CNL Healthcare Properties II (CHPII) 424B3 Prospectus supplement

Filed Pursuant to Rule 424(b)(3)
Registration No. 333-206017

CNL HEALTHCARE PROPERTIES II, INC.

STICKER SUPPLEMENT NO. 1 DATED MAY 18, 2017

TO THE PROSPECTUS DATED APRIL 26, 2017

This sticker supplement no. 1 is part of, and should be read in conjunction with, our prospectus dated April 26, 2017. Unless otherwise defined herein, capitalized terms used in this sticker supplement have the same meanings as prescribed to them in the prospectus.

The purpose of this sticker supplement is to disclose:

• an update to the disclosure regarding discounts in the “Plan of Distribution” section of the prospectus;

• “Management’s Discussion and Analysis of Financial Condition and Results of Operations” similar to that filed in our Quarterly Report on Form10-Q for the period ended March 31, 2017; and

• our condensed consolidated financial statements and the notes thereto as of and for the period ended March 31, 2017.

Plan of Distribution—Compensation Paid for Sales ofShares—Front-End Selling Commissions, Dealer Manager Fee and Discounts (Class A and Class T Shares)

The following disclosure replaces the disclosure in the “Plan of Distribution—Compensation Paid for Sales ofShares—Front-End Selling Commissions, Dealer Manager Fee and Discounts (Class A and Class T Shares)” section of the prospectus.

Except for the special sales, fee arrangements or volume discounts described later in this section, we will pay the dealer manager selling commissions and dealer manager fees of 8.5% of the sale price per Class A share, or approximately $0.93 per share, for Class A shares sold in the primary offering, and 4.75% of the sale price per Class T share, or approximately $0.50 per share, for Class T shares sold in the primary offering. For Class A shares sold in the primary offering, the maximum selling commission is 6.0% of the sale price and the maximum dealer manager fee is 2.5% of the sale price. For Class T shares sold in the primary offering, our dealer manager may elect the respective amounts of the commission and dealer manager fee, provided that the commission shall not exceed 3.0% of the gross proceeds from the completed sale of such Class T shares sold in the primary offering. Reduced selling commissions will be paid with respect to certain volume discount sales of Class A shares and Class T shares. The dealer manager may reallow all or a portion of the selling commissions and dealer manager fees to participating broker-dealers as compensation for their services in soliciting and obtaining subscriptions and for marketing the shares in connection with the primary offering, which includes coordinating the marketing of the shares with any participating broker-dealers. We will not pay any selling commissions or dealer manager fees in connection with sales of Class I shares in the primary offering. No selling commissions or dealer manager fees will be paid on any Class A, Class T or Class I shares sold pursuant to the distribution reinvestment plan.

The selling commission and/or dealer manager fee may be reduced or eliminated in connection with certain categories of sales, such as sales for which a volume discount applies, sales through certain investment advisory representatives and sales made, subject to the agreement of our dealer manager, to certain investors who have agreed with a participating broker-dealer to reduce or eliminate the selling commission and/or the dealer manager fee. The net proceeds we receive will not be affected by such sales of shares at a discount.

We expect our dealer manager to utilize multiple distribution channels to sell our Class A and Class T shares, including through FINRA-registered broker-dealers and financial intermediaries exempt from broker-dealer registration. In the event of the sale of shares in our primary offering by broker-dealers that are members of FINRA, the purchase price generally will be $10.93 per Class A share and $10.50 per Class T share. Selling commissions

and dealer manager fees generally will be paid in connection with such sales. In the event of the sale of Class A shares in our primary offering through certain investment advisory representatives as described below, the purchase price of such shares will be $10.27 per share, reflecting the fact that we will not pay our dealer manager the 6.00% selling commission on such Class A shares, as described in more detail below. The Class T shares will not be sold through investment advisory representatives.

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

Introduction

The following discussion is based on the condensed consolidated financial statements as of March 31, 2017 (unaudited) and December 31, 2016. Amounts as of December 31, 2016, included in the unaudited condensed consolidated financial statements 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 financial statements and the notes thereto, as well as the audited consolidated financial statements, notes thereto and management’s discussion and analysis included in our Annual Report onForm 10-K for the year ended December 31, 2016 and incorporated by reference into our prospectus.

Overview

CNL Healthcare Properties II, Inc. (referred to herein as “we”, “us”, “our” or the “Company”) is a Maryland corporation that incorporated on July 10, 2015 and intends to qualify as a REIT for U.S. federal income tax purposes beginning with the year ending December 31, 2017 or the first year in which we commence material operations.

We are externally managed and advised by our Advisor, CHP II Advisors, LLC. Our Advisor is responsible for managing ourday-to-day affairs and for identifying and making acquisitions and investments on our behalf. We had no operations prior to the commencement of our primary offering.

Our investment focus is on acquiring a diversified portfolio of healthcare real estate or real estate-related assets, primarily in the United States, within the seniors housing, medical office, post-acute care and acute care asset classes. The types of seniors housing that we may acquire include active adult communities(age-restricted andage-targeted housing), independent and assisted living facilities, continuing care retirement communities, and memory care facilities. The types of medical office properties that we may acquire include medical office buildings, 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 we may acquire include skilled nursing facilities, long-term acute care hospitals and inpatient rehabilitative facilities. The types of acute care facilities that we may acquire include general acute care hospitals and specialty surgical hospitals. We view, manage and evaluate our 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.

We are committed to investing the proceeds of our offering through strategic investment types aimed to maximize stockholder value by generating sustainable cash flow growth and increasing the value of our healthcare assets. We generally expect to lease seniors housing properties to single member limited liability companies wholly-owned by a wholly-owned taxable REIT subsidiary, CHP II TRS Holding, Inc. (“TRS Holdings”), and engage independent third-party managers under management agreements to operate the properties as permitted under RIDEA structures; however, we may also lease our properties to third-party tenants undertriple-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 will be leased on atriple-net, net or modified gross basis to third-party tenants. In addition, we expect most investments will be wholly owned, although, we may invest through partnerships with other entities where we believe it is appropriate and beneficial. We expect to invest in a combination of stabilized assets, new property developments and properties which have not reached full stabilization. Finally, we also may invest in and originate mortgage, bridge or mezzanine loans or in entities that make investments similar to the foregoing investment types. We generally make loans to the owners of properties to enable them to acquire land, buildings, or to develop property. In exchange, the owner generally grants us a first lien or collateralized interest in a participating mortgage collateralized by the property or by interests in the entity that owns the property.

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Portfolio Overview

We believe recent demographic trends and compelling supply and demand indicators present a strong case for an investment focus on healthcare real estate or real estate-related assets. We believe that the healthcare sector will continue to provide attractive opportunities as compared to other asset sectors over the long-term.

As of May 1, 2017, we owned one seniors housing community comprised of 89 residential units (67 assisted living and 22 memory care units). The property was acquired in March 2017 for a purchase price of approximately $21.4 million and is operated under a RIDEA structure by SRI Management, LLC (“Superior Residences”), a third-party property manager who operated the property previously for the seller under a similar structure.

We monitor the performance of our third-party operator(s) to stay abreast of material changes in the operations of underlying property by (1) reviewing the current, historical and prospective operating margins (measured by earnings before interest, taxes, depreciation, amortization and facility rent), (2) monitoring trends in the source of our revenue, including relative mix of 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 profitability and liquidity, and (4) reviewing the competition and demographics of the local and surrounding areas in which we operate.

Liquidity and Capital Resources

General

Our primary source of capital for items other than acquisitions of real estate is expected to be the net proceeds from our offering. We will use such amounts for investments in properties and other permitted investments, as well as the payment or reimbursement of fees and expenses relating to the selection, acquisition and development of properties and other permitted investments. Generally we expect to meet cash needs for items other than acquisitions from our cash flows from operations, and we expect to meet cash needs for acquisitions from net proceeds from our offering and borrowings. However, until such time as we are fully invested, we may use proceeds from our offering and/or borrowings (“Other Sources”) to pay all or a portion of our operating expenses, distributions and debt service.

We intend to strategically leverage our real estate assets and use debt as a means of providing additional funds for the acquisition of properties and the diversification of our portfolio. Our ability to increase our diversification through borrowings could be adversely affected by credit market conditions, 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 any unhedged variable rate debt or the timing of when we seek to refinance existing debt. During times when interest rates on mortgage loans are high or financing is otherwise unavailable on a timely basis, we may purchase certain properties for cash with the intention of obtaining a mortgage loan for a portion of the purchase price at a later time. Potential future sources of capital include proceeds from collateralized or uncollateralized financings from banks or other lenders. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures. As of March 31, 2017, our debt leverage ratio was approximately 56.5% of the aggregate carrying value of our assets.

The number of properties and other permitted investments we may acquire or make will depend on the number of shares sold through our offering and the resulting net proceeds available for investment.

Since the commencement of our offering and as of March 31, 2017, our net investment value per share for Class A, Class T and Class I shares continues to be $10.00 per share, which is based on the “amount available for investment/net investment amount” percentage shown in the Estimated Use of Proceeds section of our prospectus.

Sources of Liquidity and Capital Resources

Common Stock Subscriptions

For the three months ended March 31, 2017, we received aggregate subscription proceeds of approximately $6.8 million (0.6 million shares), and approximately $28,000 (2,800 shares) of subscription proceeds received pursuant to our reinvestment plan.

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During the period from April 1, 2017 through May 1, 2017, we received additional subscription proceeds of approximately $0.9 million (0.1 million shares). We expect to continue to raise capital under our offering.

Indebtedness

In August 2016, in connection with our private placement, we issued promissory notes to each of 125 separate investors for a total principal amount of $0.3 million (each a “Note” and collectively, “Notes”). We owe interest on the Notes of approximately $70,000 per annum, which is payable semi-annually in arrears. The Notes mature on June 30, 2046. Some or all of the Notes may be prepaid at any time, in whole or in part, provided that (i) such prepayment include all accrued and unpaid interest due on such prepaid principal amount to and including the date of prepayment and (ii) if the prepayment occurs prior to the second anniversary of the issue date of the Note, the operating partnership will pay on the date of such prepayment aone-time premium equal to approximately $31,000. In connection with the issuance of the Notes, the Company placed approximately $0.4 million into a third-party escrow account to be held to repay the principal of the Notes and two semi-annual interest payments until such time as we raised at least $10 million in gross proceeds in our offering, which occurred during the three months ended March 31, 2017 and approximately $0.4 million was released from escrow to us.

In March 2017, we entered into the Summer Vista Loan and received approximately $16.1 million of proceeds from this mortgage loan, which were used to fund the acquisition of Summer Vista. The Summer Vista Loan matures on April 1, 2022, subject to twoone-year extension options provided certain conditions are met. The Summer Vista Loan accrues interest at a rate equal to the sum of LIBOR plus 2.85%, with monthly payments of interest only for the first 18 months, and monthly payments of interest and principal for the remaining 42 months using a30-year amortization period with the remaining principal balance payable at maturity. Prior to April 1, 2019, the interest payable on the Summer Vista Loan may be reduced to a rate equal to the sum of LIBOR plus 2.70% if, at such time, no event of default exists, certain debt yield thresholds are met, and at least $2,150,000 of the original outstanding principal balance of the Summer Vista Loan has been paid. We may prepay, without a penalty, all or any part of the Summer Vista Loan at any time.

Expense Support Agreement

During the three months ended March 31, 2017, our cash from operating activities was positively impacted by the expense support agreement with our Advisor pursuant to which our Advisor has agreed to accept payment in restricted stock in lieu of cash for services rendered, in the event that the Company does not achieve established distribution coverage targets (as defined in the expense support agreement). For the three months ended March 31, 2017, we expect that approximately $0.1 million of asset management fees and Advisor personnel expenses will be settled in the form of restricted stock pursuant to the expense support agreement. Any amounts settled, and for which restricted stock shares will be issued, pursuant to the expense support agreement are permanently settled and we have no further obligation to pay such amounts to our Advisor.

Refer to “Notes to Condensed Consolidated Financial Statements—Related Party Arrangements” in this Supplement for additional information.

Uses of Liquidity and Capital Resources

Real Estate Acquisition

During the three months ended March 31, 2017, we acquired Summer Vista, which represents our first acquisition of property, and paid total purchase price consideration of approximately $21.8 million. We expect to continue to expand our healthcare investment portfolio through additional acquisitions as we raise additional capital from our offering.

Underwriting Compensation

For the three months ended March 31, 2017, we paid approximately $0.4 million in underwriting compensation. Under the terms of the primary offering, our Dealer Manager is entitled to receive selling commissions, dealer manager fees and/or annual distribution and stockholder servicing fees, which are based on the respective share class of our common stock sold, all or a portion of which may be reallowed to participating broker dealers.

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In March 2017, we entered into an amended and restated dealer manager agreement, which reduces the sales commissions, dealer manager fees and ongoing annual distribution and stockholder servicing fees payable to the Dealer Manager and participating broker-dealers from 9.75% to 8.5% of the gross proceeds for each share class of common stock sold in the primary offering. The aforementioned reduction to underwriting compensation will result in a lower amount of commissions and fees being paid to the Dealer Manager in future periods and will further provide for increased net proceeds from our primary offering to be available for investment.

Net Cash Used in Operating Activities

For the three months ended March 31, 2017, we used approximately $0.2 million of net cash in operating activities, primarily to pay general and administrative expenses for the period. We generally expect to meet future cash needs for general and administrative expenses, debt service and distributions from the net operating income (“NOI”) from our properties, however until such time as we acquire additional properties and generate sufficient NOI from our investments, we expect to continue to fund such amounts with Other Sources.

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. We expect to have little, if any, cash flows from operations available for distribution until we make substantial investments. There may be a delay between the sale of our common stock and the purchase of properties or other investments, which could result in a delay in our ability to generate cash flows to cover distributions to our stockholders. Therefore, we may determine to pay some or all of our cash distributions from Other Sources, such as from cash flows provided by financing activities, a component of which may include the proceeds of our offering and/or borrowings, whether collateralized by our assets or unsecured. We have not established any limit on the extent to which we may use borrowings or proceeds of our offering to pay distributions, and there is no assurance we will be able to sustain distributions at any level.

The following table details our cash distributions per share and our total cash distributions paid, including distribution reinvestments, for the three months ended March 31, 2017:

	Cash Distributions per Share (1)						Cash Distributions Paid (2)						Cash Flows Used in Operating Activities (3)
Periods	Class A Share		Class T Share		Class I Share		Cash Distributions Declared		Distribution Reinvestments		Cash Distributions net of Distribution Reinvestments
2017 Quarters
First	$	0.1050	$	0.0750	$	0.1050	$	73,202	$	28,260	$	44,942	$	154,202
Year	$	0.1050	$	0.0750	$	0.1050	$	73,202	$	28,260	$	44,942	$	154,202

FOOTNOTES:

⁽¹⁾ Our board of directors authorized monthly cash distributions on the outstanding shares of all classes of our common stock, beginning in August 2016 and continuing each month through March 2017, in monthly amounts equal to $0.0350 per share, less class-specific expenses with respect to each class.

⁽²⁾ Represents cash distributions declared, the amount of distributions reinvested in additional shares through our reinvestment plan and the amount of proceeds used to fund cash distributions.

⁽³⁾ For the three months ended March 31, 2017, our net loss was approximately $251,000 while cash distributions and stock dividends declared and issued were approximately $73,200 and 4,700 shares, respectively. For the three months ended March 31, 2017, 100% of the cash distributions paid to stockholders were considered to be funded with proceeds from our offering and were considered a return of capital to stockholders for federal income tax purposes.

In February 2017, the Company’s board of directors declared a monthly cash distribution of $0.0480, less class-specific expenses, and a monthly stock dividend of 0.00100625 shares on each outstanding share of common stock on April 1, 2017, May 1, 2017 and June 1, 2017. These distributions and dividends are to be paid and distributed by June 30, 2017.

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Results of Operations

From the time of our formation on July 10, 2015 (inception) through July 10, 2016, we had not commenced operations because we were in our development stage and had not received the minimum required offering amount of $2.0 million in shares of common stock. Operations commenced on July 11, 2016, when aggregate subscription proceeds in excess of the minimum offering amount were released to us from escrow. As a result, there are no comparative financial statements for the three months ended March 31, 2017.

The following is a discussion of our results of operations for the three months ended March 31, 2017:

• Resident fees and services and property operating expenses for the three months ended March 31, 2017 were comprised entirely of allocatedpro-rations at closing as the Summer Vista acquisition occurred on the last day of March 2017. We expect to generate additional revenues and operating expenses as the Summer Vista property is held in future periods and we acquire additional properties.

• Acquisition fees and expenses for the three months ended March 31, 2017 were approximately $0.6 million, which have been capitalized as a component of the cost of the assets acquired and allocated on a relative fair value basis.

• General and administrative expenses for the three months ended March 31, 2017 were approximately $0.3 million and were comprised primarily of directors’ and officers’ insurance, accounting and legal fees, Advisor personnel expenses and board of director fees; however, these Advisor personnel expenses are expected to be settled in the form of restricted stock pursuant to the expense support agreement and as such our general and administrative expenses were reduced by approximately $0.1 million for the three months ended March 31, 2017.

• Interest expense for the three months ended March 31, 2017 was approximately $19,000 and relates to the Notes issued in connection with our private placement as well as the Summer Vista loan.

The results of operations for the three months ended March 31, 2017 are not indicative of our expected future performance due to the limited time in which we have been operational, and our single investment to date being made on the last day of March 2017.

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

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, the North American Real Estate Investment Trust (“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, anon-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

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business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income or loss. However, FFO and Modified Funds From Operations (“MFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or loss in its applicability in evaluating operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-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 anexpensed-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 thatnon-listed REITs are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Due to the above factors and other unique features of publicly registered,non-listed REITs, the Investment Program Association (“IPA”), an industry trade group, has standardized a measure known as MFFO which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of anon-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 othernon-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 thenon-listed REIT industry.

We define MFFO, anon-GAAP measure, consistent with the IPA’s Guideline2010-01, Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: MFFO, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income or loss: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to remove the impact of GAAP straight-line adjustments from rental revenues); accretion of discounts and amortization of premiums on debt investments,mark-to-market adjustments included in net income; gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, and unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized.

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

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

For the three months ended March 31, 2017, we had no adjustments necessary in order to reconcile from net loss to FFO and MFFO.

Off-Balance Sheet Arrangements

We had nooff-balance sheet arrangements as of March 31, 2017.

Contractual Obligations

The following table presents our contractual obligations by payment period as of March 31, 2017:

	Payments Due by Period
	2017		2018-2019		2020-2021		Thereafter		Total
Mortgage and notes payable (principal and interest)	$	722,250	$	2,069,440	$	2,405,696	$	15,742,873	$	20,940,259
	$	722,250	$	2,069,440	$	2,405,696	$	15,742,873	$	20,940,259

Critical Accounting Policies and Estimates

See “Notes to Condensed Consolidated Financial Statements—Summary of Significant Accounting Policies” below for a summary of our significant accounting policies.

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Recent Accounting Pronouncements

See “Notes to Condensed Consolidated Financial Statements—Summary of Significant Accounting Policies” below for a summary of the impact of recent accounting pronouncements.

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INDEX TO FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets	F-2
Condensed Consolidated Statement of Operations	F-3
Condensed Consolidated Statements of Stockholders’ Equity	F-4
Condensed Consolidated Statement of Cash Flows	F-5
Notes to Condensed Consolidated Financial Statements	F-6

F-1

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	March 31, 2017			December 31, 2016
ASSETS
Real estate investment properties	$	20,695,646		$	—
Intangibles		1,283,846			—
Cash		6,605,689			5,977,241
Prepaid expenses		40,879			48,928
Restricted cash		30,296			383,000
Total assets	$	28,656,356		$	6,409,169
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage and notes payable	$	16,184,988		$	312,500
Due to related parties		399,939			240,651
Accounts payable and accrued liabilities		257,243			23,263
Other liabilities		53,589			—
Total liabilities		16,895,759			576,414
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.01 par value per share, 10,000,000 shares authorized; none issued or outstanding		—			—
Class A Common stock, $0.01 par value per share, 1,200,000,000 shares authorized; 434,547 and 325,119 shares issued and outstanding, respectively		4,345			3,251
Class T Common stock, $0.01 par value per share, 700,000,000 shares authorized; 837,038 and 308,587 shares issued and outstanding, respectively		8,371			3,086
Class I Common stock, $0.01 par value per share, 100,000,000 shares authorized; 17,902 and 8,454 shares issued and outstanding, respectively		180			85
Capital in excess of par value		12,471,831			6,226,141
Accumulated loss		(593,567	)		(342,447	)
Accumulated distributions		(130,563	)		(57,361	)
Total stockholders’ equity		11,760,597			5,832,755
Total liabilities and stockholders’ equity	$	28,656,356		$	6,409,169

See accompanying notes to condensed consolidated financial statements.

F-2

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)

	Three Months Ended
	March 31, 2017
Revenues:
Resident fees and services	$	11,430
Total revenues		11,430
Operating expenses:
General and administrative		234,538
Property operating expenses		8,686
Total operating expenses		243,224
Operating loss		(231,794	)
Other expense:
Interest expense		19,326
Total other expense		19,326
Net loss	$	(251,120	)
Class A common stock:
Net loss attributable to Class A stockholders	$	(95,182	)
Net loss per share of Class A common stock outstanding (basic and diluted)	$	(0.26	)
Weighted average number of Class A common shares outstanding (basic and diluted)		369,598
Distributions declared per Class A common share	$	0.1050
Class T common stock:
Net loss attributable to Class T stockholders	$	(153,180	)
Net loss per share of Class T common stock outstanding (basic and diluted)	$	(0.26	)
Weighted average number of Class T common shares outstanding (basic and diluted)		594,806
Distributions declared per Class T common share	$	0.0750
Class I common stock:
Net loss attributable to Class I stockholders	$	(2,758	)
Net loss per share of Class I common stock outstanding (basic and diluted)	$	(0.26	)
Weighted average number of Class I common shares outstanding (basic and diluted)		10,708
Distributions declared per Class I common share	$	0.1050

See accompanying notes to condensed consolidated financial statements.

F-3

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (UNAUDITED)

FOR THE THREE MONTHS ENDED MARCH 31, 2017 AND 2016

	Common Stock
							Class A				Class T				Class I				Capital in									Total
	Number			Par			Number		Par		Number		Par		Number		Par		Excess of			Accumulated			Accumulated			Stockholders’
	of Shares			Value			of Shares		Value		of Shares		Value		of Shares		Value		Par Value			Loss			Distributions			Equity
Balance at December 31, 2016		—		$	—			325,119	$	3,251		308,587	$	3,086		8,454	$	85	$	6,226,141		$	(342,447	)	$	(57,361	)	$	5,832,755
Subscriptions received for common stock, including distribution reinvestments		—			—			107,480		1,075		525,753		5,258		9,400		94		6,797,145			—			—			6,803,572
Stock dividends issued		—			—			1,948		19		2,698		27		48		1		(47	)		—			—			—
Stock issuance and offering costs		—			—			—		—		—		—		—		—		(551,408	)		—			—			(551,408	)
Net loss		—			—			—		—		—		—		—		—		—			(251,120	)		—			(251,120	)
Cash distributions declared		—			—			—		—		—		—		—		—		—			—			(73,202	)		(73,202	)
Balance at March 31, 2017		—		$	—			434,547	$	4,345		837,038	$	8,371		17,902	$	180	$	12,471,831		$	(593,567	)	$	(130,563	)	$	11,760,597
Balance at December 31, 2015		20,000		$	200			—	$	—		—	$	—		—	$	—	$	199,800		$	—		$	—		$	200,000
Conversion of initial common stock shares		(20,000	)		(200	)		20,000		200		—		—		—		—		—			—			—			—
Balance at March 31, 2016		—		$	—			20,000	$	200		—	$	—		—	$	—	$	199,800		$	—		$	—		$	200,000

See accompanying notes to condensed consolidated financial statements.

F-4

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

	Three Months Ended
	March 31, 2017
Operating activities:
Net cash flows used in operating activities	$	(154,202	)
Investing activities:
Acquisition of property		(21,769,784	)
Net cash used in investing activities		(21,769,784	)
Financing activities:
Subscriptions received for common stock through primary offering		6,775,312
Payment of underwriting compensation		(403,128	)
Payment of cash distributions, net of distribution reinvestments		(44,942	)
Proceeds from mortgage and notes payable		16,050,000
Payment of loan costs		(177,512	)
Net cash flows provided by financing activities	$	22,199,730
Net increase in cash and restricted cash		275,744
Cash and restricted cash at beginning of period		6,360,241
Cash and restricted cash at end of period	$	6,635,985
Supplemental disclosure ofnon-cash investing and financing activities:
Amounts incurred but not paid (including amounts due to related parties):
Acquisition fees and expenses related to asset acquisition	$	38,790
Annual distribution and stockholder servicing fee	$	315,386
Assumption of liabilities on acquisition of property	$	170,918

See accompanying notes to condensed consolidated financial statements.

F-5

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

1. Organization

CNL Healthcare Properties II, Inc. is a Maryland corporation organized on July 10, 2015 that intends to qualify as a real estate investment trust (“REIT”) for U.S. federal income tax purposes beginning with the year ending December 31, 2017 or the year in which the Company commences material operations. The Company is sponsored by CNL Financial Group, LLC (“Sponsor” or “CNL”) and was formed primarily to acquire and manage a diversified portfolio of healthcare real estate and real estate-related assets that it believes will generate a steady current return and provide long-term value to its stockholders. It intends to focus on investing, primarily in the United States, within the seniors housing, medical office, acute care and post-acute care sectors, as well as other types of real estate and real estate-related securities and loans.

The Company is externally managed and advised by CHP II Advisors, LLC, (“Advisor”) an affiliate of CNL. The Advisor provides advisory services to the Company relating to substantially all aspects of its investments and operations, including real estate acquisitions, asset management and other operational matters. During the period from July 10, 2015 to December 31, 2015, the Company sold 20,000 shares of common stock to the Advisor for an aggregate purchase price of $0.2 million, and these shares were converted into 20,000 Class A shares upon the filing of the Company’s Articles of Amendment and Restatement in March 2016.

On March 2, 2016, pursuant to a registration statement on FormS-11 under the Securities Act of 1933, the Company commenced its initial public offering of up to $1.75 billion (“Primary Offering”), in any combination, of Class A, Class T and Class I shares of common stock on a “best efforts” basis, which means that CNL Securities Corp. (“Dealer Manager”), an affiliate of the Sponsor, will use its best efforts but is not required to sell any specific amount of shares. The Company also intends to offer up to $250 million, in any combination, of Class A, Class T and Class I shares to be issued pursuant to its distribution reinvestment plan (“Reinvestment Plan” and, together with the Primary Offering, the “Offering”). The Company reserves the right to reallocate the shares offered between the Primary Offering and the Reinvestment Plan.

From the time of the Company’s formation on July 10, 2015 (inception) through July 10, 2016, the Company had not commenced operations because they were in their development stage and had not received the minimum required offering amount of $2.0 million in shares of common stock. The Company broke escrow in its Offering effective July 11, 2016, through the sale of 250,000 Class A shares to its Advisor for $2.5 million and commenced operations.

The Company contributes the net proceeds from its Offering to CHP II Partners, LP (“Operating Partnership”) in exchange for partnership interests. The Company intends to own substantially all of its assets either directly or indirectly through the Operating Partnership in which the Company is the sole limited partner and its wholly-owned subsidiary, CHP II GP, LLC, is the sole general partner. The Operating Partnership may own assets through: (1) a wholly-owned taxable REIT subsidiary, CHP II TRS Holding, Inc. (“TRS Holdings”) and (2) property owner subsidiaries, which are single purpose entities.

The Company generally expects to lease its seniors housing properties to single member limited liability companies wholly-owned by TRS Holdings and engage independent third-party managers under management agreements to operate the properties as permitted under REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structures; however, the Company may also lease its properties to third-party tenants undertriple-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, acute care and post-acute care properties will generally be leased on atriple-net, net or modified gross basis to third-party tenants. In addition, the Company expects most investments will be wholly-owned, although, it may invest through partnerships with other entities where the Company believes it is appropriate and beneficial. The Company expects to invest in a combination of stabilized assets, new property developments and properties which have not reached full stabilization. Finally, the Company may invest in and originate mortgage, bridge or mezzanine loans or in entities that make investments similar to the foregoing investment types. The Company would generally make loans to the owners of properties to enable them to acquire land, buildings, or to develop property. In exchange, the owner generally grants the Company a first lien or collateralized interest in a participating mortgage collateralized by the property or by interests in the entity that owns the property.

F-6

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies

BasisofPresentationandConsolidation— The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form10-Q and do not include all of the information and note disclosures required by generally accepted accounting principles in the United States (“GAAP”). The unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which, in the opinion of management, are necessary for the fair statement of the Company’s results for the interim period presented. Operating results for the three months ended March 31, 2017 may not be indicative of the results that may be expected for the year ending December 31, 2017. Amounts as of December 31, 2016 included in the unaudited condensed consolidated financial statements have been derived from audited consolidated financial statements as of that date but do not include all disclosures required by GAAP. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form10-K for the year ended December 31, 2016.

The accompanying condensed consolidated financial statements include the accounts of the Company, the Operating Partnership and its other subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation. The Company’s operations commenced on July 11, 2016, when aggregate subscription proceeds in excess of the minimum offering amount were released from escrow. As a result, there are no comparative statements of operations or cash flows for the three months ended March 31, 2017.

UseofEstimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the Company’s condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

AllocationofPurchasePriceforRealEstateAcquisitions— Upon acquisition of real estate, the Company first determines whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets in order to determine whether the acquisition should be accounted for as an asset acquisition. If the substantially all threshold is not met, the Company then determines whether the acquisition meets the definition of a business (i.e. does it include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs).

The Company estimates the fair value of acquired tangible assets (consisting of land and improvements, building and improvements, and furniture, fixtures and equipment), intangible assets (consisting ofin-place leases and above- or below-market leases) and liabilities assumed in order to allocate the purchase price. In estimating the fair value of the assets acquired and liabilities assumed, the Company considers information obtained about each property as a result of its due diligence and utilizes various valuation methods, such as estimated cash flow projections using appropriate discount and capitalization rates, estimates of replacement costs net of depreciation and available market information.

The fair value of the tangible assets of an acquired leased property is determined by valuing the property as if it were vacant, and the“as-if-vacant” value is then allocated to land and building.

The purchase price is allocated toin-place lease intangibles based on management’s evaluation of the specific characteristics of the acquired lease(s). Factors considered include estimates of carrying costs during hypothetical expectedlease-up periods, including estimates of lost rental income during the expectedlease-up periods, and costs to execute similar leases such as leasing commissions, legal and other related expenses. Above- and below-market lease intangibles are recorded based on the present value of the difference between the contractual rents to be paid pursuant to the lease and management’s estimate of the fair market lease rates for eachin-place lease and may include assumptions for lease renewals of below-market leases.

DepreciationandAmortization— Real estate costs related to the acquisition and improvement of properties are capitalized. Repair and maintenance costs are charged to expense as incurred and significant replacements and improvements are capitalized. Repair and maintenance costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life. Real estate assets are stated at cost less accumulated depreciation, which is computed using the straight-line method of accounting over the estimated useful lives of the related assets. Buildings and improvements are depreciated on the straight-line method over their estimated useful lives, which generally are the lesser of 39 and 15 years, respectively, or the remaining life of the ground lease.

F-7

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies (continued)

Amortization of intangible assets is computed using the straight-line method of accounting over the shorter of the respective lease term or estimated useful life. If a lease is terminated or modified prior to its scheduled expiration, the Company recognizes a loss on lease termination related to the unamortized lease-related costs not deemed to be recoverable.

ImpairmentofRealEstateAssets— Real estate assets are reviewed on an ongoing basis to determine whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may be impaired. To assess if an asset group is potentially impaired, management compares the estimated current and projected undiscounted cash flows, including estimated net sales proceeds, of the asset group over its remaining useful life to the net carrying value of the asset group. Such cash flow projections consider factors such as expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors. In the event that the carrying value exceeds the undiscounted operating cash flows, the Company would recognize an impairment provision to adjust the carrying value of the asset group to the estimated fair value of the asset group.

RevenueRecognition— Resident fees and services consist of monthly services, which include base rent and other related services such as assisted living care, memory care and ancillary services. Agreements with residents are generally billed monthly in advance and cancelable by the residents with a30-day notice.

MortgagesandNotesPayable— Mortgages and notes payable are recorded at the stated principal amount and are generally collateralized by the Company’s property. Mortgages and notes payable assumed in connection with an acquisition are recorded at fair market value as of the date of the acquisition.

LoanCosts— Loan costs paid in connection with obtaining indebtedness are deferred and amortized over the estimated life of the indebtedness using the effective interest method. Loan costs are presented as a direct deduction from the carrying amount of the related indebtedness in the balance sheet.

SharesBasedPaymentstoNon-Employees — In connection with an expense support arrangement described in Note 4. “Related Party Arrangements,” the Company may issue forfeitable restricted Class A shares of common stock (“Restricted Stock”) to the Advisor on an annual basis in lieu of cash for services rendered, in the event that the Company does not achieve established distribution coverage targets.

The Restricted Stock is forfeited if shareholders do not ultimately receive their original invested capital back with at least a 6% annualized return of investment upon a future liquidity or disposition event of the Company. Upon issuance of Restricted Stock, the Company measures the fair value at its then-current lowest aggregate fair value pursuant to Accounting Standards Codification (“ASC”)505-50. On the date in which the Advisor satisfies the vesting criteria, the Company remeasures the fair value of the Restricted Stock pursuant to ASC505-50 and records expense equal to the difference between the original fair value and that of the remeasurement date. In addition, given that performance is outside the control of the Advisor and involves both market conditions and counterparty performance conditions, the shares are treated as unissued for accounting purposes and the Company only includes the Restricted Stock in the calculation of diluted earnings per share to the extent their effect is dilutive and the vesting conditions have been satisfied as of the reporting date.

Pursuant to the amended expense support agreement, the Advisor shall be the record owner of the Restricted Stock until the shares of common stock are sold or otherwise disposed of, and shall be entitled to all of the rights of a stockholder of the Company including, without limitation, the right to vote such shares (to the extent permitted by the Company’s articles of incorporation) and receive all cash distributions and stock dividends paid with respect to such shares. All cash distributions and stock dividends paid to the Advisor related to the Restricted Stock shares shall vest immediately and will not be subject to forfeiture. The Company recognizes expense related to the cash distributions and stock dividends related to the Restricted Stock shares.

F-8

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies (continued)

SegmentInformation— Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and assess performance. The Company has determined that it operates in one operating segment, real estate ownership. The Company’s chief operating decision maker evaluates the Company’s operations from a number of different operational perspectives including, but not limited to, aproperty-by-property basis and by tenant or operator. The Company derives all significant revenues from a single reportable operating segment of business, healthcare real estate, regardless of the type (seniors housing, medical office, etc.) or ownership structure (leased or managed). Accordingly, the Company does not report segment information; nevertheless, management periodically evaluates whether the Company continues to have one single reportable segment of business.

AdoptedAccountingPronouncements— In August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU2016-15, “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 ASU2016-18, “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. The Company early adopted both ASU2016-15 and ASU2016-18 on January 1, 2017; the adoption of which impacts the Company’s presentation of its statement of cash flows for all periods presented, but will not have an impact on the Company’s condensed consolidated balance sheets or condensed consolidated statement of operations.

In October 2016, the FASB issued ASU2016-17, “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 ASU2016-17 on January 1, 2017; the adoption of which did not have a material impact to its condensed consolidated financial statements.

In January 2017, the FASB issued ASU2017-01, “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 ASU2017-01 on January 1, 2017; the adoption of which did have a material impact on the Company’s condensed consolidated financial statements as a result of Summer Vista Assisted Living being considered an asset acquisition.

F-9

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

2. Summary of Significant Accounting Policies (continued)

RecentAccountingPronouncements— In May 2014, the FASB issued ASUNo. 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 ASU2015-14 to defer the effective date of ASU2014-09 until annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, with earlier adoption permitted. In addition, in December 2016, the FASB issued ASU2016-20, 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 and its assessment of the impact that adoption will have on the Company’s condensed consolidated financial statements; specifically, as it relates to different revenue streams within a given contract and the impact adoption of ASC 606 could have on the Company’s financial statement disclosures.

In February 2016, the FASB issued ASU2016-02, “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 is currently evaluating the impact this ASU will have on the Company’s condensed consolidated financial statements; specifically, as it relates to arrangements in which the Company is the lessee and the required presentation in its condensed consolidated financial position.

3. Real Estate Acquisitions

During the three months ended March 31, 2017, the Company acquired Summer Vista Assisted Living (“Summer Vista”), a seniors housing community in Pensacola, Florida, for a purchase price of approximately $21.4 million. In connection therewith, the Company incurred approximately $0.6 million of acquisition fees and expenses, which have been capitalized as a component of the cost of the assets acquired and allocated on a relative fair value basis.

The seniors housing community features 89 residential units and will be operated under a RIDEA structure pursuant to a newly negotiated five-year property management agreement with SRI Management, LLC (“Superior Residences”), the property’s existing third-party property manager who has managed the property since it opened in February 2016.

The following summarizes the purchase price allocation for Summer Vista, and the related assets acquired and liabilities assumed in connection with the acquisition:

Land and land improvements	$	2,264,713
Buildings and building improvements		17,575,368
Furniture, fixtures and equipment		855,565
In-place lease intangibles (1)		1,283,846
Liabilities assumed		(170,918	)
Total purchase price consideration	$	21,808,574

FOOTNOTE:

⁽¹⁾ At the acquisition date, the weighted-average amortization period on the acquiredin-place lease intangibles for the three months ended March 31, 2017 was approximately 2.5 years and is based on the expected unit turnover.

F-10

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

4. Related Party Arrangements

The Company is externally advised and has no direct employees. All of the Company’s executive officers are executive officers, or are on the board, of managers of the Advisor. In addition, certain directors and officers hold similar positions with CNL Securities Corp., the Dealer Manager of the Offering and a wholly owned subsidiary of CNL. In connection with services provided to the Company, affiliates are entitled to the following fees:

DealerManager — From the commencement of our Offering through March 19, 2017, the Dealer Manager received a selling commission of up to 7% of the sale price for each Class A share and 2% of the sale price for each Class T share sold in the Primary Offering, all or a portion of which was reallowed to participating broker dealers. In addition, the Dealer Manager received a dealer manager fee in an amount equal to 2.75% of the price of each Class A share or Class T share sold in the Primary Offering, all or a portion of which was reallowed to participating broker dealers. Effective March 20, 2017 and subsequently, the Dealer Manager will receive a combined selling commission and dealer manager fee of up to 8.5% of the sale price for each Class A share and up to 4.5% of the sale price for each Class T share sold in the Primary Offering, all or a portion of which may be reallowed to participating broker dealers. In addition, effective March 20, 2017, for Class T shares sold in the Primary Offering, the Dealer Manager may elect the respective amounts of the commission and dealer manager fee, provided that the selling commission shall not exceed 3.0% of the gross proceeds from the completed sale of such Class T shares. Effective March 20, 2017, the Company and the Dealer Manager also agreed that the Company will cease paying the annual distribution and stockholder servicing fee of 1.00% and 0.50%, respectively (described further below), if the total underwriting compensation, comprised of the dealer manager fees, selling commissions, and annual distribution and stockholder servicing fees, payable to broker-dealers in connection with the sale of Class T and Class I shares in the Primary Offering exceeds 8.5% of the gross offering price of such Class T or Class I shares, respectively. Prior to March 20, 2017, the 8.5% cap was set as 9.75%. Separately, the Company’s stockholders approved an amendment to the Company’s charter to adjust the conversion feature of Class T and Class I shares to match this new 8.5% cap. To the extent stockholder’s that purchased Class A shares on the terms in effect prior to March 20, 2017 would have paid lower selling commissions and/or dealer manager fees on the terms in effect subsequently, the Advisor, or one of its affiliates, issued them a refund in March 2017. To the extent participating broker-dealers that sold Class T or Class I shares on the terms in effect prior to March 20, 2017 were entitled to greater ongoing annual distribution and stockholder servicing fees with respect to such sales compared to sales made on the terms in effect subsequently, the Advisor paid this liability on behalf of the Company. As a result of the overall reduction in underwriting compensation, the Company recorded an approximate $0.1 million reduction in its liability related to annual distribution and stockholder servicing fees for Class T and Class I shares sold through March 19, 2017.

The Company has and will continue to pay a distribution and stockholder servicing fee, subject to certain underwriting compensation limits, with respect to the Class T and Class I shares sold in the Primary Offering in an annual amount equal to 1% and 0.50%, respectively, of the current gross offering price per Class T or Class I share, respectively, or if the Company is no longer offering shares in a public offering, the estimated per share value per Class T or Class I share, respectively. If the Company reports an estimated per share value prior to the termination of the Primary Offering, the annual distribution and stockholder servicing fee will continue to be calculated as a percentage of the current gross offering price per Class T or Class I share until the Company reports an estimated per share value following the termination of the Primary Offering, at which point the distribution fee will be calculated based on the new estimated per share value, until such underwriting compensation limits are met or the shares are converted to Class A shares pursuant to the terms of the securities.

F-11

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

4. Related Party Arrangements (continued)

The Company records the annual distribution and stockholder servicing fees as a reduction to capital in excess of par value and measures the related liability in an amount equal to the maximum fees owed in relation to the Class T and Class I shares on the shares’ issuance date. The liability is relieved over time, as the fees are paid to the Dealer Manager, or is adjusted if the fees are no longer owed on any Class T or Class I share that is redeemed or repurchased, as well as upon the earliest occurrence of: (i) a listing on a national securities exchange; (ii) a merger or consolidation of the Company with or into another entity, or the sale or other disposition of all or substantially all of the Company’s assets; (iii) after the termination of the Primary Offering in which the initial shares in the account were sold, the end of the month in which total underwriting compensation paid in the Primary Offering is not less than 10% of the gross proceeds from all share classes of the Primary Offering; (iv) the end of the month in which the total underwriting compensation paid in a Primary Offering with respect to shares purchased in a Primary Offering is not less than 8.5% of the gross offering price of those shares purchased in such Primary Offering (excluding shares purchased through the Reinvestment Plan and those received as stock dividends); or (v) any other conditions described in the Company’s prospectus.

CNLCapitalMarketsCorp.— The Company will pay CNL Capital Markets Corp., an affiliate of CNL, an annual fee payable monthly based on the average number of total investor accounts that will be open during the term of the capital markets service agreement pursuant to which certain administrative services are provided to the Company. These services may include, but are not limited to, the facilitation and coordination of the transfer agent’s activities, client services and administrative call center activities, financial advisor administrative correspondence services, material distribution services and various reporting and troubleshooting activities.

Advisor — The Company will pay the Advisor a monthly asset management fee in an amount equal to 0.0667% of the monthly average of the sum of the Company’s and the Operating Partnership’s respective daily real estate asset value, without duplication, plus the outstanding principal amount of any loans made, plus the amount invested in other permitted investments. For this purpose, “real estate asset value” equals the amount invested in wholly-owned properties, determined on the basis of cost, and in the case of properties owned by any joint venture or partnership in which the Company is aco-venturer or partner the portion of the cost of such properties paid by the Company, exclusive of acquisition fees and acquisition expenses and will not be reduced for any recognized impairment. Any recognized impairment loss will not reduce the real estate asset value for the purposes of calculating the asset management fee. The asset management fee, which will not exceed fees which are competitive for similar services in the same geographic area, may or may not be taken, in whole or in part as to any year, in the Advisor’s sole discretion. All or any portion of the asset management fee not taken as to any fiscal year shall be deferred without interest and may be taken in such other fiscal year as the Advisor shall determine.

The Company will pay the Advisor a construction management fee of up to 1% of hard and soft costs associated with the initial construction or renovation of a property, or with the management and oversight of expansion projects and other capital improvements, in those cases in which the value of the construction, renovation, expansion or improvements exceeds (i) 10% of the initial purchase price of the property and (ii) $1 million in which case such fee will be due and payable as draws are funded for such projects.

The Advisor will receive an investment services fee of 2.25% of the purchase price of properties and funds advanced for loans or the amount invested in the case of other assets for services in connection with the selection, evaluation, structure and purchase of assets. No investment services fee will be paid to the Advisor in connection with the Company’s purchase of securities.

The Advisor, its affiliates and related parties also are entitled to reimbursement of certain operating expenses in connection with their provision of services to the Company, including personnel costs, subject to the limitation that the Company will not reimburse the Advisor for any amount by which operating expenses exceed the greater of 2% of its average invested assets or 25% of its net income in any expense year unless approved by the independent directors. The Company will begin to evaluate such limitation on its operating expenses beginning with the expense year ending September 30, 2017.

F-12

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

4. Related Party Arrangements (continued)

The Advisor will pay all other organizational and offering expenses incurred in connection with the formation of the Company, without reimbursement by the Company. These expenses include, but are not limited to, Security and Exchange Commission (“SEC”) registration fees, Financial Industry Regulatory Authority (“FINRA”) filing fees, printing and mailing expenses, blue sky fees and expenses, legal fees and expenses, accounting fees and expenses, advertising and sales literature, transfer agent fees, due diligence expenses, personnel costs associated with processing investor subscriptions, escrow fees and other administrative expenses of the Offering.

For the three months ended March 31, 2017, the Company paid cash distributions of approximately $29,000 and issued stock dividends of approximately 1,500 shares to the Advisor.

Pursuant to an expense support arrangement, the Advisor has agreed to accept payment in Restricted Stock in lieu of cash for services rendered, in the event that the Company does not achieve established distribution coverage targets (“Expense Support Agreement”). In exchange for services rendered and in consideration of the expense support provided under this arrangement, the Company shall issue, following each determination date, a number of shares of restricted stock equal to the quotient of the expense support amount provided by the Advisor for the preceding year divided by the board of directors’ most recent determination of net asset value per share of the Class A common shares, if the board has made such a determination, or otherwise the most recent public offering price per Class A common share, on the terms and conditions and subject to the restrictions set forth in the Expense Support Agreement. The Restricted Stock is subordinated and forfeited to the extent that shareholders do not receive a Priority Return on their Invested Capital (as such terms are defined in the Company’s prospectus), excluding for the purposes of calculating this threshold any shares of Restricted Stock owned by the Advisor.

The following fees for services rendered are expected to be settled in the form of Restricted Stock pursuant to the Expense Support Agreement for the three months ended March 31, 2017 and cumulatively as of March 31, 2017:

	Three Months Ended March 31, 2017		As of March 31, 2017
Fees for services rendered:
Asset management fees	$	460	$	460
Advisor personnel expenses(1)		102,263		102,263
Total fees for services rendered	$	102,723	$	102,723
Then-current public offering price	$	10.93	$	10.93
Restricted Stock shares(2)		9,398		9,398

FOOTNOTES:

⁽¹⁾ Amounts consist of personnel and related overhead costs of the Advisor or its affiliates (which, in general, are those expenses relating to the Company’s administration on anon-going basis) that are reimbursable by the Company.

⁽²⁾ Represents Restricted Stock shares expected to be issued to the Advisor as of March 31, 2017 pursuant to the Expense Support Agreement. No fair value was assigned to the Restricted Stock shares as the shares are expected to be valued at zero upon issuance, which represents the lowest possible value estimated at vesting. In addition, the Restricted Stock shares will be treated as unissued for financial reporting purposes until the vesting criteria are met.

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CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

4. Related Party Arrangements (continued)

The fees payable to the Dealer Manager for the three months ended March 31, 2017, and related amounts unpaid as of March 31, 2017 are as follows:

	Three Months Ended		Unpaid amounts as of(1)
	March 31, 2017		March 31, 2017		December 31, 2016
Selling commissions (2)	$	192,876	$	—	$	6,550
Dealer Manager fees (2)		183,736		—		5,823
Distribution and stockholder servicing fees (2)		174,796		315,386		154,733
	$	551,408	$	315,386	$	167,106

The fees and expenses incurred by and reimbursable to the Company’s related parties for the three months ended March 31, 2017, and related amounts unpaid as of March 31, 2017 are as follows:

	Three Months Ended		Unpaid amounts as of (1)
	March 31, 2017		March 31, 2017		December 31, 2016
Reimbursable expenses:
Operating expenses (3)	$	190,526	$	82,664	$	73,545
Acquisition fees and expenses		1,889		1,889		—
	$	192,415	$	84,553	$	73,545
Investment Service Fees (4)		481,500		—		—
Asset Management Fees (5)		460		—		—
	$	674,375	$	84,553	$	73,545

FOOTNOTES:

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

⁽²⁾ Amounts are recorded as stock issuance and offering costs in the accompanying condensed consolidated statements of stockholders’ equity.

⁽³⁾ Amounts are recorded as general and administrative expenses in the accompanying condensed consolidated statement of operations unless such amounts represent prepaid expenses, which are capitalized in the accompanying condensed consolidated balance sheets. For the three months ended March 31, 2017, approximately $0.1 million of personnel expenses of affiliates of the Advisor are expected to be settled in accordance with the terms of the Expense Support Agreement.

⁽⁴⁾ For the three months ended March 31, 2017, the Company incurred approximately $0.5 million in investment services fees of which approximately $0.5 million was capitalized and included in real estate investment properties, net in the accompanying condensed consolidated balance sheet.

⁽⁵⁾ For the three months ended March 31, 2017, the Company incurred approximately $460 in asset management fees, all of which are expected to be settled in accordance with the terms of the Expense Support Agreement.

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CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

5. Indebtedness

In March 2017, in connection with the Summer Vista acquisition, the Company entered into a secured mortgage loan agreement with Synovus Bank in the amount of approximately $16.1 million (“Summer Vista Loan”). The Summer Vista Loan matures on April 1, 2022, subject to twoone-year extension options provided certain conditions are met. The Summer Vista Loan accrues interest at a rate equal to the sum of the London Interbank Offered Rate (“LIBOR”) plus 2.85%, with monthly payments of interest only for the first 18 months of the term of the Summer Vista Loan, and monthly payments of interest and principal for the remaining 42 months of the term of the Summer Vista Loan using a30-year amortization period with the remaining principal balance payable at maturity. Prior to April 1, 2019, the interest payable on the Summer Vista Loan may be reduced to a rate equal to the sum of LIBOR plus 2.70% if, at such time, no event of default exists, certain debt yield thresholds are met, and at least $2,150,000 of the original outstanding principal balance of the Summer Vista Loan has been paid. The Company may prepay, without a penalty, all or any part of the Summer Vista Loan at any time.

The following table provides details of the Company’s indebtedness as of March 31, 2017:

	March 31, 2017			December 31, 2016
Mortgage and notes payable:
Mortgage loan(1)	$	16,050,000		$	—
Notes payable		312,500			312,500
Mortgage and notes payable		16,362,500			312,500
Loan costs, net		(177,512	)		—
Total mortgage and notes payable, net	$	16,184,988		$	312,500

FOOTNOTE:

⁽¹⁾ As of March 31, 2017, the Company’s mortgage loan is collateralized by the Summer Vista property.

The fair market value of the mortgage and notes payable was approximately $16.4 million as of March 31, 2017, which is 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 is categorized as Level 3 on the three-level valuation hierarchy.

The following is a schedule of future principal payments and maturity for the Company’s indebtedness for the remainder of 2017, each of the next four years and thereafter, in the aggregate, as of March 31, 2017:

2017	$	—
2018		29,347
2019		185,296
2020		194,131
2021		209,033
Thereafter		15,744,693
	$	16,362,500

F-15

CNL HEALTHCARE PROPERTIES II, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

THREE MONTHS ENDED MARCH 31, 2017 (UNAUDITED)

6. Equity

SubscriptionProceeds — As of March 31, 2017, the Company had received aggregate subscription proceeds of approximately $13.4 million (1.3 million shares), which includes $200,000 (20,000 shares) of subscription proceeds received from the Advisor prior to the commencement of the Offering, approximately $251,250 (25,125 shares) of subscription proceeds received in connection with a private placement made in 2016 and approximately $32,000 (3,000 shares) of subscription proceeds pursuant to the Reinvestment Plan.

Distributions — For the three months ended March 31, 2017, the Company declared and paid cash distributions of approximately $73,200, which were net of class-specific expenses. In addition, the Company declared and issued stock dividends of approximately 4,700 shares of common stock during the three months ended March 31, 2017.

For the three months ended March 31, 2017, 100.0% of the cash distributions paid to stockholders were considered a return of capital to stockholders for federal income tax purposes. No amounts distributed to stockholders for the three months ended March 31, 2017 were required to be or have been treated by the Company as a return of capital for purposes of calculating the stockholders’ return on their invested capital as described in the Company’s advisory agreement. The distribution of new common shares to recipients isnon-taxable.

In February 2017, the Company’s board of directors declared a monthly cash distribution of $0.0480, less class-specific expenses, and a monthly stock dividend of 0.00100625 shares on each outstanding share of common stock on April 1, 2017, May 1, 2017 and June 1, 2017. These distributions and dividends are to be paid and distributed by June 30, 2017.

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 4. “Related Party Arrangements” for information on contingent Restricted Stock shares due to the Company’s Advisor in connection with the Expense Support Agreement.

8. Subsequent Events

During the period from April 1, 2017 through May 1, 2017, the Company received additional subscription proceeds of approximately $0.9 million (0.1 million shares).

F-16