ($0.0768 per share)	—	—		—		—		(13,360)		—		(13,360)		—		(13,360)

Balance at September 30, 2022	173,960	$	1,740	$	1,516,926	$	106,487	$	(824,853)	$	1,712	$	802,012	$	571	$	802,583

See accompanying notes to condensed consolidated financial statements.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Nine Months Ended September 30,
	2023		2022
Operating activities:
Net cash flows provided by operating activities	$	24,616	$	34,394


Investing activities:
Acquisition of joint venture interest, net of cash acquired	—		(1,134)
Net proceeds from sale of property	—		36,655
Capital expenditures	(10,463)		(12,288)
Purchase of held-to-maturity securities	(4,880)		—
Proceeds from maturity of short-term securities	15,000		—
Other investing activities	—		373


Net cash (used in) provided by investing activities	(343)		23,606
Financing activities:
Distributions to stockholders	(13,360)		(13,360)
Draws on line of credit	—		45,000
Purchase of interest rate cap	(3,211)		—

Principal payments on mortgages and other notes payable	(25,067)		(45,935)
Distributions to noncontrolling interests	(71)		(2,134)
Other financing activities	(441)		(324)
Net cash flows used in financing activities	(42,150)		(16,753)
Net (decrease) increase in cash and restricted cash	(17,877)		41,247
Cash and restricted cash at beginning of period	73,574		57,681
Cash and restricted cash at end of period	$	55,697	$	98,928

Supplemental disclosure of non-cash investing and financing activities:
Real estate investment properties	$	—	$	29,384
Intangibles	—		4,281
Mortgages and notes payable	—		(18,468)
Net assets recognized upon the change in control of the Windsor Manor Joint Venture	$	—	$	15,197

See accompanying notes to condensed consolidated financial statements.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 (UNAUDITED)

1.	~~Organization~~

1.Organization

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

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

~~On September 30, 2015,~~

The Company is externally managed and advised by CNL Healthcare Corp. (“Advisor”), which is an affiliate of CNL Financial Group, LLC (“Sponsor”). The Sponsor is an affiliate of CNL Financial Group, Inc. (“CNL”). The Advisor is responsible for managing the Company’s day-to-day operations, serving as a consultant in connection with policy decisions to be made by the board of directors, and for identifying, recommending and executing on possible strategic alternatives and dispositions on the Company’s behalf pursuant to an advisory agreement among the Company, ~~completed its Offerings pursuant~~the Operating Partnership and the Advisor (as amended, the “Advisory Agreement”). Substantially all of the Company’s operating, administrative and certain property management services are provided by affiliates of the Advisor. In addition, certain property management services are provided by third-party property managers.

In 2017, the Company began evaluating possible strategic alternatives to provide liquidity to the Company’s stockholders. As part of executing under possible strategic alternatives, the Company’s board of directors committed to a ~~registration statement on Form S-11 under~~plan to sell 70 properties, which included medical office buildings, post-acute care facilities and acute care hospitals across the ~~Securities Act of 1933 with the Securities and Exchange Commission (“SEC”~~U.S., collectively (the “MOB/Healthcare Portfolio”)~~. In October 2015, the~~, plus several skilled nursing facilities. The Company deregistered the unsold shares of its common stock under its previous registration statement on Form S-11, except for 20,000,000 shares that the Company concurrently registered on Form S-3 under the Securities Exchange Act of 1933 with the SEC forcompleted the sale of ~~additional shares of common stock through its distribution reinvestment plan (“Reinvestment Plan”).~~

~~With~~ the ~~completion~~last of the ~~Offerings and substantial completion~~70 properties in 2022.

As of ~~its acquisition phase,~~September 30, 2023, the Company’s ~~focus is on actively managing a diversified portfolio of healthcare real estate and real estate-related assets within the~~ seniors housing ~~medical office, post-acute care~~portfolio was geographically diversified with properties in 26 states and ~~acute care asset classes. The types~~consisted of interests in 70 properties, including 69 seniors housing ~~that the Company has acquired include independent and assisted living facilities, continuing care retirement~~ communities and Alzheimer’s / memory care facilities. The types of medical offices that the Company has acquired include medical office buildings (“MOBs”), specialty medical and diagnostic service facilities, surgery centers, outpatient rehabilitation facilities, and other facilities designed for clinical services. The types of post-acute care facilities that the Company has acquired include skilled nursing facilities and inpatient rehabilitative hospitals. The types of acute care facilities that the Company has acquired include specialty surgical hospitals. The Company views, manages and evaluates its portfolio homogeneously as one ~~collection of healthcare assets with a common goal of maximizing revenues and property income regardless of the asset class or asset type.~~

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

2.	~~Summary of Significant Accounting Policies~~

2.Summary of Significant Accounting Policies

Basis of Presentation and Consolidation —The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the ~~United States~~U.S. (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented. Operating results for the ~~quarter and~~ nine months ended September 30, ~~2017~~2023 may not be indicative of the results that may be expected for the year ending December 31, ~~2017.~~2023. Amounts as of December 31, ~~2016~~2022 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2016 (“Annual Report”).~~

2022.

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

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 2023 (UNAUDITED)

2.Summary of Significant Accounting Policies (continued)

Grant Income — In ~~accordance~~response to the coronavirus pandemic, the federal government and some states provided funds to providers of seniors housing communities. These funds were deemed federal/state governmental grants and provided that the recipients attest to and comply with certain terms and conditions. Grant income is recognized upon receipt of the ~~guidance for~~funds and when all the ~~consolidation~~conditions of ~~VIEs,~~the grant have been met. During the nine months ended September 30, 2023 and 2022, the Company ~~analyzes its variable interests, including loans, leases, guarantees,~~recorded approximately $1.0 million and ~~equity investments, to determine if~~$3.9 million, respectively, as other income in the entity in which it has a variable interest is a VIE. The Company’s analysis includes both quantitative and qualitative reviews. The Company bases its quantitative analysis on the forecasted cash flowsaccompanying condensed consolidated statements of operations as all conditions of the entity, and its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and financial agreements. The Company also uses its quantitative and qualitative analyses to determine if it is the primary beneficiary of the VIE, and if such determination is made, it includes the accounts of the VIE in its consolidated financial statements.

grant had been met.

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

~~Adopted Accounting Pronouncements~~

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

2.	~~Summary of Significant Accounting Policies (continued)~~

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

As Filed

Adjusted

September 30,

September 30,

2016

Adjustments

2016

Operating activities:

Loss on extinguishment of debt

$
368

$
1,127

$
1,495

Net cash provided by operating activities

$
56,984

$
1,127

$
58,111

Investing activities:

Changes in restricted cash

$
(1,225
)

$
1,225

$
—

Net cash used in investing activities

$
(70,018
)

$
1,225

$
(68,793
)
Financing activities:

Payment on extinguishment of debt

$
—

$
(1,127
)

$
(1,127
)
Net cash used in financing activities

$
(1,269
)

$
(1,127
)

$
(2,396
)
Net decrease in cash and restricted cash

$
(14,303
)

$
1,225

$
(13,078
)
Cash and restricted cash at beginning of period

68,922

10,287

79,209

Cash and restricted cash at end of period

$
54,619

$
11,512

$
66,131

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

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

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

2.	~~Summary of Significant Accounting Policies (continued)~~

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

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

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

3.	~~Real Estate Assets, net~~

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

September 30,

December 31,

2017

2016

Land and land improvements

$
251,659

$
235,543

Building and building improvements

2,409,656

2,306,071

Furniture, fixtures and equipment

79,933

64,939

Less: accumulated depreciation

(244,363
)

(186,738
)
Real estate investment properties, net

2,496,885

2,419,815

Real estate under development, including land

4,856

97,164

Total real estate assets, net

$
2,501,741

$
2,516,979

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

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

~~Property Name~~	~~Location~~	~~Substantial Completion Date~~
~~Development Properties~~
~~Welbrook Transitional Care Grand Junction~~	~~Grand Junction, CO~~		~~March 2017~~
~~Waterstone on Augusta~~	~~Greenville, SC~~		~~March 2017~~
~~Wellmore of Lexington~~	~~Lexington, SC~~		~~June 2017~~
~~Dogwood Forest of Grayson~~	~~Grayson, GA~~		~~June 2017~~

~~Expansion Projects~~
~~Brookridge Heights Assisted Living & Memory Care~~	~~Marquette, MI~~		~~June 2017~~

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

Property Name
(and Location)

Developer

Real Estate Development
Costs Incurred ⁽¹⁾

Remaining Development Budget⁽²⁾

Tranquillity at Fredericktowne
(Frederick, MD)

Capital Health Partners

$
4,856

$
2,029

~~_____________~~

~~FOOTNOTES:~~

~~(1)~~

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

~~(2)~~

~~This amount includes preleasing and marketing costs, which will be expensed as incurred.~~

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

4.	~~Intangibles, net~~

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

September 30,

December 31,

2017

2016

In-place lease intangibles

$
223,854

$
223,854

Above-market lease intangibles

13,974

13,974

Below-market ground lease intangibles

12,470

12,470

Less: accumulated amortization

(143,546
)

(119,689
)
Intangible assets, net

$
106,752

$
130,609

Below-market lease intangibles

$
(12,060
)

$
(12,060
)
Above-market ground lease intangibles

(3,488
)

(3,488
)
Less: accumulated amortization

5,362

4,247

Intangible liabilities, net (1)

$
(10,186
)

$
(11,301
)

~~____________~~

~~FOOTNOTE:~~

~~(1)~~

~~Intangible liabilities, net are included in other liabilities in the accompanying condensed consolidated balance sheets.~~

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

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

5.	~~Variable Interest Entities~~

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

September 30,

December 31,

2017

2016

Assets:

Real estate investment properties, net

$
216,181

$
112,929

Real estate under development, including land

$
―

$
80,473

Intangibles, net

$
2,129

$
2,891

Cash

$
2,660

$
916

Deferred rent and lease incentives

$
5,421

$
3,061

Other assets

$
2,547

$
1,130

Restricted cash

$
56

$
20

Liabilities:

Mortgages and other notes payable, net

$
151,785

$
104,890

Accounts payable and accrued liabilities

$
3,197

$
1,461

Accrued development costs

$
749

$
15,369

Other liabilities

$
1,426

$
976

Due to related parties

$
113

$
107

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

~~As of September 30, 2017 and December 31, 2016,~~2022, the Company had 10net assets in two subsidiaries ~~which are~~ classified as ~~VIEs due to the following factors and circumstances:~~

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

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

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

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

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

The Company sold the property owned by one of these subsidiaries in August 2022, dissolved the subsidiary during the nine months ended September 30, 2023 and as of September 30, 2023, had one remaining subsidiary classified as a VIE. The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to its net investment in this entity which totaled approximately$8.5 millionas of September 30, 2023. The Company’s exposure is limited because of the non-recourse nature of the borrowings of this VIE.

3.Revenue

The following table presents disaggregated revenue related to the Company’s resident fees and services during the quarter and nine months ended September 30, 2023 and 2022:


	Quarter Ended September 30,
	Number of Units		Revenues (in millions)				Percentage of Revenues
Resident fees and services:	2023	2022	2023		2022		2023		2022
Independent living	2,222	2,223	$	20.4	$	18.7	25.7	%	25.0	%
Assisted living	3,039	3,041	39.5		37.3		49.7		49.9
Memory care	932	932	15.5		15.1		19.5		20.2
Other revenues	—	—	4.1		3.7		5.1		4.9
	6,193	6,196	$	79.5	$	74.8	100.0	%	100.0	%

	Nine Months Ended September 30,
	Number of Units		Revenues (in millions)				Percentage of Revenues
Resident fees and services:	2023	2022	2023		2022		2023		2022
Independent living	2,222	2,223	$	60.0	$	55.1	25.5	%	24.9	%
Assisted living	3,039	3,041	117.1		109.5		49.9		49.7
Memory care	932	932	46.1		45.6		19.6		20.6
Other revenues	—	—	11.7		10.7		5.0		4.8
	6,193	6,196	$	234.9	$	220.9	100.0	%	100.0	%

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 (UNAUDITED)

6.	~~Contingent Purchase Price Consideration~~

4.Real Estate Assets, net

The ~~following table provides a roll-forward of the fair value~~gross carrying amount and accumulated depreciation of the Company’s ~~aggregate contingent purchase price consideration~~real estate assets as of September 30, 2023 and December 31, 2022 are as follows (in thousands):


	September 30, 2023		December 31, 2022
Land and land improvements	$	136,984	$	136,416
Building and building improvements	1,499,634		1,495,552
Furniture, fixtures and equipment	110,984		105,784
Less: accumulated depreciation	(461,395)		(424,314)
Real estate investment properties, net	$	1,286,207	$	1,313,438

Depreciation expense on the Company’s real estate investment properties, net was approximately $12.5 million and $37.6 million for the quarter and nine months ended September 30, ~~2017~~2023, respectively, and ~~2016 (in thousands):~~

Quarter Ended September 30, 2017

Property

Beginning asset (liability) as of June 30, 2017

Contingent Consideration Payment

Change in Fair Value

Ending asset (liability) as of September 30, 2017

Superior Residences of Panama City

$
(2,000
)

$
1,000

$
—

$
(1,000
)
Center One

798

(203
)

―

595

$
(1,202
)

$
797

$
—

$
(405
)

Quarter Ended September 30, 2016

Property

Beginning asset (liability) as of June 30, 2016

Contingent Consideration Payment

Change in Fair Value

Ending asset (liability) as of September 30, 2016

Superior Residences of Panama City

$
(3,000
)

$
—

$
(1,000
)

$
(4,000
)
Siena Pavilion VI

(3,750
)

2,770

113

(867
)
Center One

843

(99
)

359

1,103

$
(5,907
)

$
2,671

$
(528
)

$
(3,764
)

Nine Months Ended September 30, 2017

Property

Beginning asset (liability) as of December 31, 2016

Contingent Consideration Payment

Change in Fair Value

Ending asset (liability) as of September 30, 2017

Superior Residences of Panama City

$
(4,000
)

$
3,000

$
—

$
(1,000
)
Siena Pavilion VI

(645
)

645

―

―

Center One

1,079

(407
)

(77
)

595

$
(3,566
)

$
3,238

$
(77
)

$
(405
)

Nine Months Ended September 30, 2016

Property

Beginning asset (liability) as of December 31, 2015

Contingent Consideration Payment

Change in Fair Value

Ending asset (liability) as of September 30, 2016

Superior Residences of Panama City

$
(3,000
)

$
—

$
(1,000
)

$
(4,000
)
The Shores of Lake Phalen

(750
)

―

750

―

Siena Pavilion VI

(3,750
)

2,770

113

(867
)
Center One

1,019

(275
)

359

1,103

$
(6,481
)

$
2,495

$
222

$
(3,764
)

~~The fair value of the contingent purchase price consideration is based on a then-current income approach that is primarily determined based on the present value~~approximately $12.4 million and ~~probability of future cash flows using internal underwriting models.~~ ~~The income approach further includes estimates of risk-adjusted rate of return, capitalization rates~~$38.2 million for ~~the respective property and/or lease-up assumptions.~~ Since these estimates include inputs that are less observable by the public and are not necessarily reflected in active markets, the measurements of the estimated fair value related to the Company’s contingent purchase price consideration are categorized as Level 3 on the three-level fair value hierarchy. There were no transfers into and out of fair value measurement levels during the quarter and nine months ended September 30, ~~2017.~~

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER~~2022, respectively.

5.Indebtedness

During the nine months ended September 30, ~~2017 (UNAUDITED)~~

7.	~~Indebtedness~~

~~The following table provides details~~2023, the Company paid approximately $25.1 million in principal payments, which included the repayment of a mortgage loan of approximately $22.8 million collateralized by one property in advance of its scheduled maturity in June 2023, the repayment of $1.4 million of unscheduled principal payments relating to a mortgage loan collateralized by five properties and $0.9 million of scheduled principal payments. During the nine months ended September 30, 2023, the Company also exercised its one-year extension option for the $133.0 million outstanding under the Company’s Revolving Credit Facility, which extended the maturity date from May 2023 to May 2024. The Company has $0.2 million of scheduled principal payments coming due during the remainder of 2023.

In June 2023, the Company refinanced a mortgage loan with the existing lender that consisted of $16.1 million of indebtedness secured by five properties that had a LIBOR based benchmark rate and was scheduled to mature in February 2024. In connection with the refinancing, the Company also amended certain terms and transitioned its benchmark rate from LIBOR to Term SOFR effective June 30, 2023, extended the maturity date from February 2024 to February 2026 and obtained two one-year extension options.

During the nine months ended September 30, 2023, the Company purchased a short-term interest rate cap for approximately $3.1 million, which had a notional value of $420.0 million and a strike price of 3.5%, to hedge the majority of its Credit Facilities. The interest rate cap matured in August 2023. In addition, the Company purchased a short-term interest rate cap for approximately $0.1 million, with a notional value of $8.0 million, a strike price of 3.5%, and a maturity date of January 2024 to hedge a portion of its interest rate exposure relating to the $16.3 million variable rate secured indebtedness that was refinanced in June 2023. The fair value of these cash flow hedges of approximately $0.04 million is included in other assets in the accompanying condensed consolidated balance sheets as of September 30, ~~2017 and December 31, 2016 (in thousands):~~

September 30,

December 31,

2017

2016

Mortgages payable and other notes payable:

Fixed rate debt

$
412,159

$
382,129

Variable rate debt ⁽¹⁾⁽⁵⁾

630,294

561,874

Mortgages and other notes payable ⁽²⁾

1,042,453

944,003

Premium (discount), net ⁽³⁾

109

(67
)
Loan costs, net

(7,448
)

(7,213
)
Total mortgages and other notes payable, net

1,035,114

936,723

Credit facilities:

Revolving Credit Facility ^{(4) (5)}

172,000

194,863

First Term Loan Facility ⁽¹⁾

175,000

175,000

Second Term Loan Facility ⁽⁵⁾

275,000

275,000

Loan costs, net related to Term Loan Facilities

(2,165
)

(2,874
)
Total credit facilities, net

619,835

641,989

Total indebtedness, net

$
1,654,949

$
1,578,712

~~_____________~~

~~FOOTNOTES:~~

~~(1)~~

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

2023.

~~(2)~~

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

~~(3)~~

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

~~(4)~~

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

~~(5)~~

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

The following is a schedule of future principal payments ~~and maturity~~ for the Company’s total indebtedness for the remainder of ~~2017,~~2023, for each of the next four years and thereafter, in the aggregate, as of September 30, ~~2017~~2023 (in thousands):

2017

$
203,265

2018

71,859

2019

505,235

2020

424,263

2021

49,556

Thereafter

410,384

$
1,664,562


2023	$	217
2024	568,968
2025	308
2026	15,542
2027	—
Thereafter	—
	$	585,035

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

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 (UNAUDITED)

7.	~~Indebtedness (continued)~~

5.Indebtedness (continued)

The Company has approximately $548.0 million outstanding under its unsecured Credit Facilities as of the balance sheet date which mature in May 2024. As of the balance sheet date, the Company does not have sufficient cash on hand to satisfy these obligations. Management has been in discussions with existing and potential lenders, and based on the negotiations to date with its lender group, the Company believes it is probable it will be successful in refinancing the amounts outstanding under the Credit Facilities. The Company’s low leverage profile, along with current and anticipated cash flows, are expected to be sufficient to support a refinancing of the current outstanding indebtedness while maintaining reasonable debt service coverage ratios. There can be no assurance that the refinancing will occur or will occur on the terms currently contemplated. If sufficient refinancing cannot be arranged under an unsecured facility to satisfy the outstanding obligations due in May 2024, it may impact the Company’s ability to continue its operations. The Company believes it has other options to meet its obligation. These other options include, but are not limited to, refinancing with lending institutions as a secured loan facility, issuing mortgages collateralized by unencumbered properties in its portfolio and/or selling all or a portion of the 63 unencumbered properties and using net sales proceeds to satisfy the obligation.

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

Interest Rate at

September 30,

Maturity

September 30,

Property and Loan Type

2017 ⁽¹⁾

Payment Terms

Date ⁽²⁾

2017

Pacific Northwest Communities;
Mortgage Loan ⁽³⁾

4.30%
per annum

Monthly principal and interest payments based on a 25-year amortization schedule

1/5/22

$
210,439

Capital Health Communities;
Mortgage Loan ⁽⁴⁾

(4)

Monthly principal and interest payments based on a 25-year amortization schedule

1/5/22

63,184

Total fixed rate debt

273,623

Wellmore of Tega Cay;
Mortgage Loan

30-day LIBOR
plus 2.65%
per annum

Monthly interest only payments for the first 12 months; principal and interest payments thereafter based on a 30-year amortization schedule

3/1/20

28,000

Knoxville Medical Office Properties and Claremont Medical Office;
Mortgage Loan ⁽⁵⁾

30-day LIBOR
plus 2.45%
per annum

Monthly principal and interest payments based on a 30-year amortization schedule

5/24/22

57,350

Total variable rate debt

85,350

Total debt

$
358,973

~~_____________~~

~~FOOTNOTES:~~

~~(1)~~

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

~~(2)~~

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

~~(3)~~

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

7.	~~Indebtedness (continued)~~

~~(4)~~

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

~~(5)~~

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

~~The following table provides~~ details of the fair market value and carrying value of the Company’s indebtedness as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 (in ~~thousands)~~millions):

	September 30,				December 31,
	2017				2016					September 30, 2023				December 31, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value			Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgages and other notes payable, net	$	1,041.0	$	1,035.1	$	943.4	$	936.7	Mortgages and other notes payable, net	$	36.0	$	36.8	$	60.8	$	61.8
Credit facilities	$	622.0	$	619.8	$	644.9	$	642.0
Credit facilities, net									Credit facilities, net	$	548.0	$	547.1	$	548.0	$	546.1

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

Generally, the ~~carrying value as of September 30, 2017 and December 31, 2016 because of the relatively short maturities of the obligations.~~

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

The ~~credit facilities~~loan agreements also contain customary events of default and remedies for the lenders. As of September 30, 2023, the Company was in compliance with all financial covenants related to its mortgage loans.

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

As of September 30, ~~2017,~~2023, the Company was in compliance with all financial ~~covenants.~~

covenants related to its Credit Facilities.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 (UNAUDITED)

8.	~~Related Party Arrangements~~

6.Related Party Arrangements

~~In February 2017,~~

On June 5, 2023, the ~~Company’s board of directors approved the fourth amended and restated expense support agreements~~Company renewed its Advisory Agreement with ~~both~~ the Advisor for an additional two years expiring June 30, 2025 and ~~Property Manager that were effective January 1, 2017. These amendments limit~~amended the ~~annual expense support amount, in~~terms of its advisory agreement with the ~~aggregate,~~Advisor. The amendment (i) revised the defined term “real estate asset value” from the greater of to ~~an annualized four percent~~the lesser of cost basis or the current independent valuation (before non-cash reserves and depreciation), and (ii) subordinated 0.05% of the ~~weighted~~0.80% per annum asset management fee paid by the Company to the Advisor (based on the monthly average of the ~~Board’s most recent determination~~sum of ~~estimated net~~the Company’s and the Operating Partnership’s respective daily real estate asset ~~value (“NAV”) per share~~value). The subordinated fee will be forfeited and ~~change~~not paid to the ~~calculation to exclude the impact of completed development properties for a specified period of time after the property is placed into service (as defined~~Advisor in the ~~agreements). These amendments, along with~~event the ~~original expense support agreements~~Company does not achieve certain performance thresholds during certain measurement periods. Additionally, the Expense Support and ~~previous amendments govern~~Restricted Stock Agreement, as amended, by and between the ~~fees~~Company and ~~expenses charged by~~ the Advisor (the “Expense Support Agreement”) was terminated effective June 8, 2023.

The Company paid approximately $0.03 million and ~~Property Manager to the Company. Refer to the Company’s Annual Report on Form 10-K for further information related to these previous expense support agreements.~~

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

~~The following fees have been or are expected to be settled in accordance with the expense support agreements for~~$0.10 million during the quarter and nine months ended September 30, 2023 and 2022, respectively, of cash distributions on Restricted Stock issued through March 2017 pursuant to the ~~quarter~~Expense Support Agreement. These amounts have been recognized as compensation expense and ~~nine months ended September 30, 2016,~~included in general and ~~cumulatively as~~administrative expenses in the accompanying condensed consolidated statements of ~~September 30, 2017 (in thousands, except per share data):~~

Quarter ended

Nine Months Ended

As of

September 30,

September 30,

September 30,

2017

2016

2017

2016

2017

Asset management fees ⁽¹⁾

$
—

$
850

$
—

$
2,550

$
13,565

Then-current offering price or NAV ⁽²⁾

$
10.04

$
9.75

$
10.04

$
9.75

$
10.04

Restricted Stock shares ⁽³⁾

―

87

―

262

1,332

Cash distributions on Restricted Stock ⁽⁴⁾

$
158

$
112

$
413

$
315

$
1,223

~~______________~~

~~FOOTNOTES:~~

~~(1)~~

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

operations. The termination of the Expense Support Agreement in June 2023 does not impact the previously issued Restricted Stock.

~~(2)~~

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

~~(3)~~

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

~~(4)~~

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

8.	~~Related Party Arrangements (continued)~~

The expenses and fees incurred by and reimbursable to the Company’s related parties for the quarter and nine months ended September 30, ~~2017~~2023 and ~~2016,~~2022, and related amounts unpaid as of September 30, ~~2017~~2023 and December 31, ~~2016~~2022 are as follows (in thousands):


	Quarter Ended				Nine Months Ended				Unpaid amounts as of (1)
	September 30,				September 30,				September 30, 2023		December 31, 2022
	2023		2022		2023		2022
Reimbursable expenses:
Operating expenses (2)	$	687	$	835	$	2,081	$	2,390	$	203	$	238
	687		835		2,081		2,390		203		238

Investment services fee (3)	—		—		—		60		—		—
Disposition fee (4)	—		127		—		195		—		—
Financing coordination fees (5)	—		—		163		—		—		—
Asset management fees	3,476		3,496		10,427		10,598		1,159		1,159
	$	4,163	$	4,458	$	12,671	$	13,243	$	1,362	$	1,397

Quarter ended

Nine Months Ended

Unpaid amounts as of ⁽¹⁾

September 30,

September 30,

September 30,

December 31,

2017

2016

2017

2016

2017

2016

Reimbursable expenses:

Operating expenses ⁽²⁾
$
1,396

$
1,043

$
4,326

$
3,533

$
1,015

$
1,072

Acquisition fees and expenses

3

28

6

101

―

3

1,399

1,071

4,332

3,634

1,015

1,075

Investment services fees ⁽³⁾

19

194

123

194

―

17

Financing coordination fees ⁽⁴⁾

2,748

―

3,601

―

―

―

Property management fees ⁽⁵⁾

1,196

1,353

3,660

3,668

423

417

Asset management fees ⁽⁶⁾

7,643

7,270

22,711

21,699

2,652

1,956

$
13,005

$
9,888

$
34,427

$
29,195

$
4,090

$
3,465

~~________________~~

FOOTNOTES:

~~(1)~~

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

~~(2)~~

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

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

~~(3)~~

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

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

~~(4)~~

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

~~(5)~~

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

8.	~~Related Party Arrangements (continued)~~

~~(6)~~

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

9.	~~Derivative Financial Instruments~~

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

Fair value asset
(liability) as of

Notional

Credit

Trade

Forward

Maturity

September 30,

December 31,

Amount

Strike ⁽¹⁾

Spread ⁽¹⁾

date

date

date

2017

2016

$
11,895

⁽²⁾

1.3
%

2.6
%

1/17/2013

1/15/2015

1/16/2018

$
(4
)

$
(44
)
$
36,990

⁽²⁾

2.7
%

2.5
%

9/6/2013

8/17/2015

7/10/2018

$
(395
)

$
(878
)
$
25,206

⁽²⁾

2.8
%

2.5
%

9/6/2013

8/17/2015

8/29/2018

$
(304
)

$
(667
)
$
47,306

⁽²⁾

2.4
%

2.9
%

8/15/2014

6/1/2016

6/2/2019

$
(551
)

$
(949
)
$
81,233

⁽²⁾

2.3
%

2.4
%

9/12/2014

8/1/2015

7/15/2019

$
(888
)

$
(1,512
)
$
6,785

⁽²⁾

1.2
%

2.3
%

11/12/2014

11/15/2014

10/15/2017

$
—

$
(17
)
$
175,000

⁽²⁾

1.6
%

2.0
%

12/23/2014

12/19/2014

2/19/2019

$
(66
)

$
(992
)
$
130,866

⁽²⁾

1.7
%

2.0
%

1/9/2015

12/10/2015

12/22/2019

$
(240
)

$
(976
)
$
260,000

⁽³⁾

1.5
%

—
%

11/19/2015

11/19/2015

11/30/2018

$
405

$
600

$
150,000

⁽³⁾

1.5
%

—
%

3/1/2016

3/1/2016

11/30/2018

$
228

$
346

$
117,000

⁽³⁾

2.3
%

—
%

8/29/2017

8/29/2017

9/1/2019

$
60

$
—

~~_______________~~

~~FOOTNOTES:~~

~~(1)~~

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

~~(2)~~

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

~~(3)~~

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

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

~~10.~~

~~Equity~~

~~Stockholders’ Equity:~~

~~Distribution Reinvestment Plan~~ — (3)For the nine months ended September 30, ~~2017 and 2016,~~2022, the Company ~~received proceeds through its Reinvestment Plan~~incurred approximately $0.1 million in investment services fees, all of ~~approximately $32.0 million (3.2 million shares)~~which was capitalized and ~~$32.0 million (3.3 million shares), respectively.~~

~~Distributions~~ ~~— The following table details~~included in real estate assets, net in the ~~Company’s historical estimated NAV per share, including~~accompanying condensed consolidated balance sheets. For the ~~prices pursuant~~quarter and nine months ended September 30, 2023, the Company did not incur any investment services fees.

(4)Amounts are recorded as a reduction to gain on sale of real estate in the ~~Reinvestment Plan and the Company’s monthly cash distributions per share:~~

accompanying condensed consolidated statements of operations.

NAV per

Reinvestment Plan Price

Monthly Cash

Period

Share

per Share

Distributions

February 12, 2016 through February 13, 2017

$
9.75

$
9.75

$
0.0353

February 14, 2017 through June 30, 2017

$
10.04

$
10.04

$
0.0353

July 1, 2017 through September 30, 2017

$
10.04

$
10.04

$
0.0388

~~During~~(5)For the nine months ended September 30, ~~2017 and 2016,~~2023, the Company ~~declared cash distributions~~incurred financing coordination fees of ~~$57.4~~approximately $0.2 million, ~~and $55.5 million, respectively, of which $25.4 million and $23.5 million, respectively, were paid in cash to stockholders and $32.0 million and $32.0 million, respectively, were reinvested pursuant~~related to the ~~Reinvestment Plan.~~

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

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

Property

Amount

Dogwood Forest of Acworth

$
(3,850
)
Wellmore of Tega Cay

(2,800
)

$
(6,650
)

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

~~CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~NINE MONTHS ENDED SEPTEMBER 30, 2017 (UNAUDITED)~~

~~10.~~

~~Equity (continued)~~

~~Other comprehensive income (loss)~~ ~~— The following table reflects the effect of derivative financial instruments held by the Company, or its equity method investments, and included in the~~accompanying condensed consolidated ~~statements~~statement of ~~comprehensive loss~~operations. The Company did not incur any financing coordination fees for the quarter and nine months ended September 30, ~~2017 and 2016 (in thousands):~~

2022.

Derivative financial
instruments

Gain (loss) recognized in
other comprehensive loss
on derivative financial instruments

Location of gain (loss)
reclassified into earnings

Gain (loss) reclassified from accumulated other comprehensive loss
into earnings

Quarter Ended

Quarter Ended

September 30,

September 30,

2017

2016

2017

2016

Interest rate swaps

$
888

$
4,033

Interest expense and loan cost amortization

$
(433
)

$
(1,731
)
Interest rate caps

295

(33
)

Interest expense and loan cost amortization

(254
)

(10
)
Reclassification of interest rate
swaps upon derecognition

132

―

Interest expense and loan cost amortization

(132
)

―

Reclassification of interest rate
swaps due to ineffectiveness

(7
)

(23
)

Interest expense and loan cost amortization

7

23

Total

$
1,308

$
3,977

$
(812
)

$
(1,718
)

Nine Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Interest rate swaps

$
3,409

$
(3,729
)

Interest expense and loan cost amortization

$
(3,201
)

$
(5,388
)
Interest rate caps

198

(2,185
)

Interest expense and loan cost amortization

(511
)

(10
)
Reclassification of interest rate
   swaps upon derecognition

186

―

Interest expense and loan cost amortization

(186
)

―

Reclassification of interest rate
   swaps due to ineffectiveness

(7
)

(1
)

Interest expense and loan cost amortization

7

1

Interest rate cap held by
   unconsolidated joint venture

―

(1
)

Not applicable

―

―

Total

$
3,786

$
(5,916
)

$
(3,891
)

$
(5,397
)

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, ~~2017~~2023 (UNAUDITED)

~~11.~~

~~Commitments and Contingencies~~

7.Commitments and Contingencies

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

~~Refer to Note 3. “Real Estate Assets, net” for additional information on the remaining development budgets for~~

As a result of the Company’s ~~real estate under development.~~

~~The~~completed seniors housing developments continuing to move towards or achieving stabilization, the Company ~~has seven~~monitors the lease-up of these properties to determine whether the established performance metrics have been met as of each reporting period. As of September 30, 2023, the Company did not have any remaining promoted interest agreements with third-party developers as the one remaining promoted interest agreement expired in July 2023.

The Company’s Advisor has approximately 1.3 million contingently issuable Restricted Stock shares for financial reporting purposes that were issued pursuant to ~~which certain operating targets have been established that, upon meeting such targets, result in~~ the developer being entitled to additional payments based on enumerated percentages of the assumed net proceeds of a deemed sale, subject to achievement of an established internal rate of return on the Company’s investment in the development. However, these performance metrics were not met nor probable of being met as of September 30, 2017.

Advisor Expense Support Agreement. Refer to Note 6. ~~“Contingent Purchase Price Consideration”~~ “Related Party Arrangements” for information on ~~potential contingent purchase price considerations~~distributions declared related to ~~property acquisitions.~~

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

~~12.~~

~~Assets Held For Sale, net~~

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

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

Expense Support Agreement.

September 30,

December 31,

2017

2016

Real estate assets, net

$
46,699

$
47,178

Intangibles, net

800

893

Deferred rent and lease incentives

4,970

5,280

Assets held for sale, net

$
52,469

$
53,351

~~13.~~

~~Subsequent Events~~

~~In October 2017, the Company exercised a one-year extension option on its Revolving Credit Facility, which as~~

Item 2. Management’s Discussion and Analysis of ~~September 30, 2017 had approximately $172.0 million outstanding~~Financial Condition and ~~was scheduled to mature in December 2017. Pursuant to this extension option, the Company’s Revolving Credit Facility is now scheduled to mature in December 2018.~~

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

Operations

~~Item 2.~~

~~Management’s Discussion and Analysis of Financial Condition and Results of Operations~~

Caution Concerning Forward-Looking Statements

Statements contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, ~~2017~~2023 that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” ~~“plans,~~“projects,” “continues,~~” “pro forma,~~” “may,” “will,” “seeks,~~” “should,~~” and “could” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated ~~per share~~ net asset value per share of the Company’s common stock, and/or other matters. The Company’s forward-looking statements are not guarantees of future performance. While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors.

Important factors that could cause the Company's actual results to vary materially from those expressed or implied in its forward-looking statements include, but are not limited to government regulation, economic, strategic, political and social conditions and the following:

•the duration of recovery to occupancy from the COVID-19 pandemic;

•a worsening economic environment in the U.S. or globally, including continued or increasing inflation and financial market fluctuations;

•risks associated with the Company’s investment strategy, including its concentration in the ~~healthcare~~seniors housing sector;

•the illiquidity of an investment in the Company’s stock;

•liquidation at less than the subscription price of the Company’s stock;

•the impact of regulations requiring periodic valuation of the Company on a per share basis, including the uncertainties inherent in such valuations and that the amount that a stockholder would ultimately realize upon liquidation may vary significantly from the Company’s estimated net asset value;

•risks associated with real estate markets, including declining real estate ~~values;~~ values and rising insurance costs;

•risks associated with reliance on the ~~Advisor~~Company’s advisor and its affiliates, including conflicts of interest;

•the Company’s failure to repay, obtain, renew, refinance or extend necessary financing or to access the debt or equity markets;

•disruptions from cybersecurity incidents;

•costs resulting from damaging weather events and climate change;

•the use of debt to finance the Company’s business activities, including repayment, refinancing and interest rate risk and the Company’s failure to comply with debt covenants; ~~the Company’s inability to identify and close on suitable investments;~~

•failure to successfully manage growth or integrate acquired properties and operations;

•the Company’s inability to make necessary improvements to properties on a timely or cost-efficient basis; risks related to property expansions and renovations; risks related to development projects or acquired property value-add conversions, if applicable, including construction delays, cost overruns, the Company’s inability to obtain necessary permits, and/or public opposition to these activities;

•competition for properties and/or tenants;

•defaults on or non-renewal of leases by tenants;

•failure to lease properties on favorable terms or at all;

•the impact of current and future environmental, zoning and other governmental regulations affecting the Company’s properties;

•the impact of changes in accounting rules;

•inaccuracies of the Company’s accounting estimates;

•unknown liabilities of acquired properties or liabilities caused by property managers or operators;

•material adverse actions or omissions by any joint venture partners;

•consequences of the Company’s net operating losses;

•increases in operating costs and other expenses;

•uninsured losses or losses in excess of the Company’s insurance coverage;

•the impact of outstanding and/or potential litigation;

•risks associated with the Company’s tax structuring;

•failure to qualify for and maintain the Company’s qualification as a REIT for federal income tax purposes; and

•the Company’s inability to protect its intellectual property and the value of its brand.

Given these uncertainties, the Company cautions you not to place undue reliance on forward-looking information.

For further information regarding risks and uncertainties associated with the Company’s business and other important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described in the Company’s reports filed from time to time with the ~~U.S. Securities and Exchange Commission,~~SEC, including, but not limited to, the Company’s ~~quarterly reports on Form 10-Q and the Company’s~~ annual ~~reports~~report on Form 10-K ~~copies~~for the year ended December 31, 2022, a copy of which may be obtained from the Company’s website at www.cnlhealthcareproperties.com.

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

Introduction

The following discussion is based on the condensed consolidated financial statements as of September 30, ~~2017~~2023 (unaudited) and December 31, ~~2016.~~2022. Amounts as of December 31, ~~2016,~~2022 included in the unaudited condensed consolidated balance sheets have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated balance sheets and the notes thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

2022.

Overview

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

From July 2011 to September 2015, we raised approximately $1.7 billion through our Offerings. The net proceeds from our Offerings were contributed to CHP Partners, LP, our operating partnership, in exchange for partnership interests.

Substantially all of our assets are held by, and all operations are conducted, either directly or indirectly, through: (1) the Operating Partnership in which we are the sole limited partner and our wholly owned subsidiary, CHP GP, LLC, is the sole general partner; (2) a wholly owned TRS, CHP TRS Holding, Inc.; (3) property owner subsidiaries and lender subsidiaries, which are single purpose entities; and (4) investments in joint ventures.

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

We are externally managed and advised by CNL Healthcare Corp. (the “Advisor”). Our Advisor ~~is responsible~~has responsibility for ~~managing~~ our ~~affairs on a~~ day-to-day ~~basis~~operations, serving as our consultant in connection with policy decisions to be made by our board of directors, and for identifying, recommending and executing ~~acquisitions~~on Possible Strategic Alternatives (as described below under “Possible Strategic Alternatives”), and dispositions on our behalf pursuant to an advisory agreement. For additional information on our Advisor, its affiliates or other related parties, as well as the fees and reimbursements we pay, see Note 6. “Related Party Arrangements.”

As of September 30, 2023, our seniors housing investment portfolio consisted of interests in 70 properties, consisting of a geographically diversified portfolio of 69 seniors housing communities and one vacant land parcel in 26 states. The types of seniors housing properties that we own include independent and assisted living facilities, continuing care retirement communities and Alzheimer’s/memory care facilities.

Possible Strategic Alternatives

In 2017, we began evaluating possible strategic alternatives to provide liquidity to our stockholders. In April 2018, our board of directors formed a special committee consisting solely of our independent directors (“Special Committee”) to consider possible strategic alternatives, including, but not limited to (i) the listing of our or one of our subsidiaries’ common stock on a national securities exchange; (ii) an orderly disposition of our assets or one or more of our asset classes and the distribution of the net sale proceeds thereof to our stockholders; and (iii) a potential business combination or other transaction with a third-party or parties that provides our stockholders with cash and/or securities of a publicly traded company (collectively, among other options, “Possible Strategic Alternatives”). Since 2018, the Special Committee has engaged KeyBanc Capital Markets Inc. to act as its financial advisor in connection with exploring our Possible Strategic Alternatives.

In connection with our consideration of the Possible Strategic Alternatives, our board of directors suspended both our Reinvestment Plan and our Redemption Plan effective July 11, 2018. In addition, as part of executing on Possible Strategic Alternatives, our board of directors committed to a plan to sell 70 properties which included medical office buildings, post-acute care facilities and acute care hospitals across the US, collectively (the “MOB/Healthcare Portfolio”) plus several skilled nursing facilities. The Company completed the sale of the last of the 70 properties in 2022.

During the COVID-19 pandemic, we shifted our focus away from the pursuit of larger strategic alternatives to provide further liquidity to our stockholders due to the market and industry disruptions in the seniors housing sector from COVID-19. However, our Special Committee continued working and continues to work with our financial advisor to carefully study market data. While we remain actively engaged in pursuing strategic alternatives, at this time we do not believe that market conditions will support a strategic transaction prior to the end of 2023.

Seniors Housing Portfolio

Our ~~Property Manager~~remaining investment focus is ~~responsible~~in seniors housing communities. We have invested in or developed the following types of seniors housing properties:

Independent Living Facilities. Independent living facilities are age-restricted, multi-family rental or ownership (condominium) housing with central dining facilities that provide residents, as part of a monthly fee, meals and other services such as housekeeping, linen service, transportation, social and recreational activities.

Assisted Living Facilities. Assisted living facilities are usually state-regulated rental properties that provide the same services as independent living facilities, but also provide, in a majority of the units, supportive care from trained employees to residents who are unable to live independently and require assistance with activities of daily living. The additional services may include assistance with bathing, dressing, eating, and administering medications.

Memory Care/Alzheimer’s Facilities. Those suffering from the effects of Alzheimer’s disease or other forms of memory loss need specialized care. Memory care/Alzheimer’s centers provide the specialized care for ~~managing~~this population including residential housing and ~~leasing~~assistance with the activities of daily living.

Portfolio Overview

As of September 30, 2023, our healthcare ~~real estate investments. Our Advisor~~investment portfolio consisted of interests in 70 properties, comprising 69 seniors housing communities and Property Manager are each wholly owned by affiliates of our Sponsor, which is an affiliate of CNL, a private investment management firm providing global real estate and alternative investments. As a result, our Advisor and Property Manager each represent related parties and each have received or will receive compensation, fees and expense reimbursements for services related to managing of our business.

one vacant land parcel.

~~Portfolio Overview~~

We believe ~~recent~~ demographic trends and compelling supply and demand indicators present a strong case for an investment focus on ~~healthcare~~seniors housing real estate orand real estate-related assets. ~~We believe that the healthcare sector will continue to provide attractive opportunities as compared to other asset sectors over the long-term.~~ Our ~~healthcare~~seniors housing investment portfolio is geographically diversified with properties in 3426 states. The map below shows our ~~current property allocations~~seniors housing investment portfolio across geographic regions as of ~~September 30, 2017:~~

As of September 30, 2017, our healthcare investment portfolio consisted of interests in 143 properties, including 72 seniors housing communities, 54 MOBs, 12 post-acute care facilities and five acute care hospitals. Of our properties held at September 30, 2017, one of our 72 seniors housing communities currently has an expansion project, one represents unimproved land and five were owned through an unconsolidated joint venture. November 8, 2023:

CHP Portfolio Map - 70 Invest. as 11.08.2023.jpg

The following table summarizes our ~~healthcare~~seniors housing investment portfolio by ~~asset class and~~ investment structure as of ~~September 30, 2017:~~

November 8, 2023:


Type of Investment	Number of Investments	Amount of Investments (in millions)		Percentage of Total Investments
Consolidated investments:
Seniors housing leased (1)	15	$	311.0	17.8	%
Seniors housing managed (2)	54	1,427.6		82.1
Vacant land	1	1.1		0.1
	70	$	1,739.7	100.0	%

Type of Investment

Number of Investments

Investment Amount
(in millions)

Percentage of Total Investments

Consolidated investments:

Seniors housing leased⁽¹⁾

15

$
311.0

10.2
%
Seniors housing managed ⁽²⁾

51

1,416.5

46.6
%
Seniors housing expansion projects ⁽³⁾

―
⁽⁴⁾

4.9

0.2
%
Seniors housing unimproved land

1

1.1

0.0
%
Medical office leased⁽¹⁾

54

931.4

30.6
%
Post-acute care leased⁽¹⁾

12

190.8

6.3
%
Acute care leased ⁽¹⁾

5

153.9

5.1
%
Unconsolidated investments:

Seniors housing managed⁽⁵⁾

5

31.1

1.0
%

143

$
3,040.7

100.0
%

FOOTNOTES:

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

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

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

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

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

~~Portfolio Evaluation~~

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

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

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

(2)Properties that are ~~above an 85% occupancy level~~leased to TRS entities and ~~subsequently drop below 85%, they are reclassified~~managed pursuant to ~~stabilizing until the assets attain the trailing three month 85% occupancy metric.~~

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

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

~~Significant Tenants and Operators~~

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

corresponding property operating expenses.

Tenants

Number of Properties

Rentable
Square Feet
(in thousands)

Percentage
of Rentable Square Feet

Lease Expiration Year
TSMM Management, LLC

13

1,261

22.0
%

2022-2025
Wellmore, LLC

2

366

6.4
%

2026-2027
Novant Medical Group, Inc.

5

297

5.2
%

2017-2025
Other tenants and vacancies ⁽¹⁾

66

3,802

66.4
%

2017-2038

86

5,726

100.0
%

Operators

Number of Properties

Rentable
Square Feet
(inthousands)

Percentage
of Rentable Square Feet

Operator Expiration Year

Integrated Senior Living, LLC

7

2,039

32.2
%

2019-2021

Prestige Senior Living, LLC

13

895

14.1
%

2019

MorningStar Senior Management, LLC

4

834

13.2
%

2018-2019

SLH Austin Manager, LLC

3

431

6.8
%

2020-2025

Parc Communities, LLC

2

385

6.1
%

2022

HarborChase Retirement, LLC

4

380

6.0
%

2018-2024

Other operators ⁽¹⁾

18

1,363

21.6
%

2017-2025

51

6,327

100.0
%

Portfolio Evaluation

~~FOOTNOTE:~~

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

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

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

When evaluating the performance of our seniors housing portfolio, management reviews property-level operating performance versus budgeted expectations, conducts periodic operational review calls with operators and conducts periodic property inspections or site visits. Management also reviews occupancy levels and monthly revenue per occupied unit, which we define as total revenue divided by average number of occupied units. Similarly, when evaluating the performance of our third-party operators, management reviews monthly financial statements, property-level operating performance versus budgeted expectations, conducts periodic operational review calls with operators and conducts periodic property inspections or site visits. All of the aforementioned operating and statistical metrics assist us in determining the ability of our properties or operators to achieve market rental rates, to assess the overall performance of our diversified healthcare portfolio, and to review compliance with leases, debt, licensure, real estate taxes, and other collateral.

Significant Tenants and Operators

Our real estate portfolio of 69 seniors housing properties is operated by a mix of national or regional operators and the following represents the significant tenants and operators that lease or manage 10% or more of our rentable space as of November 8, 2023, excluding the vacant land parcel:


Tenants	Number of Properties	Rentable Square Feet (in thousands)	Percentage of Rentable Square Feet		Lease Expiration Year
TSMM Management, LLC	13	1,261	77.5	%	2025
Wellmore, LLC	2	366	22.5		2031-2032
	15	1,627	100.0	%

Operators	Number of Properties	Rentable Square Feet (in thousands)	Percentage of Rentable Square Feet		Operator Expiration Year
Integrated Senior Living, LLC	7	1,948	30.8	%	2023-2024
Prestige Senior Living, LLC	13	895	14.2		2023-2024
Morningstar Senior Management, LLC	4	834	13.2		2024
Other operators (1)	30	2,645	41.8		2024-2029
	54	6,322	100.0	%

_____________________________

FOOTNOTE:

(1)Comprised of various operators each of which comprise less than 10% of our consolidated rentable square footage.

Tenant Lease Expirations

~~Our asset management team collaborates with existing~~

As of September 30, 2023, we owned 15 seniors housing properties that were leased to third party tenants under triple-net operating leases. During the nine months ended September 30, 2023, our rental income represented approximately 7.9% of our total revenues.

Under the terms of our triple-net lease agreements, each tenant is responsible for payment of property taxes, general liability insurance, utilities, repairs and maintenance, including structural and roof expenses. Each tenant is expected to ~~understand their current and anticipated space needs in advance of their lease term renewal date.~~ pay real estate taxes directly to the taxing authorities. However, if the tenant does not pay the real estate taxes, we are liable.

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

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

The following table lists, on an aggregate basis, scheduled expirations for the remainder of ~~2017,~~2023, each of the next nine years and thereafter on our consolidated ~~healthcare investment~~seniors housing portfolio, ~~(excludes real estate under development),~~ assuming that none of the tenants exercise any of their renewal options ~~as of September 30, 2017~~ (in thousands, except for number of ~~tenants~~properties and percentages):


Year of Expiration (1)	Number of Properties	Expiring Leased Square Feet	Expiring Annualized Base Rents (2)		Percentage of Expiring Annual Base Rents
2023	—	—	$	—	—	%
2024	—	—	—		—
2025	13	1,261	18,508		68.2
2026	—	—	—		—
2027	—	—	—		—
2028	—	—	—		—
2029	—	—	—		—
2030	—	—	—		—
2031	1	137	3,710		13.6
2032	1	229	4,937		18.2
Thereafter	—	—	—		—
Total	15	1,627	$	27,155	100.0	%

Weighted Average Remaining Lease Term: (3)			4.0 years

Year of
Expiration ⁽¹⁾

Number of
Tenants

Expiring
Rentable
Square Feet

Expiring
Annualized
Base Rents ⁽²⁾

Percentage of
Expiring Annual
Base Rents

2017

25

82

$
1,561

1.4
%
2018

98

387

7,865

7.0
%
2019

75

324

6,498

5.8
%
2020

68

372

7,013

6.3
%
2021

53

263

5,371

4.8
%
2022

48

1,096

16,889

15.1
%
2023

90

803

19,767

17.6
%
2024

13

269

6,349

5.7
%
2025

35

628

12,449

11.1
%
2026

7

164

3,475

3.1
%
Thereafter

49

940

24,934

22.1
%
Total

561

5,328

$
112,171

100.0
%

Weighted Average Remaining Lease Term: ⁽³⁾

7.1 years

FOOTNOTES:

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

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

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

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

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

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

~~Real Estate Under Development~~

Operator Expirations

As of September 30, ~~2017,~~2023, we ~~substantially completed~~had 54 seniors housing properties managed by third-party operators. All of our management agreements have been in place for multiple years and some include annual auto-renewal clauses which are effective unless a notice of termination is provided by either party. We work with our operators in advance of management agreement expirations or renewal period options in order for us to maintain a balanced operator rollover schedule, which provides us flexibility to execute on possible strategic alternatives, minimize potential early termination fees and align with the broader industry. The management agreements of 31 of our managed seniors housing properties were scheduled to expire within one year or less as of September 30, 2023, all of ~~our ground-up developments and had one property with an expansion project that will provide us with 32 additional units upon completion as follows:~~

Property Name
(and Location)

Developer

Number of Additional
Units upon
Completion

Development
Costs
Incurred
(in millions) ⁽¹⁾

Remaining
Development
Budget
(in millions) ⁽²⁾

Estimated
Completion
Date
Tranquillity at Fredericktowne
(Frederick, MD)

Capital
Health
Partners

32 units

$
4.9

$
2.0

December
2017

~~FOOTNOTES:~~

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

which are expected to be renewed.

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

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

Liquidity and Capital Resources

General

~~While our Offerings closed on September 30, 2015, we continue to provide existing stockholders the opportunity to designate their~~

Our ongoing primary source of capital is proceeds from operating cash ~~distributions for reinvestment through our Reinvestment Plan. Other potential future sources~~flows. Our primary uses of capital include ~~proceeds~~the payment of distributions, payment of operating expenses, funding capital improvements to existing properties and payment of debt service. Generally, we expect to meet short-term working capital needs from ~~collateralized or uncollateralized financings from banks or other lenders and undistributed operating~~our cash flows from operations. Our ongoing sources and uses of capital have been and will continue to ~~a lesser extent, proceeds~~be impacted by the rate of occupancy recovery from the ~~sale of properties or other assets. If~~COVID-19 pandemic and by the higher interest rate environment. As necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. Based on the amendments to our Credit Facilities in November 2017, as discussed in Note 13. “Subsequent Events,” we have approximately $55.1 million of undrawn availability under our Revolving Credit Facility, as discussed below.

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

~~Sources of Liquidity and Capital Resources~~

~~Reinvestment Plan~~

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

~~Borrowings~~

During the nine months ended September 30, 2017 and 2016, we borrowed proceeds of approximately $206.5 million and $191.4 million, respectively. We have borrowed and intend to continue borrowing money to fund ongoing real estate development and other enhancements to our portfolio, as well as to cover ~~any~~ periodic ~~shortfall~~shortfalls between distributions paid and cash flows from operating activities. ~~While~~

Weighted average occupancy was higher during the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. We implemented rate increases at our properties as part of ongoing resident lease renewals throughout 2022 and continued to implement rate increases during 2023, which when combined with improved occupancy as compared to 2022, resulted in an increase in revenues during the nine months ended September 30, 2023. Labor costs remained at elevated levels during this period due to increased wages in a tight labor market. The “great resignation” resulted in an increase in the number of vacant positions at our communities, which led to increased reliance on temporary agency personnel to temporarily fill vacancies. Our intensified focus since 2022 of hiring and filling some of the vacant staff roles resulted in ongoing reductions in our reliance on temporary agency labor during 2023. Increases in occupancy and resident rates increased revenue streams during the nine months ended September 30, 2023. However, we anticipate that labor costs and operating expenses will remain at elevated levels.

Macro-economic and geopolitical events around the globe have ~~substantially completed~~contributed to volatile credit markets. As part of its effort to reduce the rising levels of inflation, the Federal Reserve enacted several interest rate increases beginning in March 2022. Those interest rate increases continued through July 2023, and additional rate increases may continue during the remainder of 2023. The interest rate increases to date have contributed to, and any further interest rate increases will contribute to higher interest expense on our ~~acquisition phase,~~unhedged variable rate debt. We have used interest rate caps for interest rate protection on a portion of our variable rate debt and continue to monitor opportunities to further protect the remaining unhedged variable rate debt.

As of September 30, 2023, we had approximately $185.4 million of liquidity (consisting of $53.5 million cash on hand, $14.9 million invested in short term securities and $117.0 million in undrawn availability under the Revolving Credit Facility). We remain focused on maintaining liquidity and financial flexibility and continue to monitor developments as we continue to ~~monitor~~recover from the disruptions in occupancy from COVID-19, continue to navigate through rising labor costs during a tight labor market, increased operating expenses from current inflation levels and ~~evaluate additional acquisition opportunities and may borrow additional money to fund such acquisitions.~~

~~In May 2017, we refinanced approximately $57.4 million of borrowings related to our Knoxville Medical Office Properties and our Claremont Medical Office property. This combined mortgage loan has~~the increase in interest costs from a ~~term of 60 months, an~~rising interest rate ~~equal to 30-day LIBOR plus 2.45% per annum, monthly~~environment. The rate of occupancy recovery from COVID-19, a tight labor market, inflation, the volatility in the credit markets and a rising interest only payments for the first 30 months and monthly principal and interest payments and for the remaining term of the combined loan using a 30-year amortization period with the remaining principal balance payable at maturity. The previous loan balances totaled approximately $49.6 million collectively, of which approximately $12.4 million was scheduled to mature January 2018 related to our Claremont Medical Office property and approximately $37.2 million was scheduled to mature in July 2018 related to our Knoxville Medical Office Properties.

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

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

cash flows.

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

debt or variable rate debt with interest rate protection scheduled to mature.

Sources of Liquidity and Capital Resources

Proceeds from Sale of Real Estate

During the nine months ended September 30, 2023, we did not sell any properties. During the nine months ended September 30, 2022, we closed on the sale of the Hurst Specialty Hospital and the Fieldstone at Pear Orchard and Fieldstone Memory Care properties (collectively, the “Fieldstone Properties”), and received net sales proceeds of approximately $36.7 million. One of the Fieldstone Properties was indirectly owned through a consolidated joint venture and we used a portion of the net sales proceeds from the sale of the property owned by the consolidated joint venture to pay distributions to our co-venture partner in accordance with the terms of the joint venture agreement.

Borrowings

During the nine months ended September 30, 2023, we refinanced a mortgage loan with the existing lender that consisted of $16.1 million of indebtedness secured by five properties that had a LIBOR based benchmark rate and was scheduled to mature in February 2024. In connection with the refinancing, we also amended certain terms and transitioned its benchmark rate from LIBOR to Term SOFR effective June 30, 2023, extended the maturity date from February 2024 to February 2026 and obtained two one-year extension options. We paid the Advisor a refinance fee of approximately $0.2 million related to this transaction. During the nine months ended September 30, 2022, we borrowed $45.0 million from our Revolving Credit Facility to refinance approximately $44.5 million of secured indebtedness in advance of its September 2022 maturity. We may borrow money to fund enhancements to our portfolio, as well as to cover periodic shortfalls between distributions paid and cash flows from operating activities to the extent impacted by compressed property NOI margins from rising labor costs, inflationary pressures on other operating expenses and an increased interest rate environment.

Maturity of Short-Term Securities

During the nine months ended September 30, 2023, we received approximately $15.0 million from the maturity of short-term securities and reinvested $4.9 million of these proceeds in short-term securities as described below under “Purchase of Held-to-Maturity Securities”. We did not own investments in any securities during the nine months ended September 30, 2022.

Net Cash Provided by Operating Activities

Cash flows from operating activities for the nine months ended September 30, 2023 and 2022 were approximately $24.6 million and $34.4 million, respectively. The change in cash flows from operating activities for the nine months ended September 30, 2023 as compared to the same period in 2022 was primarily the result of the following:

•higher interest expense due to the rising interest rate environment; and

•$3.9 million received in provider relief funds under the CARES Act during the nine months ended September 30, 2022, compared to $1.0 million received in state grants during the nine months ended September 30, 2023; partially offset by

•an increase in property NOI related to our seniors housing properties due to higher average occupancy and rate increases subsequent to September 30, 2022, offset by the sale of two properties in August 2022.

Uses of Liquidity and Capital Resources

Acquisition of Joint Venture Interest

There were no acquisitions during the nine months ended September 30, 2023. As of December 31, 2021, we indirectly owned five properties through a 75% interest in an unconsolidated joint venture (the “Windsor Manor Joint Venture”), an unconsolidated equity method investment. Effective January 1, 2022, we acquired the remaining 25% interest from our joint venture partner for approximately $3.3 million and we currently own a 100% controlling interest in the Windsor Manor Joint Venture.

Capital Expenditures

We paid approximately $10.5 million and $12.3 million in capital expenditures during the nine months ended September 30, 2023 and 2022, respectively. We continue to invest in capital improvements to maintain and improve our properties.

Purchase of Held-to-Maturity Securities

During the nine months ended September 30, 2023, we reinvested approximately $4.9 million of proceeds received from the maturities of held-to-maturity securities in additional short-term held-to-maturity securities to enhance the yield earned on cash on hand. We did not purchase held-to-maturity securities during the nine months ended September 30, 2022.

Purchase of Interest Rate Cap

During the nine months ended September 30, 2023, we paid approximately $3.1 million to purchase a short-term interest rate cap with a notional value of $420.0 million, a strike price of 3.5%, and a maturity date in August 2023, to hedge the majority of our variable rate interest exposure relating to our Credit Facilities. In addition, during the nine months ended September 30, 2023, we paid approximately $0.1 million to purchase a short-term interest rate cap with a notional value of $8.0 million, a strike price of 3.5%, and a maturity date of January 2024 to hedge a portion of our interest rate exposure relating to $16.3 million of variable rate secured indebtedness that we refinanced in June 2023. During the nine months ended September 30, 2023, we earned a combined $3.2 million from the interest rate cap counterparties related to our two interest rate caps which are included in interest expense and loan costs amortization in the accompanying condensed consolidated statements of operations. We did not purchase any interest rate caps during the nine months ended September 30, 2022.

Debt Repayments

During the nine months ended September 30, 2023, we paid approximately $25.1 million in principal payments, which included the repayment of a mortgage loan of approximately $22.8 million collateralized by one property in advance of its scheduled maturity of June 2023, the repayment of $1.4 million of unscheduled principal payments relating to a mortgage loan collateralized by five properties and $0.9 million of scheduled principal payments. During the nine months ended September 30, 2023, we exercised our one-year extension option and extended the maturity date of our Revolving Credit Facility from May 2023 to May 2024. During the nine months ended September 30, 2022, we paid approximately $45.9 million, which included $1.4 million of scheduled repayments on our mortgages and other notes payable and the June 2022 refinance of approximately $44.5 million of secured indebtedness, consisting of debt collateralized by five properties, in advance of its scheduled maturity of September 2022. We added the five properties to the borrowing base of our unsecured Credit Facilities and used $45.0 million from amounts available under the Revolving Credit Facility to repay our secured indebtedness.

The following is a schedule of future principal payments for our total indebtedness for the remainder of 2023, for each of the next four years and thereafter, in the aggregate, as of September 30, 2023 (in thousands):


2023	$	217
2024	568,968
2025	308
2026	15,542
2027	—
Thereafter	—
	$	585,035

As of September 30, 2023, we had approximately $185.4 million of liquidity (consisting of $53.5 million cash on hand, $14.9 million invested in short term securities and $117.0 million available under the Revolving Credit Facility) and were well positioned to manage the $0.2 million of scheduled payments coming due during the rest of 2023.

We have approximately $548.0 million outstanding under our unsecured Credit Facilities as of the balance sheet date which mature in May 2024. We anticipate refinancing the amounts outstanding under our Credit Facilities in advance of their May 2024 maturity and have been in discussions with existing and new participating lenders on the refinancing. We anticipate reducing the total facility size from $665 million to approximately $600 million. Based on feedback from our proposed lender group and on the negotiations to date, we believe that it is probable that we will be successful in refinancing the amounts outstanding under our Credit Facilities. Our low leverage profile, along with current and anticipated cash flows, are expected to be sufficient to support a refinancing of the current outstanding indebtedness while maintaining reasonable debt service coverage ratios. There can be no assurance that the refinancing will occur or on the terms currently contemplated. If sufficient refinancing cannot be arranged under an unsecured facility to satisfy the outstanding obligations due in May 2024, we believe we have other options to meet our obligation. These other options include but are not limited to, refinancing with lending institutions as a secured loan facility, issuing mortgages collateralized by unencumbered properties in our portfolio and/or selling all or a portion of our 63 unencumbered properties and using net sales proceeds to satisfy the obligation.

On an ongoing basis, we monitor our debt maturities, engage in dialogue with third-party lenders about various financing scenarios and analyze our overall portfolio borrowings in advance of scheduled maturity dates of the debt obligations to determine the optimal borrowing strategy.

The aggregate amount of long-term financing is not expected to exceed 60% of our ~~total assets~~gross asset values (as defined in our Credit Facilities) on an annual basis. As of September 30, ~~2017~~2023 and December 31, ~~2016,~~2022, we had an aggregate debt leverage ~~ratio~~ratios of approximately ~~58.9%~~30.9% and ~~55.8%~~31.9%, respectively, of the aggregate carrying value of our assets.

~~Net Cash Provided by Operating Activities~~

~~We experienced positive cash flow from operating activities~~

Generally, the loan agreements for our mortgage loans contain customary financial covenants and ratios; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc. The loan agreements also contain customary performance criteria and remedies for the ~~nine months ended~~lenders. As of September 30, ~~2017~~2023, we were in compliance with all financial covenants related to our mortgage loans.

The Credit Facilities contain affirmative, negative, and ~~2016~~financial covenants which are customary for loans of ~~approximately $56.9 million~~this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage, (viii) maximum unsecured indebtedness ratio and ~~$58.1 million, respectively. The decrease in cash flows from operating activities for the nine months ended September 30, 2017 as compared~~(ix) limitations on certain types of investments and with respect to the ~~same period in 2016 was primarily~~pool of properties supporting borrowings under the ~~result of the following:~~

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

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

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

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

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

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

~~an increase in interest expense paid resulting from higher average debt outstanding~~terms, as well as ~~higher interest rates for~~property type, MSA, operator, and asset value concentration limits. The limitations on distributions generally include a limitation on the ~~nine months ended~~extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the Credit Facilities) and the minimum amount of distributions required to maintain the Company’s REIT status. As of September 30, ~~2017, as compared to the nine months ended September 30, 2016;~~

~~We expect cash flows provided by operating activities to grow as~~2023, we ~~increase occupancy~~were in our existing properties and lease-up our completed development and expansion properties. Since we have substantially completed our acquisition phase, we do not expect to incur significant acquisition fees and expenses in future periods and generally expect this to contribute to positive growth in our cash flows from operations in future periods.

~~Expense Support Agreements~~

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

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

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

~~Uses of Liquidity and Capital Resources~~

~~Lease Incentives~~

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

~~Development Properties~~

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

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

~~Debt Repayments~~

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

~~Contingent Purchase Price Consideration~~

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

Facilities.

Distributions

~~Distributions~~

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

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

real estate.

The following table ~~represents~~presents cash distributions per share and total cash distributions declared ~~distributions reinvested and cash distributions per share~~on a quarterly basis for ~~quarter and~~the nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 (in thousands, except per share data):


Periods	Cash Distributions per Share		Total Cash Distributions Declared (1)		Cash Flows Provided by Operating Activities (2)
2023 Quarters
First	$	0.02560	$	4,453	$	5,328
Second	0.02560		4,453		11,415
Third	0.02560		4,454		7,873
Total	$	0.07680	$	13,360	$	24,616

2022 Quarters
First	$	0.02560	$	4,453	$	8,236
Second	0.02560		4,453		15,840
Third	0.02560		4,454		10,318
Total	$	0.07680	$	13,360	$	34,394

Distributions Paid ⁽¹⁾

Periods

Cash
Distributions
per Share

Total Cash
Distributions
Declared ⁽²⁾

Reinvested via
Reinvestment
Plan

Cash
Distributions
net of
Reinvestment
Proceeds

Cash Flows
Provided by
Operating
Activities⁽³⁾

2017 Quarters

First

$
0.1058

$
18,525

$
10,412

$
8,113

$
18,667

Second

0.1058

18,515

10,305

8,210

22,815

Third

0.1164

20,363

11,271

9,092

15,460

Total

$
0.3280

$
57,403

$
31,988

$
25,415

$
56,942

2016 Quarters

First

$
0.1058

$
18,454

$
10,725

$
7,729

$
16,008

Second

0.1058

18,538

10,658

7,880

18,741

Third

0.1058

18,496

10,607

7,889

23,362

Total

$
0.3174

$
55,488

$
31,990

$
23,498

$
58,111

FOOTNOTES:

~~FOOTNOTES:~~

⁽¹⁾

~~Represents the amount~~(1)For the nine months ended September 30, 2023 and 2022, our net (loss) income attributable to common stockholders was approximately $(16.6) million and $4.6 million, respectively, while total cash distributions declared were approximately $13.4 million and $13.4 million, respectively. For the nine months ended September 30, 2023 and 2022, approximately 100% of cash ~~used to fund distributions and the amount of distributions paid which were reinvested in additional shares through our Reinvestment Plan.~~

⁽²⁾

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

⁽³⁾

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

Cash provided by operating activities for the nine months ending September 30, 2016 was impacted by the adoption of two ASU’s affecting the presentation of the statement of cash flows, which required a payment on extinguishment of debt in 2016 to be reclassified from cash provided by operating activities toas calculated on a quarterly basis for GAAP purposes.

(2)Cash flows from operating activities calculated in accordance with GAAP are not necessarily indicative of the amount of cash ~~used in financing activities. Refer to Note 2. “Summary of Significant Accounting Policies” for additional information.~~

~~Common Stock Redemptions~~

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

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

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

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

~~Our~~ board of directors ~~has~~uses other measures such as FFO and MFFO in order to evaluate the ~~ability, in its sole discretion,~~level of distributions.

Distributions to ~~amend or suspend the redemption plan or to waive any specific conditions if it is deemed to be in our best interest.~~

Noncontrolling Interests

During the nine months ended September 30, ~~2017, we~~2023, our consolidated joint venture paid distributions of approximately ~~$32.0~~$0.1 million ~~in redemptions~~ to our co-venture partner, representing their pro rata share of common stock of which approximately $10.4 million related to prior year redemption requests that were payable as of December 31, 2016. In addition, subsequent to September 30, 2017, we paid approximately $14.0 million in redemptions of common stock related to requests received for the nine months ended September 30, 2017 and were payable as of September 30, 2017.operating cash flows. During the nine months ended September 30, ~~2016, we~~2022, our consolidated joint ventures paid ~~approximately $20.3 million in redemptions of common stock of which approximately $2.7 million related to prior year redemption requests that were payable as of December 31, 2015.~~

~~During the nine months ended September 30, 2017, we received requests for the redemption of common stock~~distributions of approximately ~~$35.6~~$2.1 million to co-venture partners, which ~~exceeded proceeds received from our Reinvestment Plan by approximately $3.6 million. Our board~~included $2.0 million representing the pro rata share of ~~directors approved the excess redemptions as there were some unused~~net sales proceeds from the ~~Reinvestment Plan in~~sale of one of the ~~previous year. The aggregate amount~~Fieldstone Properties owned by one of ~~funds available for redemptions may be less than, or may exceed,~~ the ~~aggregate proceeds received through our Reinvestment Plan~~consolidated joint ventures, and the balance represented their pro rata share of operating cash flows.

Results of Operations

Except for the year ending December 31, 2017. There is no guarantee that any funds will be set aside under the Reinvestment Plan or otherwise made available for the redemption plan during any period during which redemptions may be requested.

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

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

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

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

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

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

~~pro rata as to all other redemption requests.~~

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

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

2017 Quarters

First

Second

Third

Total

Redemptions requested

1,088

1,072

1,408

3,568

Shares redeemed

(1,088
)

(1,072
)

(1,408
)

(3,568
)
Pending redemption requests

―

―

―

―

Average price paid per share

$
9.99

$
9.97

$
9.99

$
9.98

2016 Quarters

First

Second

Third

Total

Redemptions requested

277

1,529

850

2,656

Shares redeemed

(277
)

(1,529
)

(850
)

(2,656
)
Pending redemption requests

―

―

―

―

Average price paid per share

$
9.73

$
9.73

$
9.73

$
9.73

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

~~Results of Operations~~

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

Quarter and nine months ended September 30, ~~2017~~2023 as compared to the quarter and nine months ended September 30, ~~2016~~

2022

As of September 30, ~~2017,~~2023 and 2022, excluding our vacant land, we owned ~~137~~69, consolidated operating ~~real estate~~ investment properties, which excludes unconsolidated investments and unimproved land, and our portfolio consisted of 5,874 units operated under management agreements with third-party operators and approximately 5.3 million rentable square feet that was 93.1% leased to third-party tenants.

respectively.

	Investment count as of
	September 30,					Investment count as of September 30,
Consolidated operating investment types:	2017		2016		Consolidated operating investment types:	2023	2022
Seniors housing leased		15		16	Seniors housing leased	15	15
Seniors housing managed		51		48	Seniors housing managed	54	54
Medical office leased		54		54
Post-acute care leased		12		10
Acute care leased		5		5
		137		133
						69	69

Rental Income ~~from Operating Leases.~~and Related Revenues. Rental income ~~from operating leases was~~and related revenues were approximately ~~$32.0~~$6.7 million and ~~$97.4~~$20.2 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017~~2023, respectively, as compared to approximately ~~$31.0~~$6.7 million and ~~$92.7~~$20.2 million ~~respectively,~~ for the quarter and nine months ended September 30, 2016. The increase in rental income from operating leases across periods primarily resulted from: (1) the transition of Wellmore of Tega Cay in August 2016 from being managed pursuant to a third-party management contract under a RIDEA structure to being leased to a third-party operator under a triple-net lease arrangement (“Tega Cay Managed to Lease Transition”); (2) the acquisition of Cobalt Rehabilitation Hospital of New Orleans in October 2016; and (3) the completion of Welbrook Transitional Care Grand Junction development and the commencement of the related lease in March 2017. These were offset by the transition of the Parc Communities in July 2017 from being leased to a third-party operator under a triple-net lease arrangement to being managed pursuant to a third-party management contract under a RIDEA structure (“Parc Communities Leased to Managed Transition”).

2022, respectively.

Resident Fees and Services. Resident fees and services income was approximately ~~$64.5~~$79.5 million and ~~$182.6~~$234.9 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017~~2023, respectively, as compared to approximately ~~$59.3~~$74.8 million and ~~$174.6~~$220.9 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2016.~~2022, respectively. The increase in ~~resident fees~~revenue during the quarter and services is primarily a result of year-over-year growth in occupancy rates at our value-add seniors housing properties as well as the completion of our Fieldstone at Pear Orchard, Waterstone on Augusta and Dogwood Forest of Grayson developments subsequent tonine months ended September 30, ~~2016,~~2023 as compared to the quarter and nine months ended September 30, 2022 was primarily due to an increase in average occupancy and increases in rates charged to our residents. The increase was partially offset by the sale of ~~Dogwood Forest of Acworth~~two properties in ~~November 2016 and the Tega Cay Managed to Lease Transition.~~

August 2022.

Property Operating Expenses.Property operating expenses were approximately ~~$50.0~~$59.4 million and ~~$142.9~~$175.7 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017~~2023, respectively, as compared to approximately ~~$47.2~~$57.3 million and ~~$139.6~~$169.1 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2016.~~2022, respectively. Property operating expenses increased during the quarter and nine months ended September 30, 2023 as compared to the quarter and nine months ended September 30, 2022, primarily due to an increase in average occupancy and increased labor costs. The increase in property operating expenses is primarily a result of increased property operating expenses at our value-add seniors housing properties due to year-over-year growth in occupancy rates, the Parc Communities Leased to Managed Transition as well as the completion of our Fieldstone at Pear Orchard, Waterstone on Augusta and Dogwood Forest of Grayson developments subsequent to September 30, 2016,was partially offset by the sale of ~~Dogwood Forest of Acworth~~two properties in ~~November 2016 and the Tega Cay Managed to Lease Transition.~~

August 2022.

General and ~~Administrative.~~Administrative Expenses. General and administrative expenses were approximately ~~$3.5~~$2.0 million and ~~$9.8~~$6.6 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017~~2023, respectively, as compared to approximately $2.7 million and ~~$9.7~~$7.8 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2016.~~2022, respectively. General and administrative expenses were comprised primarily of personnel expenses of affiliates of our Advisor, directors’ and officers’ insurance, franchise taxes, sales taxes, accounting and legal fees, and board of director fees. The increase in general and administrative expenses were primarily attributed to the increase in third-party costs associated with the refinancing of debt associated with some of our properties that were determined to be loan modifications for accounting purposes.

Asset Management Fees. We incurred asset management fees ~~payable to our Advisor~~ of approximately ~~$7.6~~$3.5 million and ~~$22.7~~$10.4 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017,~~2023, respectively, as compared to approximately ~~$7.3~~$3.5 million and ~~$21.7~~$10.6 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2016. For the quarter and nine months ended September 30, 2017, approximately $0.1 million and $0.5 million of asset~~2022, respectively. Asset management fees were capitalized as real estate under development. For the quarter and nine months ended September 30, 2016, we recognized a reduction in asset management fees of approximately $0.9 million and $2.6 million, respectively, as an estimate of the annual expense support amount expected to be settled in accordance with the terms of the expense support agreements and approximately $0.2 million and $0.5 million, respectively, were capitalized as real estate under development. As described in Note 8. “Related Party Arrangements,” there was no expense support estimated during the quarter and nine months ended September 30, 2017 as we do not expect fees to be settled in accordance with the expense support agreements for the year ending December 31, 2017. Monthly asset management fees equal to 0.08334% of invested assets are paid to ~~the~~our Advisor for the management of our real estate assets ~~including our pro rata share of our investments in unconsolidated entities, loans~~ and other permitted investments.

~~Financing Coordination~~

Property Management Fees. ~~Financing coordination~~We incurred property management fees payable to ~~the Advisor were~~our third-party property managers of approximately ~~$2.7~~$3.9 million and ~~$3.6~~$11.5 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017 of which~~2023, respectively, as compared to approximately ~~$0.0~~$3.7 million and ~~$0.9~~$11.0 million respectively, were capitalized as loan costs and reduced mortgages and other notes payable, net in the accompanying condensed consolidated balance sheets. Financing coordination fees associated with the refinancing of debt are either expensed or capitalized based on whether such refinancings are determined to represent loan modifications or loan extinguishments, respectively, for accounting purposes. There were no financing coordination fees for the quarter and nine months ended September 30, ~~2016.~~

2022, respectively. The property management fees are based on a percentage of revenues under the property management agreement and the increase across periods is reflective of the increase in average occupancy and resident fees and service revenue over the same period as described above.

Financing Coordination Fees. We incurred financing coordination fees of approximately $0.2 million for the nine months ended September 30, 2023 related to the refinancing of the loan associated with five operating properties. We did not incur any financing coordination fees for the quarter ended September 30, 2023 and the quarter and nine months ended September 30, 2022.

Depreciation and Amortization. Depreciation and amortization expenses were approximately ~~$26.8~~$12.5 million and ~~$81.1~~$38.7 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017,~~2023, respectively, as compared to approximately ~~$30.3~~$13.2 million and ~~$94.4~~$40.8 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2016.~~2022, respectively. Depreciation and amortization expenses are comprised of depreciation and amortization of the buildings, equipment, land improvements and in-place leases related to our real estate portfolio. The decrease is primarily due to the sale of two properties in August 2022. The decrease in depreciation and amortization expense ~~across periods resulted from several intangible assets related~~was partially offset by investments of approximately $16.0 million in capital improvements to maintain and improve our ~~seniors housing investments being fully amortized by~~properties subsequent to September 30, 2022.

Gain on sale of real estate. Gain on the ~~end~~sale of ~~2016.~~

real estate of the Fieldstone Properties was approximately $6.3 million during the quarter and nine months ended September 30, 2022. One of the Fieldstone Properties was indirectly owned through a consolidated joint venture. Of the aggregate gain on the sale of real estate for the nine months ended September 30, 2022, approximately $5.4 million was allocable to common stockholders. We did not sell any properties during the quarter and nine months ended September 30, 2023.

Interest ~~Expense~~ and ~~Loan Cost Amortization.~~Other Income. Interest ~~expense~~ and ~~loan cost amortization were~~other income was approximately ~~$17.2~~$0.5 million and ~~$50.4~~$2.5 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2017,~~2023, respectively, as compared to approximately ~~$16.5~~$0.1 million and ~~$45.8~~$4.1 million ~~respectively,~~for each of the quarter and nine months ended September 30, 2022, respectively. The increase in interest and other income during the quarter ended September 30, 2023 as compared to the quarter ended September 30, 2022 was primarily due to an increase in interest income from cash deposits and U.S. treasuries. Interest and other income includes $1.0 million in COVID-19 relief funds received during the nine months ended September 30, 2023 and $3.9 million in COVID-19 relief funds received during the nine months ended September 30, 2022.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization were approximately $10.8 million and $30.7 million for the quarter and nine months ended September 30, ~~2016. For the quarter and nine months ended September 30, 2017, approximately $0.1 million and $2.0 million,~~2023, respectively, ~~was capitalized as development costs relating to our real estate under development,~~ as compared to approximately ~~$0.7~~$6.1 million and ~~$1.9~~$14.7 million ~~respectively,~~ for the quarter and nine months ended September 30, ~~2016.~~2022, respectively. The increase in interest expense and loan cost amortization ~~was primarily the result of an increase in our average debt outstanding to approximately $1.7 billion and $1.6 billion, respectively,~~ for the quarter and nine months ended September 30, ~~2017,~~2023 is primarily due to the rising interest rate environment. During the nine months ended September 30, 2023 and 2022, we were able to partially mitigate the full impact from the rise in interest rates due to the interest rate caps in place as ~~compared with~~part of our overall variable debt hedging strategy.

Gain on Change of Control of a Joint Venture. During the nine months ended September 30, 2022, we recognized a gain of approximately ~~$1.5 billion for both~~$8.4 million as part of acquiring the remaining 25% interest in the Windsor Manor Joint Venture from our joint venture partner, resulting in us owning a 100% controlling interest in the Windsor Manor Joint Venture and recognizing our equity method investment in the Windsor Manor Joint Venture. We did not record such gains during the quarter and nine months ended September 30, ~~2016~~2023.

Income Tax Expense. We incurred income tax expense of approximately $0.1 million and $0.3 million during the ~~increase in LIBOR~~quarter and nine months ended September 30, 2023, respectively, and incurred approximately $0.1 million and $0.2 million during the quarter and nine months ended September 30, 2022, respectively.

Net income attributable to noncontrolling interests. Net income attributable to noncontrolling interests was approximately $0.02 million during the quarter and nine months ended September 30, 2023, and approximately $0.9 million and $1.0 million for the quarter and nine months ended September 30, ~~2017~~2022, respectively. The decrease in the net income attributable to noncontrolling interests during the quarter and nine months ended September 30, 2023, as compared to the quarter and nine months ended September 30, ~~2016. In addition, during~~2022, was primarily due to the ~~nine months ended September 30, 2017, we incurred~~sale of one of the Fieldstone Properties by one of our consolidated joint ventures in August 2022, which resulted in a ~~loss~~gain on ~~the extinguishment~~sale of ~~debt~~real estate of approximately ~~$0.2~~$0.9 million ~~related to the refinancing of our mortgage loans on the Knoxville Medical Office Properties and the Claremont Medical Office property.~~

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

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

noncontrolling interests.

Net Operating Income

We generally expect to meet future cash needs for general and administrative expenses, debt service and distributions from NOI. We define NOI, a non-GAAP measure, as ~~rental income from operating leases, resident fees and services, and tenant reimbursement income~~total revenues less the property operating expenses and property management fees from managed properties. We use NOI as a key performance metric for internal monitoring and planning purposes, including the preparation of annual operating budgets and monthly operating reviews, as well as to facilitate analysis of future investment and business decisions. It does not represent cash flows ~~generated~~ from operating activities in accordance with GAAP and should not be considered to be an alternative to net income or loss (determined in accordance with GAAP) as an indication of our operating performance or to be an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity. We believe the presentation of this non-GAAP measure is important to the understanding of our operating results for the periods presented because it is an indicator of the return on property investment and provides a method of comparing property performance over time. ~~In addition, we have aggregated~~We aggregate NOI on a ~~“same-store”~~“same store” basis ~~only~~ for comparable properties that we have owned during the entirety of ~~all~~the periods presented. Non-same-store NOI ~~represents aggregated~~includes NOI from ~~acquisitions made or developments completed after July 1, 2016 or January 1, 2016, which are excluded~~a property sold in April 2022 and two properties sold in August 2022, as we did not own ~~those~~these properties during the entirety of all periods presented. ~~In understanding our operating results in the accompanying condensed consolidated financial statements, it is important to understand how the growth in our assets has impacted our results.~~

The chart below ~~illustrates~~presents a reconciliation of our net ~~losses, and~~income to NOI for the quarter and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 (in thousands) and the amount invested in properties as of September 30, ~~2017~~2023 and ~~2016~~2022 (in millions):

Quarter Ended
September 30,

Change

Nine Months Ended September 30,

Change

2017

2016

$

%

2017

2016

$

%

Net loss

$
(11,231
)

$
(12,023
)

$
(26,691
)

$
(38,553
)

Adjusted to exclude:

General and administrative
   expenses

3,529

2,705

9,811

9,653

Acquisition fees and
   expenses

―

126

―

277

Asset management fees

7,562

6,240

22,197

18,606

Contingent purchase price
     consideration adjustment

―

528

77

(222
)

Financing coordination fees

2,748

―

2,748

―

Loss on lease terminations

―

―

―

785

Depreciation and
   amortization

26,768

30,289

81,054

94,428

Other expenses, net of other
   income

17,411

15,617

48,571

43,695

Income tax expense

90

66

344

241

NOI

46,877

43,548

$
3,329

7.6
%

138,111

128,910

$
9,201

7.1
%
Less: Non-same-store NOI

(3,393
)

(1,322
)

(5,187
)

(3,789
)

Same-store NOI

$
43,485

$
42,226

$
1,258

3.0
%

$
132,924

$
125,121

$
7,803

6.2
%
Invested in operating properties,
     end of period (in millions)

$
3,004

$
2,857

$
3,004

$
2,857


	Quarter Ended								Nine Months Ended
	September 30,				Change				September 30,				Change
	2023		2022		$		%		2023		2022		$		%
Net (loss) income	$	(5,399)	$	1,262					$	(16,563)	$	5,614
Adjusted to exclude:
General and administrative expenses	2,015		2,730						6,569		7,802
Asset management fees	3,476		3,496						10,427		10,598
Financing coordination fees	—		—						163		—
Depreciation and amortization	12,471		13,232						38,741		40,765
Gain on sale of real estate	—		(6,282)						—		(6,282)
Other expense	10,256		6,006						28,170		2,238
Income tax expense	118		71						321		221

NOI	$	22,937	$	20,515	$	2,422	11.8	%	$	67,828	$	60,956	$	6,872	11.3	%
Less: Non-same-store NOI	—		282						—		1,266
Same-store NOI	$	22,937	$	20,233	$	2,704	13.4	%	$	67,828	$	59,690	$	8,138	13.6	%
Invested in operating properties, end of period (in millions)	$	1,739	$	1,739					$	1,739	$	1,739

Overall, our same-store NOI for the quarter and nine months ended September 30, ~~2017~~2023 increased by approximately ~~$9.2~~$2.7 million and $8.1 million, respectively, as compared to the ~~same period in the prior year. Our non-same-store NOI of approximately $5.2 million for the~~quarter and nine months ended September 30, ~~2017~~2022. Same store NOI increased primarily ~~related~~due to the acquisition of Cobalt Rehabilitation Hospital of New Orleans in October 2016, as well as the completion of seven development properties and two expansion projects after January 1, 2016. Our same-store NOI for the nine months ended September 30, 2017 increased by approximately $7.8 million, or 6.2%, as compared to the same period in the prior year. Thean increase in ~~same-store NOI is primarily attributable~~average occupancy and increases in rates charged to ~~year-over-year revenue~~our residents, partially offset by an increase in operating expenses due to inflation and ~~occupancy growth within our seniors housing properties and most notably attributable to the following properties:~~

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

increased labor costs.

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

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

Funds from Operations and Modified Funds from Operations

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

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

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

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

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

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

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

By excluding expensed acquisition costs, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties.

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

periods.

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

The following table presents a reconciliation of net ~~loss~~income to FFO and MFFO for the quarter and nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 (in thousands, except per share data):


	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net (loss) income attributable to common stockholders	$	(5,414)	$	322	$	(16,580)	$	4,626
Adjustments:
Depreciation and amortization	12,471		13,232		38,741		40,765
Gain on sale of real estate(1)	—		(6,282)		—		(6,282)
Gain on change of control of a joint venture(2)	—		—		—		(8,376)
FFO adjustments attributable to noncontrolling interests	(13)		902		(37)		833
FFO attributable to common stockholders	7,044		8,174		22,124		31,566
Straight-line rent adjustments(3)	436		264		1,334		784
Amortization of premium for debt investments	—		(10)		(17)		(31)
Realized loss on extinguishment of debt(4)	—		—		11		28
MFFO adjustments attributable to noncontrolling interests	(2)		22		(4)		12
MFFO attributable to common stockholders	$	7,478	$	8,450	$	23,448	$	32,359
Weighted average number of shares of common stock outstanding (basic and diluted)	173,960		173,960		173,960		173,960
Net (loss) income per share (basic and diluted)	$	(0.03)	$	—	$	(0.10)	$	0.03
FFO per share (basic and diluted)	$	0.04	$	0.05	$	0.13	$	0.18
MFFO per share (basic and diluted)	$	0.04	$	0.05	$	0.13	$	0.19

Quarter Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Net loss attributable to common stockholders

$
(11,170
)

$
(11,992
)

$
(26,395
)

$
(38,506
)
Adjustments:

Depreciation and amortization

26,768

30,289

81,054

94,428

FFO adjustments attributable to noncontrolling
   interests

(60
)

―

(60
)

―

FFO adjustments from unconsolidated entities⁽¹⁾

131

36

452

577

FFO attributable to common stockholders

15,669

18,333

55,051

56,499

Acquisition fees and expenses ⁽²⁾

―

126

―

277

Straight-line rent adjustments⁽³⁾

(1,085
)

(882
)

(2,083
)

(4,870
)
Amortization of above and below market intangibles ⁽⁴⁾

135

167

479

572

Unrealized loss from mark-to-market adjustments on
   swaps⁽⁵⁾

(50
)

(24
)

5

(1
)
Loss on extinguishment of debt ⁽⁶⁾

―

1,495

239

1,495

Loss on lease terminations ⁽⁷⁾

―

―

―

785

Contingent purchase price consideration adjustment ⁽⁸⁾

―

528

77

(222
)
MFFO adjustments attributable to noncontrolling
   interests

(2
)

―

(2
)

―

MFFO attributable to common stockholders

$
14,667

$
19,743

$
53,766

$
54,535

Weighted average number of shares of common
   stock outstanding (basic and diluted)

175,190

175,033

175,229

175,068

Net loss per share (basic and diluted)

$
(0.06
)

$
(0.07
)

$
(0.15
)

$
(0.22
)
FFO per share (basic and diluted)

$
0.09

$
0.10

$
0.31

$
0.32

MFFO per share (basic and diluted)

$
0.08

$
0.11

$
0.31

$
0.31

FOOTNOTES:

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

⁽²⁾

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

⁽³⁾

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

⁽⁴⁾

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

⁽⁵⁾

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

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

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

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

~~Off-Balance Sheet Arrangements~~

~~As of September 30, 2017, our off-balance sheet and other arrangements were not materially different from the amounts reported~~ for the ~~year ended December 31, 2016. Refer to~~gain on sale of real estate is appropriate because the adjustment is not reflective of our ~~annual report on Form 10-K~~ongoing operating performance and, as a result, the adjustment better aligns results with management’s analysis of operating performance.

(2)Management believes that adjusting for the ~~year ended December 31, 2016 for~~gain on change of control of a ~~summary~~joint venture is appropriate because the adjustment is not reflective of our ~~off-balance sheet~~ongoing operating performance and, as a result, the adjustment better aligns results with management’s analysis of operating performance.

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

(4)Management believes that adjusting for the realized loss on the extinguishment of debt, hedges or other ~~arrangements.~~

~~Contractual Obligations~~

~~The following table presents~~derivatives is appropriate because the adjustments are not reflective of our ~~contractual obligations by payment period~~ongoing operating performance and, as a result, the adjustments better align results with management’s analysis of ~~September 30, 2017 (in thousands):~~

Payments Due by Period

2017

2018-2019

2020-2021

Thereafter

Total

Mortgage and other notes payable (principal and
interest)

$
43,403

$
463,229

$
217,610

$
418,171

$
1,142,413

Credit facilities (principal and interest) ⁽¹⁾

187,704

199,023

282,308

―

669,035

Development contracts on development properties ⁽²⁾

4,696

―

―

―

4,696

Ground and air rights leases⁽³⁾

499

4,054

4,153

111,468

120,174

$
236,302

$
666,306

$
504,071

$
529,639

$
1,936,318

~~FOOTNOTES:~~

⁽¹⁾

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

operating performance.

⁽²⁾

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

Related Party Transactions

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

~~Critical Accounting Policies and Estimates~~

See Item 1. ~~“Financial Statements”~~“Condensed Consolidated Financial Information” and our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2022 for a summary of our related party transactions.

Critical Accounting Policies and Estimates

See Item 1. “Condensed Consolidated Financial Information” and our Annual Report on Form 10-K for the year ended December 31, 2022 for a summary of our critical accounting policies and estimates.

Recent Accounting Pronouncements

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

~~Item 3.~~

Item 3. Quantitative and Qualitative Disclosures about Market Risks

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

The following is a schedule as of September 30, ~~2017,~~2023 of our fixed and variable rate debt maturities for the remainder of ~~2017,~~2023, and each of the next four years and thereafter (principal maturities only) (in thousands):


	Expected Maturities																	Expected Maturities
	2017		2018		2019		2020		2021		Thereafter		Total		Fair Value ⁽¹⁾			2023			2024			2025			2026			2027			Thereafter			Total			Fair Value(1)
Fixed rate debt	$	2,539	$	10,868	$	12,009	$	51,070	$	11,970	$	323,812	$	412,268	$	413,000	Fixed rate debt	$	142		$	20,668		$	—		$	—		$	—		$	—		$	20,810		$	20,000
Weighted average interest rate on fixed debt		4.25%		4.24%		4.23%		3.84%		4.28%		4.28%		4.22%
Weighted average interest rate on fixed rate debt																	Weighted average interest rate on fixed rate debt	3.25		%	3.25		%	—		%	—		%	—		%	—		%	3.25		%
Variable rate debt	$	200,726	$	60,991	$	493,226	$	373,192	$	37,587	$	86,572	$	1,252,294	$	1,250,000	Variable rate debt	$	75		$	548,300		$	308		$	15,542		$	—		$	—		$	564,225		$	564,000
Average interest rate on variable rate debt	LIBOR + 2.44%		LIBOR +2.40%		LIBOR + 2.41%		LIBOR + 2.51%		LIBOR +2.87%		LIBOR + 3.13%		LIBOR + 2.51%
Average interest rate on variable rate debt(2)																	Average interest rate on variable rate debt(2)	1.55% + Term SOFR			1.55% + Term SOFR			2.50% + Term SOFR			2.50% + Term SOFR			—			—			1.58% + Term SOFR

~~FOOTNOTE:~~

⁽¹⁾

____________

FOOTNOTES:

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

~~Assuming no interest rate protection, management estimates that a one-percentage point increase or decrease in LIBOR in 2017, compared to LIBOR~~ rates as of September 30, ~~2017,~~2023. We determined market rates through discussions with our existing lenders by pricing our loans with similar terms and current rates and spreads.

(2)Term SOFR is defined in the respective debt agreement.

Management estimates that a hypothetical one-percentage point increase in variable rates compared to variable rates as of September 30, 2023, disregarding the impact of our interest rate caps in place, would ~~result in fluctuation of~~increase interest expense by approximately $5.6 million on ~~our~~an annualized basis based on variable rate debt outstanding as of ~~approximately $12.5 million for the year ending December 31, 2017.~~September 30, 2023. This sensitivity analysis contains certain simplifying assumptions, and although it gives an indication of our exposure to changes in interest rates, it is not intended to predict future results and actual results will likely vary given that our sensitivity analysis on the effects of changes in ~~LIBOR~~SOFR does not factor in a potential change in variable rate debt levels ~~any offsetting gains on~~or interest rate ~~swap contracts, or~~protection provided by interest rate caps.

Throughout most of 2023, we had two interest rate caps in place, one of which expired in August 2023. Prior to the ~~impact~~expiration of ~~any LIBOR floors or caps.~~

~~As of September 30, 2017, the Company’s~~this interest rate cap, our debt iswas comprised of approximately ~~24.8%~~3.6% in fixed rate debt, approximately ~~63.0%~~73.1% in variable rate debt with interest rate protection and approximately 23.3% of unhedged variable rate debt (primarily related to our Credit Facilities) based on debt outstanding as of mid-August 2023. After the expiration of the interest rate cap, our debt was comprised of 3.6% in fixed rate debt, approximately 1.4% in variable rate debt with current interest rate protection and approximately ~~12.2%~~95.0% of unhedged variable rate debt. ~~The remaining unhedged variable rate debt primarily relates to our construction loans~~We are evaluating several hedging options and anticipate entering into a new hedging transaction by the Revolving Credit Facility. Overall, we believe longer term fixed rate debt could be beneficial in a rising interest rate or rising inflation rate environment and as such we continue to evaluate the need for additionalend of 2023 that will provide interest rate protection on a portion of our unhedged variable rate debt.

~~Item 4.~~

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

~~PART II.~~

~~OTHER INFORMATION~~

PART II. OTHER INFORMATION

~~Item 1.~~

~~Legal Proceedings~~

Item 1. Legal Proceedings

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

~~Item 1A.~~

~~Risk Factors~~

Item 1A. Risk Factors

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

2022.

~~Item 2.~~

~~Unregistered Sales of Equity Securities and Use of Proceeds~~

Item 2.Unregistered Sales of Equity Securities

~~During the period covered by this quarterly report, we did not sell any equity securities that were not registered under the~~ and Use of Proceeds

Unregistered Sales of Equity Securities ~~Act of 1933, and we did not repurchase any of our securities.~~

– None

Issuer Purchases of Equity Securities

~~The following table presents details regarding our repurchase~~– None

Secondary Sales of ~~securities under our redemption plan~~Registered Shares between ~~July 1, 2017 and September 30, 2017 (in thousands, except per share data):~~

Investors

Period

Total
number
of shares
purchased

Average
price paid
per share

Total number
of shares
purchased
under the plan

Maximum
number of shares
that may yet be
purchased under
the plan⁽¹⁾

July 1, 2017 through July 31, 2017

―

―

―

4,672,990

August 1, 2017 through August 31, 2017

―

―

―

4,671,539

September 1, 2017 through September 30, 2017

1,408

$
9.99

1,408

4,117,392

Total

1,408

$
9.99

1,408

~~FOOTNOTE:~~

⁽¹⁾

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

During the nine months ended September 30, ~~2017, our board of directors approved approximately $3.6 million of redemptions that exceeded the proceeds received from our Reinvestment Plan as~~2023 and 2022, there were ~~some proceeds available for redemptions from the Reinvestment Plan in the previous year.~~

approximately 1,560,000 shares and 864,000 shares transferred between investors, respectively, at an average sales price per share of approximately $4.64 and $4.73, respectively. We are not ~~obligated to redeem~~aware of any other trades of our shares, ~~under~~other than previous purchases made in our redemption plan. Our board of directors will continue to evaluate the aggregate amount of funds that will be used to redeem shares pursuant to the redemption plan on a quarterly basis and will determine the amountOfferings and/or redemptions of shares ~~to be redeemed based on what it believes to be~~by us.

Item 3. Defaults Upon Senior Securities– None

Item 4. Mine Safety Disclosure–Not Applicable

Item 5. Other Information

Insider Trading Arrangements

During the quarter ended September 30, 2023, none of our officers or directors adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in ~~the best interest~~Item 408 of the Company and our stockholders as the redemption of shares dilutes the amount of cash available for other corporate purposes. The aggregate amount of funds may be less than, but is not expected to exceed, the aggregate proceeds received through our Reinvestment Plan.

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

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

Regulation S-K.

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

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

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

~~pro rata as to all other redemption requests.~~

~~Item 3.~~

~~Defaults Upon Senior Securities- None~~

~~Item 4.~~

~~Mine Safety Disclosure~~–~~Not Applicable~~

~~Item 5.~~

~~Other Information- None~~

~~Item 6.~~

~~Exhibits~~

Item 6. Exhibits

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

EXHIBIT INDEX

Exhibits

The following exhibits are included, or incorporated by reference in this Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, ~~2017~~2023 (and are numbered in accordance with Item 601 of Regulation S-K).

~~Exhibit No.~~	~~Description~~
Exhibit No.		Description
~~31.1~~
3.1		Third Articles of Amendment and Restatement of CNL Healthcare Properties, Inc. (Previously filed as Exhibit 3.1 to the Current Report on Form 8-K filed July 25, 2016 and incorporated herein by reference.)
3.2		Third Amended and Restated Bylaws of CNL Healthcare Properties, Inc., effective June 27, 2013. (Previously filed as Exhibit 3.2 to the Current Report on Form 8-K filed July 2, 2013 and incorporated herein by reference.)
4.1		Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates). (Previously filed as Exhibit 4.5 to the Pre-effective Amendment One to the Registration Statement on Form S-11 (File No. 333-168129) filed October 20, 2010 and incorporated herein by reference.)
10.1		Fourth Amendment to Advisory Agreement by and among CNL Healthcare Properties, Inc., CHP Partners, LP, and CNL Healthcare Corp. dated effective as of June 8, 2023. (Previously filed as Exhibit 10.1 to the Current Report on Form 8-K filed June 6, 2023 and incorporated herein by reference.)
31.1		Certification of Chief Executive Officer of CNL Healthcare Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ~~(Filed~~(Filed herewith.)
31.2
~~31.2~~	Certification of Chief Financial Officer of CNL Healthcare Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. ~~(Filed~~(Filed herewith.)
32.1
~~32.1~~	Certification of Chief Executive Officer and Chief Financial Officer of CNL Healthcare Properties, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ~~(Filed~~(Filed herewith.)
101
~~101~~	The following materials from CNL Healthcare Properties, Inc. Quarterly Report on Form 10-Q for the quarter and nine months ended September 30, ~~2017,~~2023, formatted in ~~XBRL (Extensible~~iXBRL (Inline eXtensible Business Reporting Language); (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated ~~Statement~~Statements of Operations, (iii) Condensed Consolidated ~~Statement~~Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Stockholders’ Equity and Redeemable Noncontrolling Interest, (v) Condensed Consolidated ~~Statement~~Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.
104		Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)

~~SIGNATURES~~

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the ~~8th~~9th day of November ~~2017.~~

2023.


CNL HEALTHCARE PROPERTIES, INC.

By:		~~By:~~	/s/ Stephen H. Mauldin
			STEPHEN H. MAULDIN
			Chief Executive Officer and President
			(Principal Executive Officer)


By:		~~By:~~	/s/ ~~Kevin R. Maddron~~ Ixchell C. Duarte
			~~KEVIN R. MADDRON~~ IXCHELL C. DUARTE
			Chief Financial Officer, ~~Chief Operating~~Senior Vice President and Treasurer
		(Principal Financial Officer and ~~Treasurer~~
	(Principal ~~Financial~~Accounting Officer)

																			Accumulated
	Redeemable			Common Stock						Capital in									Other			Total			Non-
	Noncontrolling			Number			Par			Excess of			Accumulated			Accumulated			Comprehensive			Stockholders'			controlling			Total
	Interest			of Shares			Value			Par Value			Loss			Distributions			Income (Loss)			Equity			Interest			Equity
Balance at December 31, 2016	$	472			175,070		$	1,751			1,528,435		$	(182,813	)	$	(186,551	)	$	(7,863	)	$	1,152,959		$	1,386		$	1,154,817
Subscriptions received for common stock through reinvestment plan	―				3,186			32			31,957		―			―			―				31,989		―				31,989
Redemptions of common stock	―				(3,568	)		(36	)		(35,588	)	―			―			―				(35,624	)	―				(35,624	)
Net loss		(73	)	―			―			―				(26,395	)	―			―				(26,395	)		(223	)		(26,691	)
Other comprehensive income	―			―			―			―			―			―				3,786			3,786		―				3,786
Distribution to holder of noncontrolling interest	―			―			―			―			―			―			―			―				(27	)		(27	)
Cash distributions declared ($0.3280 per share)	―			―			―			―			―				(57,403	)	―				(57,403	)	―				(57,403	)
Contribution from noncontrolling interests	―			―			―			―			―			―			―			―				60			60
Balance at September 30, 2017	$	399			174,688		$	1,747		$	1,524,804		$	(209,208	)	$	(243,954	)	$	(4,077	)	$	1,069,312		$	1,196		$	1,070,907

Balance at December 31, 2015	$	551			174,430		$	1,744		$	1,528,781		$	(151,146	)	$	(112,543	)	$	(9,747	)	$	1,257,089		$	1,462		$	1,259,102
Subscriptions received for common stock through reinvestment plan	―				3,281			33			31,957		―			―			―				31,990		―				31,990
Redemptions of common stock	―				(2,656	)		(26	)		(25,819	)	―			―			―				(25,845	)	―				(25,845	)
Net income (loss)		(52	)	―			―			―				(38,506	)	―			―				(38,506	)		5			(38,553	)
Other comprehensive loss	―			―			―			―			―			―				(5,916	)		(5,916	)	―				(5,916	)
Distribution to holder of noncontrolling interest	―			―			―			―			―			―			―			―				(29	)		(29	)
Distributions to holders of promoted interest	―			―			―				(6,650	)	―			―			―				(6,650	)	―				(6,650	)
Cash distributions declared ($0.3174 per share)	―			―			―			―			―				(55,488	)	―				(55,488	)	―				(55,488	)
Balance at September 30, 2016	$	499			175,055		$	1,751		$	1,528,269		$	(189,652	)	$	(168,031	)	$	(15,663	)	$	1,156,674		$	1,438		$	1,158,611

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Weighted Average Remaining Lease Term: ⁽³⁾			7.1 years

			Distributions Paid ⁽¹⁾
Periods	Cash Distributions per Share		Total Cash Distributions Declared ⁽²⁾		Reinvested via Reinvestment Plan		Cash Distributions net of Reinvestment Proceeds		Cash Flows Provided by Operating Activities⁽³⁾
2017 Quarters
First	$	0.1058	$	18,525	$	10,412	$	8,113	$	18,667
Second		0.1058		18,515		10,305		8,210		22,815
Third		0.1164		20,363		11,271		9,092		15,460
Total	$	0.3280	$	57,403	$	31,988	$	25,415	$	56,942

2016 Quarters
First	$	0.1058	$	18,454	$	10,725	$	7,729	$	16,008
Second		0.1058		18,538		10,658		7,880		18,741
Third		0.1058		18,496		10,607		7,889		23,362
Total	$	0.3174	$	55,488	$	31,990	$	23,498	$	58,111

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

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

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