American Healthcare REIT - 10-Q quarterly report FY2023 Q2

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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 000-55775

AMERICAN HEALTHCARE REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland						47-2887436
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

18191 Von Karman Avenue, Suite 300 Irvine, California						92612
(Address of principal executive offices)						(Zip Code)

(949) 270-9200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

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

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

As of August 11, 2023, there were 19,562,539 shares of Class T common stock and 46,673,320 shares of Class I common stock of American Healthcare REIT, Inc. outstanding.

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

(A Maryland Corporation)

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets as of June 30, 2023 and December 31, 2022			3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2023 and 2022			5
Condensed Consolidated Statements of Equity for the Three and Six Months Ended June 30, 2023 and 2022			6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022			10
Notes to Condensed Consolidated Financial Statements			12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			40
Item 3. Quantitative and Qualitative Disclosures About Market Risk			55
Item 4. Controls and Procedures			57

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			58
Item 1A. Risk Factors			58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			59
Item 3. Defaults Upon Senior Securities			59
Item 4. Mine Safety Disclosures			60
Item 5. Other Information			60
Item 6. Exhibits			60
Signatures			61

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2023 and December 31, 2022

(In thousands, except share and per share amounts) (Unaudited)


	June 30, 2023		December 31, 2022
ASSETS
Real estate investments, net	$	3,482,804	$	3,581,609
Debt security investment, net	84,933		83,000
Cash and cash equivalents	48,407		65,052
Restricted cash	45,343		46,854
Accounts and other receivables, net	145,663		137,501

Identified intangible assets, net	210,636		236,283
Goodwill	234,942		231,611

Operating lease right-of-use assets, net	264,293		276,342
Other assets, net	149,363		128,446
Total assets	$	4,666,384	$	4,786,698

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgage loans payable, net(1)	$	1,237,565	$	1,229,847
Lines of credit and term loan, net(1)	1,281,683		1,281,794
Accounts payable and accrued liabilities(1)	223,561		243,831
Identified intangible liabilities, net	9,995		10,837
Financing obligations(1)	47,013		48,406
Operating lease liabilities(1)	262,718		273,075
Security deposits, prepaid rent and other liabilities(1)	47,574		49,545
Total liabilities	3,110,109		3,137,335

Commitments and contingencies (Note 10)

Redeemable noncontrolling interests (Note 11)	59,873		81,598

Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding	—		—
Class T common stock, $0.01 par value per share; 200,000,000 shares authorized; 19,562,539 and 19,535,095 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	194		194
Class I common stock, $0.01 par value per share; 800,000,000 shares authorized; 46,673,320 and 46,675,367 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively	467		467
Additional paid-in capital	2,547,135		2,540,424
Accumulated deficit	(1,209,578)		(1,138,304)
Accumulated other comprehensive loss	(2,444)		(2,690)
Total stockholders’ equity	1,335,774		1,400,091
Noncontrolling interests (Note 12)	160,628		167,674
Total equity	1,496,402		1,567,765
Total liabilities, redeemable noncontrolling interests and equity	$	4,666,384	$	4,786,698

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)

As of June 30, 2023 and December 31, 2022

(In thousands) (Unaudited)

___________

(1)Such liabilities of American Healthcare REIT, Inc. represented liabilities of American Healthcare REIT Holdings, LP or its consolidated subsidiaries as of June 30, 2023 and December 31, 2022. American Healthcare REIT Holdings, LP is a variable interest entity, or VIE, and a consolidated subsidiary of American Healthcare REIT, Inc. The creditors of American Healthcare REIT Holdings, LP or its consolidated subsidiaries do not have recourse against American Healthcare REIT, Inc., except for the 2022 Credit Facility, as defined in Note 8, held by American Healthcare REIT Holdings, LP in the amount of $926,400 and $965,900 as of June 30, 2023 and December 31, 2022, respectively, which was guaranteed by American Healthcare REIT, Inc.

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

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three and Six Months Ended June 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues and grant income:
Resident fees and services	$	410,622	$	326,225	$	819,252	$	645,199
Real estate revenue	50,568		51,105		94,164		103,048
Grant income	6,381		10,969		6,381		16,183
Total revenues and grant income	467,571		388,299		919,797		764,430
Expenses:
Property operating expenses	372,549		296,059		742,695		583,219
Rental expenses	14,653		14,663		29,848		29,950
General and administrative	11,774		10,928		24,827		22,047
Business acquisition expenses	888		1,757		1,220		1,930
Depreciation and amortization	44,701		39,971		89,371		82,282
Total expenses	444,565		363,378		887,961		719,428

Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs, debt discount/premium and gain/loss on debt extinguishments)	(40,990)		(20,345)		(80,001)		(43,670)
Gain in fair value of derivative financial instruments	4,993		—		4,798		500
(Loss) gain on dispositions of real estate investments	(2,072)		(73)		(2,204)		683
Impairment of real estate investments	—		(17,340)		—		(17,340)

(Loss) income from unconsolidated entities	(113)		638		(419)		2,024
Gain on re-measurement of previously held equity interest	—		—		726		—
Foreign currency gain (loss)	1,068		(3,607)		2,076		(4,994)
Other income	2,589		469		4,197		1,729
Total net other expense	(34,525)		(40,258)		(70,827)		(61,068)
Loss before income taxes	(11,519)		(15,337)		(38,991)		(16,066)
Income tax expense	(348)		(205)		(491)		(373)
Net loss	(11,867)		(15,542)		(39,482)		(16,439)
Net (income) loss attributable to noncontrolling interests	(316)		(1,768)		1,427		(3,827)
Net loss attributable to controlling interest	$	(12,183)	$	(17,310)	$	(38,055)	$	(20,266)
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted	$	(0.19)	$	(0.26)	$	(0.58)	$	(0.31)
Weighted average number of Class T and Class I common shares outstanding — basic and diluted	66,033,345		65,754,423		66,029,779		65,692,159

Net loss	$	(11,867)	$	(15,542)	$	(39,482)	$	(16,439)
Other comprehensive income (loss):
Foreign currency translation adjustments	124		(493)		246		(687)
Total other comprehensive income (loss)	124		(493)		246		(687)
Comprehensive loss	(11,743)		(16,035)		(39,236)		(17,126)
Comprehensive (income) loss attributable to noncontrolling interests	(316)		(1,768)		1,427		(3,827)
Comprehensive loss attributable to controlling interest	$	(12,059)	$	(17,803)	$	(37,809)	$	(20,953)

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

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Six Months Ended June 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Three Months Ended June 30, 2023
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — March 31, 2023	66,210,308	$	661	$	2,546,299	$	(1,180,741)	$	(2,568)	$	1,363,651	$	163,338	$	1,526,989



Issuance of nonvested restricted common stock	24,200	—		—		—		—		—		—		—
Vested restricted stock units(1)	4,120	—		(72)		—		—		(72)		—		(72)
Amortization of nonvested restricted common stock and stock units	—	—		1,564		—		—		1,564		—		1,564


Stock based compensation	—	—		—		—		—		—		20		20
Repurchase of common stock	(2,769)	—		(87)		—		—		(87)		—		(87)

Distributions to noncontrolling interests	—	—		—		—		—		—		(3,092)		(3,092)


Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(20)		(20)
Adjustment to value of redeemable noncontrolling interests	—	—		(569)		—		—		(569)		(52)		(621)
Distributions declared ($0.25 per share)	—	—		—		(16,654)		—		(16,654)		—		(16,654)
Net (loss) income	—	—		—		(12,183)		—		(12,183)		434		(11,749)		(2)
Other comprehensive income	—	—		—		—		124		124		—		124
BALANCE — June 30, 2023	66,235,859	$	661	$	2,547,135	$	(1,209,578)	$	(2,444)	$	1,335,774	$	160,628	$	1,496,402

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)

For the Three and Six Months Ended June 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Three Months Ended June 30, 2022
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — March 31, 2022	65,952,428	$	660	$	2,538,780	$	(980,613)	$	(2,160)	$	1,556,667	$	174,154	$	1,730,821
Offering costs — common stock	—	—		1		—		—		1		—		1
Issuance of common stock under the DRIP	299,857	3		11,140		—		—		11,143		—		11,143
Issuance of nonvested restricted common stock	13,725	—		—		—		—		—		—		—
Amortization of nonvested restricted common stock and stock units	—	—		980		—		—		980		—		980


Stock based compensation	—	—		—		—		—		—		21		21
Repurchase of common stock	(174,865)	(2)		(6,447)		—		—		(6,449)		—		(6,449)

Distributions to noncontrolling interests	—	—		—		—		—		—		(3,537)		(3,537)

Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(21)		(21)
Adjustment to value of redeemable noncontrolling interests	—	—		(976)		—		—		(976)		(1)		(977)
Distributions declared ($0.40 per share)	—	—		—		(26,405)		—		(26,405)		—		(26,405)
Net (loss) income	—	—		—		(17,310)		—		(17,310)		1,986		(15,324)		(2)
Other comprehensive loss	—	—		—		—		(493)		(493)		—		(493)
BALANCE — June 30, 2022	66,091,145	$	661	$	2,543,478	$	(1,024,328)	$	(2,653)	$	1,517,158	$	172,602	$	1,689,760

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)

For the Three and Six Months Ended June 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Six Months Ended June 30, 2023
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — December 31, 2022	66,210,462	$	661	$	2,540,424	$	(1,138,304)	$	(2,690)	$	1,400,091	$	167,674	$	1,567,765



Issuance of nonvested restricted common stock	26,156	—		—		—		—		—		—		—
Vested restricted stock units(1)	4,120	—		(72)		—		—		(72)		—		(72)
Amortization of nonvested restricted common stock and stock units	—	—		2,615		—		—		2,615		—		2,615


Stock based compensation	—	—		—		—		—		—		41		41
Repurchase of common stock	(4,879)	—		(165)		—		—		(165)		—		(165)

Distributions to noncontrolling interests	—	—		—		—		—		—		(6,194)		(6,194)


Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(41)		(41)
Adjustment to value of redeemable noncontrolling interests	—	—		4,333		—		—		4,333		89		4,422
Distributions declared ($0.50 per share)	—	—		—		(33,219)		—		(33,219)		—		(33,219)
Net loss	—	—		—		(38,055)		—		(38,055)		(941)		(38,996)		(2)
Other comprehensive income	—	—		—		—		246		246		—		246
BALANCE — June 30, 2023	66,235,859	$	661	$	2,547,135	$	(1,209,578)	$	(2,444)	$	1,335,774	$	160,628	$	1,496,402

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)

For the Three and Six Months Ended June 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Six Months Ended June 30, 2022
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — December 31, 2021	65,758,004	$	658	$	2,533,904	$	(951,303)	$	(1,966)	$	1,581,293	$	175,553	$	1,756,846

Offering costs — common stock	—	—		(2)		—		—		(2)		—		(2)
Issuance of common stock under the DRIP	606,375	6		22,441		—		—		22,447		—		22,447
Issuance of nonvested restricted common stock	13,725	—		—		—		—		—		—		—
Amortization of nonvested restricted common stock and stock units	—	—		1,791		—		—		1,791		—		1,791
Stock based compensation	—	—		—		—		—		—		42		42
Repurchase of common stock	(286,959)	(3)		(10,580)		—		—		(10,583)		—		(10,583)



Distributions to noncontrolling interests	—	—		—		—		—		—		(7,052)		(7,052)
Adjustment to noncontrolling interest in connection with the Merger	—	—		(1,173)		—		—		(1,173)		1,173		—

Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(42)		(42)
Adjustment to value of redeemable noncontrolling interests	—	—		(2,903)		—		—		(2,903)		(930)		(3,833)
Distributions declared ($0.80 per share)	—	—		—		(52,759)		—		(52,759)		—		(52,759)
Net (loss) income	—	—		—		(20,266)		—		(20,266)		3,858		(16,408)		(2)
Other comprehensive loss	—	—		—		—		(687)		(687)		—		(687)
BALANCE — June 30, 2022	66,091,145	$	661	$	2,543,478	$	(1,024,328)	$	(2,653)	$	1,517,158	$	172,602	$	1,689,760

___________

(1)The amounts are shown net of common stock withheld from issuance to satisfy employee minimum tax withholding requirements in connection with the vesting of restricted stock units. See Note 12, Equity — AHR 2015 Incentive Plan, for further discussion.

(2)For the three months ended June 30, 2023 and 2022, amounts exclude $(118) and $(218), respectively, of net loss attributable to redeemable noncontrolling interests. For the six months ended June 30, 2023 and 2022, amounts exclude $(486) and $(31), respectively, of net loss attributable to redeemable noncontrolling interests. See Note 11, Redeemable Noncontrolling Interests, for further discussion.

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

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2023 and 2022

(In thousands) (Unaudited)


	Six Months Ended June 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(39,482)	$	(16,439)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	89,371		82,293
Other amortization	32,647		12,178
Deferred rent	(2,083)		(3,542)

Stock based compensation	2,656		1,779



Impairment of real estate investments	—		17,340
Loss (gain) on dispositions of real estate investments	2,204		(683)
Loss (income) from unconsolidated entities	419		(2,024)
Gain on re-measurement of previously held equity interest	(726)		—
Foreign currency (gain) loss	(2,125)		4,848


Loss on extinguishments of debt	—		4,410

Change in fair value of derivative financial instruments	(4,798)		(500)


Changes in operating assets and liabilities:
Accounts and other receivables	(9,827)		(14,474)
Other assets	(4,449)		(5,277)
Accounts payable and accrued liabilities	(4,662)		(5,231)
Accounts payable due to affiliates	—		(184)
Operating lease liabilities	(18,866)		(8,617)
Security deposits, prepaid rent and other liabilities	3,363		(9,739)
Net cash provided by operating activities	43,642		56,138
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from dispositions of real estate investments	87,446		14,002
Developments and capital expenditures	(52,074)		(35,508)
Acquisitions of real estate investments	(12,333)		(75,125)
Acquisition of previously held equity interest	(335)		—



Investments in unconsolidated entities	(12,000)		(200)


Real estate and other deposits	(1,017)		(533)


Net cash provided by (used in) investing activities	9,687		(97,364)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under mortgage loans payable	61,077		89,712
Payments on mortgage loans payable	(55,127)		(40,662)

Borrowings under the lines of credit and term loan	199,300		1,009,900
Payments on the lines of credit and term loan	(199,400)		(968,900)
Deferred financing costs	(1,903)		(5,617)
Debt extinguishment costs	—		(2,790)


Payments on financing and other obligations	(7,779)		(12,141)


Distributions paid to common stockholders	(43,086)		(30,247)
Repurchase of common stock	(165)		(10,583)


Payments to taxing authorities in connection with common stock directly withheld from employees	(72)		—
Distributions to noncontrolling interests in total equity	(6,612)		(7,052)

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Six Months Ended June 30, 2023 and 2022

(In thousands) (Unaudited)


	Six Months Ended June 30,
	2023		2022
Contribution from redeemable noncontrolling interest	$	—	$	173
Distributions to redeemable noncontrolling interests	(1,012)		(1,405)
Repurchase of redeemable noncontrolling interests	(15,954)		—
Payment of offering costs	(781)		(9)
Security deposits	(61)		(455)
Net cash (used in) provided by financing activities	(71,575)		19,924
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	$	(18,246)	$	(21,302)
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	90		(8)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	111,906		125,486
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	93,750	$	104,176

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period:
Cash and cash equivalents	$	65,052	$	81,597
Restricted cash	46,854		43,889
Cash, cash equivalents and restricted cash	$	111,906	$	125,486

End of period:
Cash and cash equivalents	$	48,407	$	59,101
Restricted cash	45,343		45,075
Cash, cash equivalents and restricted cash	$	93,750	$	104,176

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	76,013	$	36,348
Income taxes	$	797	$	382
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued developments and capital expenditures	$	25,664	$	14,055



Tenant improvement overage	$	1,047	$	568










Issuance of common stock under the DRIP	$	—	$	22,447
Distributions declared but not paid — common stockholders	$	16,559	$	8,812
Distributions declared but not paid — limited partnership units	$	875	$	467
Distributions declared but not paid — restricted stock units	$	123	$	37
Accrued offering costs	$	1,023	$	—



The following represents the net increase (decrease) in certain assets and liabilities in connection with our acquisitions and dispositions of investments:
Accounts and other receivables	$	(1,733)	$	(262)
Other assets, net	$	(920)	$	5,480
Mortgage loan payable, net	$	—	$	(12,059)

Accounts payable and accrued liabilities	$	(461)	$	1,672

Financing obligations	$	12	$	56
Security deposits, prepaid rent and other liabilities	$	28	$	8,129

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

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Six Months Ended June 30, 2023 and 2022

The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. and its subsidiaries, including American Healthcare REIT Holdings, LP, except where otherwise noted.

1. Organization and Description of Business

Overview and Background

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed real estate investment trust, or REIT, that owns a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, or MOBs, senior housing, skilled nursing facilities, or SNFs, hospitals and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). Our healthcare facilities operated under a RIDEA structure include our senior housing operating properties, or SHOP, and our integrated senior health campuses. We have originated and acquired secured loans and may also originate and acquire other real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

On October 1, 2021, Griffin-American Healthcare REIT III, Inc., or GAHR III, merged with and into a wholly owned subsidiary, or Merger Sub, of Griffin-American Healthcare REIT IV, Inc., or GAHR IV, with Merger Sub being the surviving company, which we refer to as the REIT Merger, and our operating partnership, Griffin-American Healthcare REIT IV Holdings, LP, merged with and into Griffin-American Healthcare REIT III Holdings, LP, or the Surviving Partnership, with the Surviving Partnership being the surviving entity, which we refer to as the Partnership Merger and, together with the REIT Merger, the Merger. Following the Merger on October 1, 2021, our company was renamed American Healthcare REIT, Inc. and the Surviving Partnership was renamed American Healthcare REIT Holdings, LP, or our operating partnership.

Also on October 1, 2021, immediately prior to the consummation of the Merger, and pursuant to a contribution and exchange agreement dated June 23, 2021, GAHR III acquired a newly formed entity, American Healthcare Opps Holdings, LLC, or NewCo, which we refer to as the AHI Acquisition. Following the Merger and the AHI Acquisition, our company became self-managed.

Operating Partnership

We conduct substantially all of our operations through our operating partnership and we are the sole general partner of our operating partnership. As of both June 30, 2023 and December 31, 2022, we owned 95.0% of the partnership units, or OP units, in our operating partnership, and the remaining 5.0% limited OP units, were owned by AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer and President, and Mathieu B. Streiff, one of our directors; Platform Healthcare Investor TII, LLC; Flaherty Trust; and a wholly owned subsidiary of Griffin Capital Company, LLC, or collectively, the NewCo Sellers. See Note 11, Redeemable Noncontrolling Interests, and Note 12, Equity — Noncontrolling Interests in Total Equity, for a further discussion of the ownership in our operating partnership.

Public Offerings

As of June 30, 2023, after taking into consideration the impact of the Merger and the reverse stock split as discussed in Note 2, Summary of Significant Accounting Policies, we had issued 65,445,557 shares for a total of $2,737,716,000 of common stock since February 26, 2014 in our initial public offerings and our distribution reinvestment plan, or DRIP, offerings (includes historical offering amounts sold by GAHR III and GAHR IV prior to the Merger).

On September 16, 2022, we filed with the United States Securities and Exchange Commission, or the SEC, a Registration Statement on Form S-11 (File No. 333-267464), and on July 14, 2023, we filed with the SEC Amendment No. 1 to Registration Statement on Form S-11, with respect to a proposed public offering by us of our shares of common stock in conjunction with a contemplated listing of our common stock on the New York Stock Exchange, or the Proposed Listing. Such registration statement and contemplated listing are not yet effective.

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See Note 12, Equity — Common Stock, and Note 12, Equity — Distribution Reinvestment Plan, for a further discussion of our public offerings.

Our Real Estate Investments Portfolio

We currently operate through six reportable business segments: integrated senior health campuses, MOBs, SNFs, SHOP, senior housing — leased and hospitals. As of June 30, 2023, we owned and/or operated 300 buildings and integrated senior health campuses, including completed development and expansion projects, representing approximately 19,142,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,517,298,000. In addition, as of June 30, 2023, we also owned a real estate-related debt investment purchased for $60,429,000.

COVID-19

Our residents, tenants, operating partners and managers, our industry and the U.S. economy have been adversely affected by the impact of the COVID-19 pandemic and the economic impact of the pandemic. While the immediate effects of the COVID-19 pandemic have subsided, the timing and extent of the economic recovery towards pre-pandemic norms is dependent upon many factors, including the emergence and severity of future COVID-19 variants, the effectiveness and frequency of booster vaccinations, the duration and implications of ongoing or future restrictions and safety measures, the availability of ongoing government financial support to our tenants, operating partners and managers and the overall pace of economic recovery, among others. As an owner and operator of healthcare facilities, we expect to continue to be adversely affected by the long-term effects of the COVID-19 pandemic for some period of time; however, it is not possible to predict the full extent of its future impact on us, the operations of our properties or the markets in which they are located, or the overall healthcare industry.

We have evaluated such economic impacts of the COVID-19 pandemic on our business thus far and incorporated information concerning such impacts into our assessments of liquidity, impairment and collectability from tenants and residents as of June 30, 2023. We will continue to monitor such impacts and will adjust our estimates and assumptions based on the best available information.

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our accompanying condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.

Basis of Presentation

Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership, the wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries in which we have control, as well as any VIEs in which we are the primary beneficiary. The portion of equity in any subsidiary that is not wholly owned by us is presented in our accompanying condensed consolidated financial statements as a noncontrolling interest. We evaluate our ability to control an entity, and whether the entity is a VIE and we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance.

On November 15, 2022 we effected a one-for-four reverse stock split of our common stock and a corresponding reverse split of the OP units, or the Reverse Splits. All numbers of common shares and per share data, as well as the OP units, in our accompanying condensed consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the Reverse Splits.

We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries of which we have control, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of our operating partnership and as of both June 30, 2023 and December 31, 2022, we owned a 95.0% general partnership interest therein, and the remaining 5.0% limited partnership interest was owned by the NewCo Sellers.

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The accounts of our operating partnership are consolidated in our accompanying condensed consolidated financial statements because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership). All intercompany accounts and transactions are eliminated in consolidation.

Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to the SEC’s rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable.

In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023.

Use of Estimates

The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the initial and recurring valuation of certain assets acquired and liabilities assumed through property acquisitions, including through business combinations, goodwill and its impairment, revenues and grant income, allowance for credit losses, impairment of long-lived and intangible assets and contingencies. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.

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Revenue Recognition — Resident Fees and Services Revenue

Disaggregation of Resident Fees and Services Revenue

The following tables disaggregate our resident fees and services revenue by line of business, according to whether such revenue is recognized at a point in time or over time (in thousands):


	Three Months Ended June 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Over time	$	298,628	$	46,600	$	345,228	$	232,839	$	37,891	$	270,730
Point in time	64,228		1,166		65,394		54,743		752		55,495
Total resident fees and services	$	362,856	$	47,766	$	410,622	$	287,582	$	38,643	$	326,225


	Six Months Ended June 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Over time	$	597,479	$	92,212	$	689,691	$	463,373	$	75,107	$	538,480
Point in time	127,147		2,414		129,561		105,221		1,498		106,719
Total resident fees and services	$	724,626	$	94,626	$	819,252	$	568,594	$	76,605	$	645,199

The following tables disaggregate our resident fees and services revenue by payor class (in thousands):


	Three Months Ended June 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Private and other payors	$	165,154	$	44,996	$	210,150	$	137,419	$	35,632	$	173,051
Medicare	117,999		—		117,999		93,680		—		93,680
Medicaid	79,703		2,770		82,473		56,483		3,011		59,494
Total resident fees and services	$	362,856	$	47,766	$	410,622	$	287,582	$	38,643	$	326,225


	Six Months Ended June 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Private and other payors	$	334,831	$	88,846	$	423,677	$	269,222	$	70,669	$	339,891
Medicare	244,466		311		244,777		188,197		—		188,197
Medicaid	145,329		5,469		150,798		111,175		5,936		117,111
Total resident fees and services	$	724,626	$	94,626	$	819,252	$	568,594	$	76,605	$	645,199

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___________

(1)Includes fees for basic housing, as well as fees for assisted living or skilled nursing care. We record revenue when services are rendered at amounts billable to individual residents. Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For patients under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered.

Accounts Receivable, Net — Resident Fees and Services Revenue

The beginning and ending balances of accounts receivable, net — resident fees and services are as follows (in thousands):


	Private and Other Payors		Medicare		Medicaid		Total
Beginning balance — January 1, 2023	$	55,484	$	45,669	$	20,832	$	121,985
Ending balance — June 30, 2023	58,199		45,477		18,708		122,384
Increase (decrease)	$	2,715	$	(192)	$	(2,124)	$	399

Deferred Revenue — Resident Fees and Services Revenue

Deferred revenue is included in security deposits, prepaid rent and other liabilities in our accompanying condensed consolidated balance sheets. The beginning and ending balances of deferred revenue — resident fees and services, almost all of which relates to private and other payors, are as follows (in thousands):


	Total
Beginning balance — January 1, 2023	$	17,901
Ending balance — June 30, 2023	22,232
Increase	$	4,331

Resident and Tenant Receivables and Allowances

Resident receivables, which are related to resident fees and services revenue, are carried net of an allowance for credit losses. An allowance is maintained for estimated losses resulting from the inability of residents and payors to meet the contractual obligations under their lease or service agreements. Substantially all of such allowances are recorded as direct reductions of resident fees and services revenue as contractual adjustments provided to third-party payors or implicit price concessions in our accompanying condensed consolidated statements of operations and comprehensive loss. Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the residents’ financial condition, security deposits, cash collection patterns by payor and by state, current economic conditions, future expectations in estimating credit losses and other relevant factors. Tenant receivables, which are related to real estate revenue, and unbilled deferred rent receivables are reduced for amounts where collectability is not probable, which are recognized as direct reductions of real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss.

As of June 30, 2023 and December 31, 2022, we had $15,046,000 and $14,071,000, respectively, in allowances, which were determined necessary to reduce receivables by our expected future credit losses. For the six months ended June 30, 2023 and 2022, we increased allowances by $9,090,000 and $9,581,000, respectively, and reduced allowances for collections or adjustments by $3,596,000 and $3,643,000, respectively. For the six months ended June 30, 2023 and 2022, $4,519,000 and $3,518,000, respectively, of our receivables were written off against the related allowances.

Accounts Payable and Accrued Liabilities

As of June 30, 2023 and December 31, 2022, accounts payable and accrued liabilities primarily include insurance reserves of $42,307,000 and $39,893,000, respectively, reimbursement of payroll-related costs to the managers of our SHOP and integrated senior health campuses of $39,408,000 and $38,624,000, respectively, accrued developments and capital expenditures to unaffiliated third parties of $25,664,000 and $30,211,000, respectively, accrued property taxes of $25,415,000 and $24,926,000, respectively, and accrued distributions to common stockholders of $16,559,000 and $26,484,000, respectively.

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Recently Issued Accounting Pronouncement

In July 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280-General Revision of Regulation S-X: Income or Loss Applicable to Common Stock, or ASU 2023-03. ASU 2023-03 amends the Accounting Standards Codification, or ASC, for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. These updates were immediately effective and did not have a material impact on our consolidated financial statements and disclosures.

3. Real Estate Investments, Net and Business Combinations

Our real estate investments, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Building, improvements and construction in process	$	3,618,097	$	3,670,361
Land and improvements	341,262		344,359
Furniture, fixtures and equipment	235,159		221,727
	4,194,518		4,236,447
Less: accumulated depreciation	(711,714)		(654,838)
	$	3,482,804	$	3,581,609

Depreciation expense for the three months ended June 30, 2023 and 2022 was $37,139,000 and $34,328,000, respectively, and for the six months ended June 30, 2023 and 2022 was $73,038,000 and $68,750,000, respectively. For the three months ended June 30, 2023, we incurred capital expenditures of $18,858,000 for our integrated senior health campuses, $7,268,000 for our MOBs, $2,179,000 for our SHOP and $245,000 for our senior housing — leased. We did not incur any capital expenditures for our properties within our hospitals and SNFs segments for the three months ended June 30, 2023. For the six months ended June 30, 2023, we incurred capital expenditures of $29,059,000 for our integrated senior health campuses, $10,842,000 for our MOBs, $3,929,000 for our SHOP and $245,000 for our senior housing — leased. We did not incur any capital expenditures for our properties within our hospitals and SNFs segments for the six months ended June 30, 2023.

For both the three and six months ended June 30, 2023, we did not recognize impairment charges on real estate investments. During both the three and six months ended June 30, 2022, we determined that four of our SHOP were impaired and recognized an aggregate impairment charge of $17,340,000, which reduced the total carrying value of such assets to $19,325,000. The fair value of one SHOP was determined by the sales price from an executed purchase and sale agreement with a third-party buyer, which was considered a Level 2 measurement within the fair value hierarchy. The fair value of the remaining three SHOP were based on their projected sales prices, which were considered Level 2 measurements within the fair value hierarchy. We disposed of three of such impaired facilities during the fourth quarter of 2022 and one of such impaired facilities during the first quarter of 2023. See the “Dispositions of Real Estate Investments” section below.

Acquisitions of Real Estate Investments

On February 15, 2023, we, through a majority-owned subsidiary of Trilogy Investors, LLC, or Trilogy, acquired an integrated senior health campus located in Kentucky for a contract purchase price of $11,000,000, plus immaterial closing costs. We financed such acquisition with cash on hand and a mortgage loan payable placed on the property at the time of acquisition with a principal balance of $7,700,000.

On June 30, 2023, we, through a majority-owned subsidiary of Trilogy, acquired a land parcel in Ohio for a contract purchase price of $660,000, plus closing costs, for the future expansion of an existing integrated senior health campus.

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We accounted for our acquisition of land and real estate investment completed during the six months ended June 30, 2023 as asset acquisitions. The following table summarizes the purchase price of such acquisitions based on their relative fair values (in thousands):


	2023 Acquisitions
Building and improvements	$	10,139
Land and improvements	1,575




Total assets acquired	$	11,714

Dispositions of Real Estate Investments

For the six months ended June 30, 2023, we disposed of five SHOP and 11 MOBs. We recognized a total aggregate net loss on such dispositions of $1,975,000. The following is a summary of such dispositions (dollars in thousands):


Location	Number of Buildings	Type	Date Disposed	Contract Sales Price
Pinellas Park, FL(1)	1	SHOP	02/01/23	$	7,730
Olympia Fields, IL	1	MOB	04/10/23	3,750
Auburn, CA	1	MOB	04/26/23	7,050
Pottsville, PA	1	MOB	04/26/23	6,000
New London, CT	1	MOB	05/24/23	4,200
Stratford, CT	1	MOB	05/24/23	4,800
Westbrook, CT	1	MOB	05/24/23	7,250
Lakeland, FL(1)	1	SHOP	06/01/23	7,080
Winter Haven, FL(1)	1	SHOP	06/01/23	17,500
Acworth, GA	3	MOB	06/14/23	8,775
Lithonia, GA	1	MOB	06/14/23	3,445
Stockbridge, GA	1	MOB	06/14/23	2,430
Lake Placid, FL(1)	1	SHOP	06/30/23	5,620
Brooksville, FL(1)	1	SHOP	06/30/23	7,800
Total	16			$	93,430

___________

(1)See Note 11, Redeemable Noncontrolling Interests, for information about the ownership of the Central Florida Senior Housing Portfolio.

Business Combinations

On February 15, 2023, we, through a majority-owned subsidiary of Trilogy, acquired from an unaffiliated third party, a 60.0% controlling interest in a privately held company, Memory Care Partners, LLC, or MCP, that operated integrated senior health campuses located in Kentucky. The contract purchase price for the acquisition of MCP was $900,000, which was acquired using cash on hand. Prior to such acquisition, we owned a 40.0% interest in MCP, which was accounted for as an equity method investment and was included in investments in unconsolidated entities within other assets, net in our accompanying condensed consolidated balance sheet as of December 31, 2022. In connection with the acquisition of the remaining interest in MCP, we now own a 100% controlling interest in MCP. As a result, we re-measured the fair value of our previously held equity interest in MCP and recognized a gain on re-measurement of $726,000 in our accompanying condensed consolidated statements of operations and comprehensive loss.

On January 3, 2022, we, through a majority-owned subsidiary of Trilogy, acquired an integrated senior health campus in Kentucky from an unaffiliated third party. The contract purchase price for such property acquisition was $27,790,000 plus immaterial transaction costs. We acquired such property using cash on hand and placed a mortgage loan payable of $20,800,000 on the property at the time of acquisition. Further, on April 1, 2022, we, through a majority-owned subsidiary of Trilogy, acquired a 50.0% interest in a pharmaceutical business in Florida from an unaffiliated third party and incurred

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transaction costs of $938,000. Prior to such pharmaceutical business acquisition, we owned the other 50.0% interest in such business, which was accounted for as an equity method investment. Therefore, through March 31, 2022, our 50.0% interest in the net earnings or losses of such unconsolidated entity was included in income (loss) from unconsolidated entities in our accompanying condensed consolidated statements of operations and comprehensive loss.

Based on quantitative and qualitative considerations, such business combinations were not material to us individually or in the aggregate and therefore, pro forma financial information is not provided. Any necessary adjustments are finalized within one year from the date of acquisition. The table below summarizes the acquisition date fair values of the assets acquired and liabilities assumed of our business combinations during the six months ended June 30, 2023 and 2022 (in thousands):


	2023 Acquisition		2022 Acquisitions
Building and improvements	$	—	$	17,273
Land	—		3,060
In-place leases	—		3,420
Goodwill	3,331		2,816
Furniture, fixtures and equipment	39		1,936
Cash and restricted cash	565		971
Certificates of need	—		690
Operating lease right-of-use assets	—		646
Other assets	66		457
Accounts receivable, net	—		427
Total assets acquired	4,001		31,696
Security deposits and other liabilities	(812)		(8,129)

Accounts payable and accrued liabilities	(1,676)		(1,802)
Operating lease liabilities	—		(646)
Financing obligations	(12)		(56)
Total liabilities assumed	(2,500)		(10,633)
Net assets acquired	$	1,501	$	21,063

4. Debt Security Investment, Net

Our investment in a commercial mortgage-backed debt security, or debt security, bears an interest rate on the stated principal amount thereof equal to 4.24% per annum, the terms of which security provide for monthly interest-only payments. The debt security matures on August 25, 2025 at a stated amount of $93,433,000, resulting in an anticipated yield-to-maturity of 10.0% per annum. The debt security was issued by an unaffiliated mortgage trust and represents a 10.0% beneficial ownership interest in such mortgage trust. The debt security is subordinate to all other interests in the mortgage trust and is not guaranteed by a government-sponsored entity.

As of June 30, 2023 and December 31, 2022, the carrying amount of the debt security investment was $84,933,000 and $83,000,000, respectively, net of unamortized closing costs of $633,000 and $767,000, respectively. Accretion on the debt security for the three months ended June 30, 2023 and 2022 was $1,046,000 and $986,000, respectively, and for the six months ended June 30, 2023 and 2022 was $2,066,000 and $1,966,000, respectively, which is recorded as an increase to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss. Amortization expense of closing costs for the three months ended June 30, 2023 and 2022 was $68,000 and $58,000, respectively, and for the six months ended June 30, 2023 and 2022 was $133,000 and $114,000, respectively, which is recorded as a decrease to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss. We evaluated credit quality indicators such as the agency ratings and the underlying collateral of such investment in order to determine expected future credit loss. We did not record a credit loss for the three and six months ended June 30, 2023 and 2022.

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5. Intangibles

Identified intangible assets, net and identified intangible liabilities, net consisted of the following as of June 30, 2023 and December 31, 2022 (dollars in thousands):


	June 30, 2023		December 31, 2022
Amortized intangible assets:
In-place leases, net of accumulated amortization of $46,451 and $38,930 as of June 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 7.4 years and 7.0 years as of June 30, 2023 and December 31, 2022, respectively)	$	59,937	$	75,580
Above-market leases, net of accumulated amortization of $6,503 and $6,360 as of June 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 8.2 years and 9.0 years as of June 30, 2023 and December 31, 2022, respectively)	20,238		30,194
Customer relationships, net of accumulated amortization of $859 and $785 as of June 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 13.2 years and 13.7 years as of June 30, 2023 and December 31, 2022, respectively)	1,981		2,055

Unamortized intangible assets:
Certificates of need	97,693		97,667
Trade names	30,787		30,787
Total identified intangible assets, net	$	210,636	$	236,283

Amortized intangible liabilities:
Below-market leases, net of accumulated amortization of $3,169 and $2,508 as of June 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 8.1 years and 8.4 years as of June 30, 2023 and December 31, 2022, respectively)	$	9,995	$	10,837
Total identified intangible liabilities, net	$	9,995	$	10,837

Amortization expense on identified intangible assets for the three months ended June 30, 2023 and 2022 was $7,711,000 and $6,121,000, respectively, which included $859,000 and $1,113,000, respectively, of amortization recorded as a decrease to real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations and comprehensive loss. Amortization expense on identified intangible assets for the six months ended June 30, 2023 and 2022 was $24,782,000 and $14,360,000, respectively, which included $9,942,000 and $2,227,000, respectively, of amortization recorded as a decrease to real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations and comprehensive loss. On March 1, 2023, we transitioned our SNFs within Central Wisconsin Senior Care Portfolio to a RIDEA structure, which resulted in a full amortization of $8,073,000 of above-market leases and $885,000 of in-place leases.

Amortization expense on below-market leases for the three months ended June 30, 2023 and 2022 was $404,000 and $414,000, respectively, and for the six months ended June 30, 2023 and 2022 was $812,000 and $1,023,000, respectively, which is recorded as an increase to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss.

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The aggregate weighted average remaining life of the identified intangible assets was 7.8 years and 7.7 years as of June 30, 2023 and December 31, 2022, respectively. The aggregate weighted average remaining life of the identified intangible liabilities was 8.1 years and 8.4 years as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023, estimated amortization expense on the identified intangible assets and liabilities for the six months ending December 31, 2023 and for each of the next four years ending December 31 and thereafter was as follows (in thousands):


	Amortization Expense
Year	Intangible Assets		Intangible Liabilities
2023	$	12,461	$	777
2024	12,638		1,470
2025	9,838		1,343
2026	8,683		1,193
2027	8,110		1,158
Thereafter	30,426		4,054
Total	$	82,156	$	9,995

6. Other Assets, Net

Other assets, net consisted of the following as of June 30, 2023 and December 31, 2022 (dollars in thousands):


	June 30, 2023		December 31, 2022
Deferred rent receivables	$	48,508	$	46,867
Prepaid expenses, deposits, other assets and deferred tax assets, net	31,121		25,866
Investments in unconsolidated entities	21,306		9,580
Inventory — finished goods	19,289		19,775
Lease commissions, net of accumulated amortization of $6,646 and $6,260 as of June 30, 2023 and December 31, 2022, respectively	18,723		19,217

Derivative financial instrument	4,798		—
Deferred financing costs, net of accumulated amortization of $7,391 and $5,704 as of June 30, 2023 and December 31, 2022, respectively	2,986		4,334
Lease inducement, net of accumulated amortization of $2,368 and $2,193 as of June 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 7.4 years and 7.9 years as of June 30, 2023 and December 31, 2022, respectively)	2,632		2,807
Total	$	149,363	$	128,446

Deferred financing costs included in other assets, net were related to the 2019 Trilogy Credit Facility and the senior unsecured revolving credit facility portion of the 2022 Credit Facility. See Note 8, Lines of Credit and Term Loan, for further discussion. Amortization expense on lease inducement for both the three and six months ended June 30, 2023 and 2022 was $88,000 and $176,000, respectively, which is recorded as a decrease to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss.

7. Mortgage Loans Payable, Net

As of June 30, 2023 and December 31, 2022, mortgage loans payable were $1,260,429,000 ($1,237,565,000, net of discount/premium and deferred financing costs) and $1,254,479,000 ($1,229,847,000, net of discount/premium and deferred financing costs), respectively. As of June 30, 2023, we had 71 fixed-rate mortgage loans payable and 12 variable-rate mortgage loans payable with effective interest rates ranging from 2.21% to 8.01% per annum based on interest rates in effect as of June 30, 2023 and a weighted average effective interest rate of 4.51%. As of December 31, 2022, we had 68 fixed-rate mortgage loans payable and 11 variable-rate mortgage loans payable with effective interest rates ranging from 2.21% to 7.26% per annum based on interest rates in effect as of December 31, 2022 and a weighted average effective interest rate of 4.29%. We are required by the terms of certain loan documents to meet certain reporting requirements and covenants, such as net worth ratios, fixed charge coverage ratios and leverage ratios.

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Mortgage loans payable, net consisted of the following as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Total fixed-rate debt	$	929,442	$	885,892
Total variable-rate debt	330,987		368,587
Total fixed- and variable-rate debt	1,260,429		1,254,479
Less: deferred financing costs, net	(8,851)		(8,845)
Add: premium	199		237
Less: discount	(14,212)		(16,024)
Mortgage loans payable, net	$	1,237,565	$	1,229,847

The following table reflects the changes in the carrying amount of mortgage loans payable, net for the six months ended June 30, 2023 and 2022 (in thousands):


	Six Months Ended June 30,
	2023		2022
Beginning balance	$	1,229,847	$	1,095,594
Additions:
Borrowings under mortgage loans payable	61,077		155,882

Amortization of deferred financing costs	1,136		1,191
Amortization of discount/premium on mortgage loans payable, net	632		1,528
Deductions:
Scheduled principal payments on mortgage loans payable	(55,127)		(40,662)
Early payoff of mortgage loans payable	—		(78,437)

Deferred financing costs	—		(1,037)
Ending balance	$	1,237,565	$	1,134,059

For the three and six months ended June 30, 2023, we did not incur any gain or loss on the early extinguishment of mortgage loans payable. For the three and six months ended June 30, 2022, we incurred an aggregate gain (loss) on the early extinguishment of mortgage loans payable of $181,000 and $(1,249,000), respectively, which is recorded as an decrease (increase) to interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss. Such aggregate net loss was primarily related to the write-off of unamortized loan discount related to eight mortgage loans payable that we refinanced on January 1, 2022 that were due to mature in 2044 through 2052.

As of June 30, 2023, the principal payments due on our mortgage loans payable for the six months ending December 31, 2023 and for each of the next four years ending December 31 and thereafter were as follows (in thousands):


Year	Amount
2023	$	24,165
2024	332,910
2025	166,091
2026	155,736
2027	35,023
Thereafter	546,504
Total	$	1,260,429

8. Lines of Credit and Term Loan

2022 Credit Facility

On January 19, 2022, we, through our operating partnership, as borrower, and certain of our subsidiaries, or the subsidiary guarantors, collectively as guarantors, entered into an agreement, or the 2022 Credit Agreement, to amend and

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restate the credit agreement for our existing credit facility with Bank of America, N.A., or Bank of America, KeyBank National Association, Citizens Bank, National Association, and the lenders named therein. The 2022 Credit Agreement provides for a credit facility with an aggregate maximum principal amount up to $1,050,000,000, or the 2022 Credit Facility, which consists of a senior unsecured revolving credit facility in the initial aggregate amount of $500,000,000 and a senior unsecured term loan facility in the initial aggregate amount of $550,000,000. The proceeds of loans made under the 2022 Credit Facility may be used for refinancing existing indebtedness and for general corporate purposes including for working capital, capital expenditures and other corporate purposes not inconsistent with obligations under the 2022 Credit Agreement. We may also obtain up to $25,000,000 in the form of standby letters of credit pursuant to the 2022 Credit Facility. Unless defined herein, all capitalized terms under this “2022 Credit Facility” subsection are defined in the 2022 Credit Agreement.

Under the terms of the 2022 Credit Agreement, the revolving loans mature on January 19, 2026, and may be extended for one 12-month period, subject to the satisfaction of certain conditions, including payment of an extension fee. The term loan matures on January 19, 2027, and may not be extended. The maximum principal amount of the 2022 Credit Facility may be increased by an aggregate incremental amount of $700,000,000, subject to: (i) the terms of the 2022 Credit Agreement; and (ii) at least five business days’ prior written notice to Bank of America.

The 2022 Credit Facility bears interest at varying rates based upon, at our option, (i) Daily SOFR, plus the Applicable Rate for Daily SOFR Rate Loans or (ii) the Term SOFR, plus the Applicable Rate for Term SOFR Rate Loans. If, under the terms of the 2022 Credit Agreement, there is an inability to determine the Daily SOFR or the Term SOFR then the 2022 Credit Facility will bear interest at a rate per annum equal to the Base Rate plus the Applicable Rate for Base Rate Loans. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions.

The 2022 Credit Agreement requires us to add additional subsidiaries as guarantors in the event the value of the assets owned by the subsidiary guarantors falls below a certain threshold as set forth in the 2022 Credit Agreement. In the event of default, Bank of America has the right to terminate the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions under the 2022 Credit Agreement, and to accelerate the payment on any unpaid principal amount of all outstanding loans and interest thereon. On March 1, 2023, we entered into an amendment to the 2022 Credit Agreement, or the First Amendment. The material terms of the First Amendment provided for revisions to certain financial covenants for a limited period of time. Except as modified by the terms of the First Amendment, the material terms of the 2022 Credit Agreement remain in full force and effect.

As of both June 30, 2023 and December 31, 2022, our aggregate borrowing capacity under the 2022 Credit Facility was $1,050,000,000, excluding the $25,000,000 in standby letters of credit described above. As of June 30, 2023 and December 31, 2022, borrowings outstanding under the 2022 Credit Facility totaled $926,400,000 ($925,549,000, net of deferred financing costs related to the senior unsecured term loan facility portion of the 2022 Credit Facility) and $965,900,000 ($965,060,000, net of deferred financing costs related to the senior unsecured term loan facility portion of the 2022 Credit Facility), respectively, and the weighted average interest rate on such borrowings outstanding was 6.82% and 6.07% per annum, respectively.

In January 2022, in connection with the 2022 Credit Agreement, we incurred an aggregate $3,161,000 loss on the extinguishment of a portion of senior unsecured term loan related to former credit facilities. Such loss on extinguishment of debt is recorded as an increase to interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss, and primarily consisted of lender fees we paid to obtain the 2022 Credit Facility.

2019 Trilogy Credit Facility

We, through Trilogy RER, LLC, are party to an amended and restated loan agreement, or the 2019 Trilogy Credit Agreement, among certain subsidiaries of Trilogy OpCo, LLC, Trilogy RER, LLC, and Trilogy Pro Services, LLC; KeyBank; CIT Bank, N.A.; Regions Bank; KeyBanc Capital Markets, Inc.; Regions Capital Markets; Bank of America; The Huntington National Bank; and a syndicate of other banks, as lenders named therein, with respect to a senior secured revolving credit facility that had an aggregate maximum principal amount of $360,000,000, consisting of: (i) a $325,000,000 secured revolver supported by real estate assets and ancillary business cash flow and (ii) a $35,000,000 accounts receivable revolving credit facility supported by eligible accounts receivable, or the 2019 Trilogy Credit Facility. The proceeds of the 2019 Trilogy Credit Facility may be used for acquisitions, debt repayment and general corporate purposes. The maximum principal amount of the 2019 Trilogy Credit Facility could have been increased by up to $140,000,000, for a total principal amount of $500,000,000, subject to certain conditions.

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On December 20, 2022, we entered into an amendment to the 2019 Trilogy Credit Agreement, or the 2019 Trilogy Credit Amendment. The material terms of the 2019 Trilogy Credit Amendment provided for an increase to the secured revolver amount from $325,000,000 to $365,000,000, thereby increasing our aggregate maximum principal amount under the credit facility from $360,000,000 to $400,000,000. In addition, all references to the London Inter-bank Offered Rate, or LIBOR, were replaced with the Secured Overnight Financing Rate, or SOFR. On March 30, 2023, we further amended the 2019 Trilogy Credit Agreement to update the definition of Implied Debt Service, which is used to calculate the Real Estate Borrowing Base Availability, for interest rate changes and to add an annual interest-only payment calculation option. Except as modified by the terms of the amendments, the material terms of the 2019 Trilogy Credit Agreement remain in full force and effect. Unless defined herein, all capitalized terms under this “2019 Trilogy Credit Facility” subsection are defined in the 2019 Trilogy Credit Amendment.

The 2019 Trilogy Credit Facility matures on September 5, 2023 and may be extended for one 12-month period during the term of the 2019 Trilogy Credit Amendment, subject to the satisfaction of certain conditions, including payment of an extension fee. We intend to satisfy the conditions pursuant to the 2019 Trilogy Credit Facility and pay the required extension fee in order to exercise our option to extend the maturity date for one 12-month period. At our option, the 2019 Trilogy Credit Facility bears interest at per annum rates equal to (a) SOFR, plus 2.75% for SOFR Rate Loans and (b) for Base Rate Loans, 1.75% plus the highest of: (i) the fluctuating rate per annum of interest in effect for such day as established from time to time by KeyBank as its prime rate, (ii) 0.50% above the Federal Funds Effective Rate and (iii) 1.00% above one-month Adjusted Term SOFR.

As of both June 30, 2023 and December 31, 2022, our aggregate borrowing capacity under the 2019 Trilogy Credit Facility was $400,000,000. As of June 30, 2023 and December 31, 2022, borrowings outstanding under the 2019 Trilogy Credit Facility totaled $356,134,000 and $316,734,000, respectively, and the weighted average interest rate on such borrowings outstanding was 7.94% and 7.17% per annum, respectively.

9. Derivative Financial Instrument

We use a derivative financial instrument to manage interest rate risk associated with our variable-rate term loan pursuant to our 2022 Credit Facility and we record such derivative financial instrument in our accompanying condensed consolidated balance sheets as either an asset or a liability measured at fair value. We did not have any derivative financial instruments as of December 31, 2022. The following table provides information with respect to the derivative financial instrument held by us as of June 30, 2023, which was included in other assets, net in our accompanying condensed consolidated balance sheet (dollars in thousands):

Instrument

Notional Amount

Index

Interest Rate

Maturity Date

Fair Value
June 30, 2023

Swap

275,000

one month
Term SOFR

3.74%

01/19/26

4,798

As of June 30, 2023, our derivative financial instrument was not designated as a hedge. The derivative financial instrument not designated as a hedge is not speculative and is used to manage our exposure to interest rate movements, but does not meet the strict hedge accounting requirements. For the three months ended June 30, 2023 and 2022, we recorded $4,993,000 and $0, respectively, and for the six months ended June 30, 2023 and 2022, we recorded $4,798,000 and $500,000, respectively, as a decrease to interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss related to the change in the fair value of our derivative financial instrument.

See Note 13, Fair Value Measurements, and Note 19, Subsequent Event, for a further discussion of our derivative financial instruments.

10. Commitments and Contingencies

Litigation

We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.

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Environmental Matters

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

Other

Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, which include calls/puts to sell/acquire properties. In our view, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

11. Redeemable Noncontrolling Interests

As of both June 30, 2023 and December 31, 2022, we, through our direct and indirect subsidiaries, owned a 95.0% general partnership interest in our operating partnership and the remaining 5.0% limited partnership interest in our operating partnership was owned by the NewCo Sellers. Some of the limited partnership units outstanding, which account for approximately 1.0% of our total operating partnership units outstanding, have redemption features outside of our control and are accounted for as redeemable noncontrolling interests presented outside of permanent equity in our accompanying condensed consolidated balance sheets.

As of both June 30, 2023 and December 31, 2022, we, through Trilogy REIT Holdings LLC, or Trilogy REIT Holdings, in which we indirectly hold a 76.0% ownership interest, owned 97.4% and 96.2%, respectively, of the outstanding equity interests of Trilogy. As of June 30, 2023 and December 31, 2022, certain members of Trilogy’s management and certain members of an advisory committee to Trilogy’s board of directors owned approximately 2.6% and 3.8%, respectively, of the outstanding equity interests of Trilogy. We account for such equity interests as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets in accordance with FASB Accounting Standards Codification Topic 480-10-S99-3A given certain features associated with such equity interests. For the three and six months ended June 30, 2023, we redeemed a portion of the equity interests owned by current members of Trilogy’s management for an aggregate of $84,000 and $15,954,000, respectively. For the six months ended June 30, 2022, we did not redeem any equity interests of Trilogy.

As of June 30, 2023 and December 31, 2022, we own, through our operating partnership, approximately 98.0% of the joint ventures with an affiliate of Meridian Senior Living, LLC, or Meridian, that own Central Florida Senior Housing Portfolio, Pinnacle Beaumont ALF and Pinnacle Warrenton ALF. The noncontrolling interests held by Meridian have redemption features outside of our control and are accounted for as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets. See Note 3, Real Estate Investments, Net and Business Combinations — Dispositions of Real Estate Investments, for dispositions within our Central Florida Senior Housing Portfolio.

We previously owned 90.0% of the joint venture with Avalon Health Care, Inc., or Avalon, that owned Catalina West Haven ALF and Catalina Madera ALF. The noncontrolling interests held by Avalon had redemption features outside of our control and were accounted for as redeemable noncontrolling interests until December 1, 2022, when we exercised our right to purchase the remaining 10.0% of the joint venture with Avalon for a contract purchase price of $295,000. As such, 10.0% of the net earnings of such joint venture were allocated to redeemable noncontrolling interests in our accompanying consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022.

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We record the carrying amount of redeemable noncontrolling interests at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interests consisted of the following for the six months ended June 30, 2023 and 2022 (in thousands):


	Six Months Ended June 30,
	2023		2022
Beginning balance	$	81,598	$	72,725
Additional redeemable noncontrolling interest	—		173
Reclassification from equity	41		42
Distributions	(904)		(1,405)
Repurchase of redeemable noncontrolling interests	(15,954)		—
Adjustment to redemption value	(4,422)		3,833
Net loss attributable to redeemable noncontrolling interests	(486)		(31)
Ending balance	$	59,873	$	75,337

12. Equity

Preferred Stock

Pursuant to our charter, we are authorized to issue 200,000,000 shares of our preferred stock, par value $0.01 per share. As of both June 30, 2023 and December 31, 2022, no shares of preferred stock were issued and outstanding.

Common Stock

Pursuant to our charter, as amended, we are authorized to issue 1,000,000,000 shares of our common stock, par value $0.01 per share, whereby 200,000,000 shares are classified as Class T common stock and 800,000,000 shares are classified as Class I common stock. As of June 30, 2023, after taking into consideration the Merger and the impact of the reverse stock split as discussed below, we had issued 65,445,557 shares for a total of $2,737,716,000 of common stock since February 26, 2014 in our initial public offerings and DRIP offerings (includes historical offering amounts sold by GAHR III and GAHR IV prior to the Merger). See “Distribution Reinvestment Plan” section below for further discussion.

On November 15, 2022 we effected a one-for-four reverse split of our common stock and a corresponding reverse split of the partnership units in our operating partnership. As a result of the Reverse Splits, every four shares of our common stock, or four partnership units in our operating partnership, were automatically combined and converted into one issued and outstanding share of our common stock of like class, or one partnership unit of like class, as applicable, rounded to the nearest 1/100th share or unit. The Reverse Splits impacted all classes of common stock and partnership units proportionately and had no impact on any stockholder’s or partner’s ownership percentage. Neither the number of authorized shares nor the par value of the Class T common stock and Class I common stock were ultimately impacted. All numbers of common shares and per share data, as well as partnership units in our operating partnership, in our accompanying condensed consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the Reverse Splits.

Distribution Reinvestment Plan

Our DRIP allowed our stockholders to elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of our common stock in lieu of receiving cash distributions. However, in connection with the Proposed Listing, on November 14, 2022, our board suspended the DRIP offering beginning with the distributions declared for the quarter ended December 31, 2022. As a result of the suspension of the DRIP offering, unless and until our board reinstates the DRIP offering, stockholders who are current participants in the DRIP were or will be paid distributions in cash.

Our board has been establishing an estimated per share net asset value, or NAV, annually. Shares of our common stock issued pursuant to our DRIP are issued at the current estimated per share NAV until such time as our board determined an updated estimated per share NAV.

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The following is a summary of the historical estimated per share NAV:


Approval Date by our Board	Estimated Per Share NAV



03/24/22	$	37.16
03/15/23	$	31.40

For both the three and six months ended June 30, 2023, there were no distributions reinvested and no shares of our common stock were issued pursuant to our DRIP offerings. For the three and six months ended June 30, 2022, $11,143,000 and $22,447,000, respectively, in distributions were reinvested and 299,857 and 606,375 shares of our common stock, respectively, were issued pursuant to our DRIP offerings.

Share Repurchase Plan

Our share repurchase plan allowed for repurchases of shares of our common stock by us when certain criteria were met. Share repurchases were made at the sole discretion of our board. On October 4, 2021, as a result of the Merger, our board authorized the partial reinstatement of our share repurchase plan with respect to requests to repurchase shares resulting from the death or qualifying disability of stockholders, effective with respect to qualifying repurchases for the fiscal quarter ending December 31, 2021. All share repurchase requests other than those requests resulting from the death or qualifying disability of stockholders were rejected. On November 14, 2022, our board suspended our share repurchase plan beginning with share repurchase requests for the quarter ending December 31, 2022. All share repurchase requests, including requests resulting from the death or qualifying disability of stockholders, received commencing with the quarter ended December 31, 2022, will not be processed, will be considered canceled in full and will not be considered outstanding repurchase requests.

Funds for the repurchase of shares of our common stock were derived from the cumulative proceeds we received from the sale of shares of our common stock pursuant to our DRIP offerings. Pursuant to our share repurchase plan, the repurchase price with respect to repurchases resulting from the death or qualifying disability of stockholders was equal to the most recently published estimated per share NAV.

We did not repurchase any shares of our common stock pursuant to our share repurchase plan for the three months ended June 30, 2023. For the six months ended June 30, 2023, pursuant to our share repurchase plan, we repurchased 1,681 shares of common stock for $62,000, at a repurchase price of $37.16 per share. For the three and six months ended June 30, 2022, pursuant to our share repurchase plan, we repurchased 174,865 and 286,959 shares of common stock, respectively, for an aggregate of $6,449,000 and $10,583,000, respectively, at a repurchase price of $36.88 per share. Such repurchase requests were submitted prior to the suspension of our share repurchase plan.

Noncontrolling Interests in Total Equity

As of June 30, 2023 and December 31, 2022, Trilogy REIT Holdings owned approximately 97.4% and 96.2%, respectively, of Trilogy. We are the indirect owner of a 76.0% interest in Trilogy REIT Holdings pursuant to an amended joint venture agreement with an indirect, wholly owned subsidiary of NorthStar Healthcare Income, Inc., or NHI. We serve as the managing member of Trilogy REIT Holdings. As of both June 30, 2023 and December 31, 2022, NHI indirectly owned a 24.0% membership interest in Trilogy REIT Holdings and as such, for the three and six months ended June 30, 2023 and 2022, 24.0%of the net earnings of Trilogy REIT Holdings were allocated to noncontrolling interests.

In connection with our operation of Trilogy, time-based profit interest units in Trilogy, or the Profit Interests, were issued to Trilogy Management Services, LLC and two independent directors of Trilogy, both unaffiliated third parties that manage or direct the day-to-day operations of Trilogy. The Profit Interests are measured at their grant date fair value and vest in increments of 20.0% on each anniversary of the respective grant date over a five-year period. We amortize the Profit Interests on a straight-line basis over the vesting periods, which are recorded to general and administrative expenses in our accompanying condensed consolidated statements of operations and comprehensive loss. The nonvested Profit Interests are presented as noncontrolling interests in total equity in our accompanying condensed consolidated balance sheets, and are re-classified to redeemable noncontrolling interests upon vesting as they had redemption features outside of our control, similar to the common stock units held by Trilogy’s management. See Note 11, Redeemable Noncontrolling Interests, for further discussion.

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There were no canceled, expired or exercised Profit Interests during the three and six months ended June 30, 2023 and 2022. For the three months ended June 30, 2023 and 2022, we recognized stock compensation expense related to the time-based Profit Interests of $20,000 and $21,000, respectively. For the six months ended June 30, 2023 and 2022, we recognized stock compensation expense related to the time-based Profit Interests of $41,000 and $42,000, respectively.

One of our consolidated subsidiaries issued non-voting preferred shares of beneficial interests to qualified investors for total proceeds of $125,000. These preferred shares of beneficial interests are entitled to receive cumulative preferential cash dividends at the rate of 12.5% per annum. We classify the value of our subsidiary’s preferred shares of beneficial interests as noncontrolling interests in our accompanying condensed consolidated balance sheets and the dividends of the preferred shares of beneficial interests in net income or loss attributable to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss.

As of both June 30, 2023 and December 31, 2022, we owned an 86.0% interest in a consolidated limited liability company that owns Lakeview IN Medical Plaza. As such, 14.0% of the net earnings of Lakeview IN Medical Plaza were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022.

As of both June 30, 2023 and December 31, 2022, we owned a 90.6% membership interest in a consolidated limited liability company that owns Southlake TX Hospital. As such, 9.4% of the net earnings of Southlake TX Hospital were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022.

As of both June 30, 2023 and December 31, 2022, we owned a 90.0% interest in a joint venture that owns the Louisiana Senior Housing Portfolio. As such, 10.0% of the net earnings of the joint venture were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2023 and 2022.

As discussed in Note 1, Organization and Description of Business, as of both June 30, 2023 and December 31, 2022, we, through our direct and indirect subsidiaries, own a 95.0% general partnership interest in our operating partnership and the remaining 5.0% limited partnership interest in our operating partnership is owned by the NewCo Sellers. As of both June 30, 2023 and December 31, 2022, 4.0% of our total operating partnership units outstanding is presented in total equity in our accompanying condensed consolidated balance sheets. See Note 11, Redeemable Noncontrolling Interests, for further discussion.

AHR 2015 Incentive Plan

Pursuant to the Amended and Restated 2015 Incentive Plan, our board (with respect to options and restricted shares of common stock granted to independent directors), or our compensation committee (with respect to any other award), may grant options, restricted shares of common stock, stock purchase rights, stock appreciation rights or other awards to our independent directors, officers, employees and consultants. On June 15, 2023, we adopted the Second Amended and Restated 2015 Incentive Plan, or the AHR Incentive Plan, which, among other things, increased the maximum number of shares of our common stock that may be issued pursuant to such plan from 1,000,000 to 4,000,000 shares, extended the term of such plan to June 15, 2033 and made certain administrative changes to the Amended and Restated 2015 Incentive Plan.

Restricted common stock

Pursuant to the AHR Incentive Plan, through June 30, 2023, we granted an aggregate of 315,459 shares of our restricted common stock, or RSAs, which include restricted Class T common stock and restricted Class I common stock, as defined in the AHR Incentive Plan. RSAs were granted to our independent directors in connection with their initial election or re-election to our board or in consideration of their past services rendered. In addition, certain executive officers and key employees received grants of restricted Class T common stock. RSAs generally have a vesting period ranging from one to four years and are subject to continuous service through the vesting dates.

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Restricted stock units

Pursuant to the AHR Incentive Plan, through June 30, 2023, we granted our executive officers an aggregate 70,751 of performance-based restricted stock units, or PBUs, representing the right to receive shares of our Class T common stock upon vesting. We also granted to our executive officers and certain employees 169,529 time-based restricted stock units, or TBUs, representing the right to receive shares of our Class T common stock upon vesting. PBUs and TBUs are collectively referred to as RSUs. RSUs granted to executive officers and employees generally have a vesting period of up to three years and are subject to continuous service through the vesting dates, and any performance conditions, as applicable.

A summary of the status of our nonvested RSAs and RSUs as of June 30, 2023 and December 31, 2022 and the changes for the six months ended June 30, 2023 is presented below:


	Number of Nonvested RSAs	Weighted Average Grant Date Fair Value - RSAs		Number of Nonvested RSUs		Weighted Average Grant Date Fair Value - RSUs




Balance — December 31, 2022	183,240	$	36.97	48,553		$	37.16
Granted	26,156	31.83		191,728		31.40
Vested	(21,030)	37.47		(6,400)	(1)	37.16
Forfeited	—	—		—		—
Balance — June 30, 2023	188,366	$	36.20	233,881		$	32.44

___________

(1)Amount includes 2,280 shares of common stock that were withheld from issuance to satisfy employee minimum tax withholding requirements associated with the vesting of RSUs during the six months ended June 30, 2023.

For the three months ended June 30, 2023 and 2022, we recognized $1,564,000 and $980,000, respectively, and for the six months ended June 30, 2023 and 2022, we recognized $2,615,000 and $1,791,000, respectively, in stock compensation expense related to awards granted pursuant to the AHR Incentive Plan based on the grant date fair value for time based awards and for performance-based awards that are probable of vesting, which grant date fair value is equal to the most recently published estimated per share NAV. Such stock compensation expense is included in general and administrative expenses in our accompanying condensed consolidated statements of operations and comprehensive loss.

13. Fair Value Measurements

Assets and Liabilities Reported at Fair Value

The table below presents our assets and liabilities measured at fair value on a recurring basis as of June 30, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):


	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total



Assets:
Derivative financial instrument	$	—	$	4,798	$	—	$	4,798

Total assets at fair value	$	—	$	4,798	$	—	$	4,798

There were no transfers into and out of fair value measurement levels during the six months ended June 30, 2023 and 2022. We did not have any assets and liabilities measured at fair value on a recurring basis as of December 31, 2022.

Derivative Financial Instruments

We entered into an interest rate swap to manage interest rate risk associated with variable-rate debt. We also previously used interest rate swaps or interest rate caps to manage such interest rate risk. The valuation of these instruments was determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows of each derivative. Such valuation reflected the contractual terms of the derivatives, including the period to maturity, and used

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observable market-based inputs, including interest rate curves, as well as option volatility. The fair value of our interest rate swap was determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates derived from observable market interest rate curves.

We incorporated credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurement. In adjusting the fair value of our derivative contract for the effect of nonperformance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although we determined that the majority of the inputs used to value our derivative financial instrument fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with this instrument utilized Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparty. However, as of June 30, 2023, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative position and determined that the credit valuation adjustments were not significant to the overall valuation of our derivative. As a result, we determined that our derivative valuation in its entirety was classified in Level 2 of the fair value hierarchy. On January 25, 2022, our prior interest rate swap contracts matured and as of December 31, 2022, we did not have any derivative financial instruments.

Financial Instruments Disclosed at Fair Value

Our accompanying condensed consolidated balance sheets include the following financial instruments: debt security investment, cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and accrued liabilities, mortgage loans payable and borrowings under our lines of credit and term loan.

We consider the carrying values of cash and cash equivalents, restricted cash, accounts and other receivables and accounts payable and accrued liabilities to approximate the fair value for these financial instruments based upon an evaluation of the underlying characteristics, market data and because of the short period of time between origination of the instruments and their expected realization.

The fair value of our debt security investment is estimated using a discounted cash flow analysis using interest rates available to us for investments with similar terms and maturities. The fair values of our mortgage loans payable and our lines of credit and term loan are estimated using discounted cash flow analyses using borrowing rates available to us for debt instruments with similar terms and maturities. We have determined that the valuations of our debt security investment, mortgage loans payable and lines of credit and term loan are classified in Level 2 within the fair value hierarchy. The carrying amounts and estimated fair values of such financial instruments as of June 30, 2023 and December 31, 2022 were as follows (in thousands):


	June 30, 2023				December 31, 2022
	Carrying Amount(1)		Fair Value		Carrying Amount(1)		Fair Value
Financial Assets:

Debt security investment	$	84,933	$	92,998	$	83,000	$	93,230
Financial Liabilities:
Mortgage loans payable	$	1,237,565	$	1,096,898	$	1,229,847	$	1,091,667
Lines of credit and term loan	$	1,278,697	$	1,283,619	$	1,277,460	$	1,285,205

___________

(1)Carrying amount is net of any discount/premium and unamortized deferred financing costs.

14. Income Taxes

As a REIT, we generally will not be subject to U.S. federal income tax on taxable income that we distribute to our stockholders. We have elected to treat certain of our consolidated subsidiaries as taxable REIT subsidiaries, or TRS, pursuant to the Code. TRS may participate in services that would otherwise be considered impermissible for REITs and are subject to federal and state income tax at regular corporate tax rates.

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Current Income Tax

Federal and state income taxes are generally a function of the level of income recognized by our TRS. Foreign income taxes are generally a function of our income on our real estate located in the United Kingdom, or UK, and Isle of Man.

Deferred Taxes

Deferred income tax is generally a function of the period’s temporary differences (primarily basis differences between tax and financial reporting for real estate assets and equity investments) and generation of tax net operating loss that may be realized in future periods depending on sufficient taxable income.

We recognize the financial statement effects of an uncertain tax position when it is more likely than not, based on the technical merits of the tax position, that such a position will be sustained upon examination by the relevant tax authorities. If the tax benefit meets the “more likely than not” threshold, the measurement of the tax benefit will be based on our estimate of the ultimate tax benefit to be sustained if audited by the taxing authority. As of both June 30, 2023 and December 31, 2022, we did not have any tax benefits or liabilities for uncertain tax positions that we believe should be recognized in our accompanying condensed consolidated financial statements.

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A valuation allowance is established if we believe it is more likely than not that all or a portion of the deferred tax assets are not realizable. As of both June 30, 2023 and December 31, 2022, our valuation allowance fully reserves the net deferred tax assets due to historical losses and inherent uncertainty of future income. We will continue to monitor industry and economic conditions, and our ability to generate taxable income based on our business plan and available tax planning strategies, which would allow us to utilize the tax benefits of the net deferred tax assets and thereby allow us to reverse all, or a portion of, our valuation allowance in the future.

15. Leases

Lessor

We have operating leases with tenants that expire at various dates through 2050. For the three months ended June 30, 2023 and 2022, we recognized $49,216,000 and $50,060,000, respectively, of revenues related to operating lease payments, of which $9,711,000 and $9,663,000, respectively, was for variable lease payments. For the six months ended June 30, 2023 and 2022, we recognized $91,519,000 and $100,790,000, respectively, of revenues related to operating lease payments, of which $19,750,000 and $20,076,000, respectively, was for variable lease payments. As of June 30, 2023, the following table sets forth the undiscounted cash flows for future minimum base rents due under operating leases for the six months ending December 31, 2023 and for each of the next four years ending December 31 and thereafter for properties that we wholly own (in thousands):


Year	Amount
2023	$	75,245
2024	143,777
2025	131,148
2026	120,394
2027	114,746
Thereafter	581,532
Total	$	1,166,842

Lessee

We lease certain land, buildings, furniture, fixtures, campus and office equipment and automobiles. We have lease agreements with lease and non-lease components, which are generally accounted for separately. Most leases include one or more options to renew, with renewal terms that generally can extend at various dates through 2107, excluding extension options. The exercise of lease renewal options is at our sole discretion. Certain leases also include options to purchase the leased property. As of June 30, 2023, we had future lease payments of $6,054,000 for an operating lease that had not yet commenced. Such operating lease will commence in fiscal year 2023 with a lease term of five years.

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The depreciable life of assets and leasehold improvements are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. Certain of our lease agreements include rental payments that are adjusted periodically based on the United States Bureau of Labor Statistics’ Consumer Price Index, and may also include other variable lease costs (i.e., common area maintenance, property taxes and insurance). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease costs were as follows (in thousands):


		Three Months Ended June 30,
Lease Cost	Classification	2023		2022
Operating lease cost(1)	Property operating expenses, rental expenses or general and administrative expenses	$	11,473	$	5,408
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	297		316
Interest on lease liabilities	Interest expense	66		66
Sublease income	Resident fees and services revenue or other income	(172)		(234)
Total lease cost		$	11,664	$	5,556


		Six Months Ended June 30,
Lease Cost	Classification	2023		2022
Operating lease cost(1)	Property operating expenses, rental expenses or general and administrative expenses	$	23,396	$	11,764
Finance lease cost:
Amortization of leased assets	Depreciation and amortization	600		629
Interest on lease liabilities	Interest expense	157		140
Sublease income	Resident fees and services revenue or other income	(328)		(382)
Total lease cost		$	23,825	$	12,151

___________

(1)Includes short-term leases and variable lease costs, which are immaterial.

Additional information related to our leases for the periods presented below was as follows (dollars in thousands):


Lease Term and Discount Rate	June 30, 2023		December 31, 2022
Weighted average remaining lease term (in years):
Operating leases	12.5		12.8
Finance leases	1.9		2.3
Weighted average discount rate:
Operating leases	5.71	%	5.69	%
Finance leases	7.74	%	7.66	%


	Six Months Ended June 30,
Supplemental Disclosure of Cash Flows Information	2023		2022

Operating cash outflows related to finance leases	$	157	$	140
Financing cash outflows related to finance leases	$	38	$	26

Right-of-use assets obtained in exchange for operating lease liabilities	$	1,155	$	646

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Operating Leases

As of June 30, 2023, the following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments for the six months ending December 31, 2023 and for each of the next four years ending December 31 and thereafter, as well as the reconciliation of those cash flows to operating lease liabilities on our accompanying condensed consolidated balance sheet (in thousands):


Year	Amount
2023	$	19,240
2024	37,822
2025	37,210
2026	37,256
2027	37,890
Thereafter	229,084
Total undiscounted operating lease payments	398,502
Less: interest	135,784
Present value of operating lease liabilities	$	262,718

Finance Leases

As of June 30, 2023, the following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments for the six months ending December 31, 2023 and for each of the next four years ending December 31 and thereafter, as well as a reconciliation of those cash flows to finance lease liabilities (in thousands):


Year	Amount
2023	$	29
2024	76
2025	31
2026	—
2027	—
Thereafter	—
Total undiscounted finance lease payments	136
Less: interest	11
Present value of finance lease liabilities	$	125

16. Segment Reporting

As of June 30, 2023, we evaluated our business and made resource allocations based on six reportable business segments: integrated senior health campuses, MOBs, SNFs, SHOP, senior housing — leased and hospitals. Our MOBs are typically leased to multiple tenants under separate leases, thus requiring active management and responsibility for many of the associated operating expenses (much of which are, or can effectively be, passed through to the tenants). Our integrated senior health campuses each provide a range of independent living, assisted living, memory care, skilled nursing services and certain ancillary businesses that are owned and operated utilizing a RIDEA structure. Our senior housing — leased and skilled nursing facilities are single-tenant properties for which we lease the facilities to unaffiliated tenants under triple-net and generally master leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. In addition, our senior housing — leased segment includes our debt security investment. Our hospital investments are similarly structured to our leased skilled nursing and senior housing facilities. Our SHOP segment includes senior housing facilities, which may provide assisted living care, independent living, memory care or skilled nursing services, that are owned and operated utilizing a RIDEA structure.

While we believe that net income (loss), as defined by GAAP, is the most appropriate earnings measurement, we evaluate our segments’ performance based upon segment net operating income or loss, or NOI. We define segment NOI as total revenues and grant income, less property operating expenses and rental expenses, which excludes depreciation and amortization, general and administrative expenses, business acquisition expenses, interest expense, gain or loss on dispositions

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of real estate investments, impairment of real estate investments, income or loss from unconsolidated entities, impairment of goodwill, foreign currency gain or loss, gain on re-measurement of previously held equity interest, other income and income tax benefit or expense for each segment. We believe that segment NOI serves as an appropriate supplemental performance measure to net income (loss) because it allows investors and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies and between periods on a consistent basis.

Interest expense, depreciation and amortization and other expenses not attributable to individual properties are not allocated to individual segments for purposes of assessing segment performance. Non-segment assets primarily consist of corporate assets including cash and cash equivalents, other receivables, deferred financing costs and other assets not attributable to individual properties.

Summary information for the reportable segments during the three and six months ended June 30, 2023 and 2022 was as follows (in thousands):


	Integrated Senior Health Campuses		SHOP		MOBs		Senior Housing — Leased		SNFs		Hospitals		Three Months Ended June 30, 2023
Revenues and grant income:
Resident fees and services	$	362,856	$	47,766	$	—	$	—	$	—	$	—	$	410,622
Real estate revenue	—		—		36,640		5,392		6,090		2,446		50,568
Grant income	6,381		—		—		—		—		—		6,381
Total revenues and grant income	369,237		47,766		36,640		5,392		6,090		2,446		467,571
Expenses:
Property operating expenses	328,696		43,853		—		—		—		—		372,549
Rental expenses	—		—		13,927		229		378		119		14,653
Segment net operating income	$	40,541	$	3,913	$	22,713	$	5,163	$	5,712	$	2,327	$	80,369
Expenses:
General and administrative													$	11,774
Business acquisition expenses													888
Depreciation and amortization													44,701
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)													(40,990)
Gain in fair value of derivative financial instruments													4,993
Loss on dispositions of real estate investments													(2,072)

Loss from unconsolidated entities													(113)

Foreign currency gain													1,068
Other income													2,589
Total net other expense													(34,525)
Loss before income taxes													(11,519)
Income tax expense													(348)


Net loss													$	(11,867)

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	Integrated Senior Health Campuses		SHOP		MOBs		Senior Housing — Leased		SNFs		Hospitals		Three Months Ended June 30, 2022
Revenues and grant income:
Resident fees and services	$	287,582	$	38,643	$	—	$	—	$	—	$	—	$	326,225
Real estate revenue	—		—		36,833		5,262		6,599		2,411		51,105
Grant income	10,969		—		—		—		—		—		10,969
Total revenues and grant income	298,551		38,643		36,833		5,262		6,599		2,411		388,299
Expenses:
Property operating expenses	258,934		37,125		—		—		—		—		296,059
Rental expenses	—		—		13,791		212		521		139		14,663
Segment net operating income	$	39,617	$	1,518	$	23,042	$	5,050	$	6,078	$	2,272	$	77,577
Expenses:
General and administrative													$	10,928
Business acquisition expenses													1,757
Depreciation and amortization													39,971
Other income (expense):

Interest expense (including amortization of deferred financing costs, debt discount/premium and gain on debt extinguishments)													(20,345)

Loss on dispositions of real estate investments													(73)
Impairment of real estate investments													(17,340)
Income from unconsolidated entities													638
Foreign currency loss													(3,607)
Other income													469
Total net other expense													(40,258)
Loss before income taxes													(15,337)
Income tax expense													(205)
Net loss													$	(15,542)

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)


	Integrated Senior Health Campuses		SHOP		MOBs		Senior Housing — Leased		SNFs		Hospitals		Six Months Ended June 30, 2023
Revenues and grant income:
Resident fees and services	$	724,626	$	94,626	$	—	$	—	$	—	$	—	$	819,252
Real estate revenue	—		—		74,123		10,668		4,458		4,915		94,164
Grant income	6,381		—		—		—		—		—		6,381
Total revenues and grant income	731,007		94,626		74,123		10,668		4,458		4,915		919,797
Expenses:
Property operating expenses	657,057		85,638		—		—		—		—		742,695
Rental expenses	—		—		28,335		428		847		238		29,848
Segment net operating income	$	73,950	$	8,988	$	45,788	$	10,240	$	3,611	$	4,677	$	147,254
Expenses:
General and administrative													$	24,827
Business acquisition expenses													1,220
Depreciation and amortization													89,371
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)													(80,001)
Gain in fair value of derivative financial instruments													4,798
Loss on dispositions of real estate investments													(2,204)

Loss from unconsolidated entities													(419)
Gain on re-measurement of previously held equity interest													726
Foreign currency gain													2,076
Other income													4,197
Total net other expense													(70,827)
Loss before income taxes													(38,991)
Income tax expense													(491)


Net loss													$	(39,482)

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	Integrated Senior Health Campuses		SHOP		MOBs		Senior Housing — Leased		SNFs		Hospitals		Six Months Ended June 30, 2022
Revenues and grant income:
Resident fees and services	$	568,594	$	76,605	$	—	$	—	$	—	$	—	$	645,199
Real estate revenue	—		—		74,670		10,560		12,992		4,826		103,048
Grant income	16,065		118		—		—		—		—		16,183
Total revenues and grant income	584,659		76,723		74,670		10,560		12,992		4,826		764,430
Expenses:
Property operating expenses	512,084		71,135		—		—		—		—		583,219
Rental expenses	—		—		28,104		391		1,207		248		29,950
Segment net operating income	$	72,575	$	5,588	$	46,566	$	10,169	$	11,785	$	4,578	$	151,261
Expenses:
General and administrative													$	22,047
Business acquisition expenses													1,930
Depreciation and amortization													82,282
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs, debt discount/premium and loss on debt extinguishments)													(43,670)
Gain in fair value of derivative financial instruments													500
Gain on dispositions of real estate investments													683
Impairment of real estate investments													(17,340)
Income from unconsolidated entities													2,024
Foreign currency loss													(4,994)
Other income													1,729
Total net other expense													(61,068)
Loss before income taxes													(16,066)
Income tax expense													(373)


Net loss													$	(16,439)

Total assets by reportable segment as of June 30, 2023 and December 31, 2022 were as follows (in thousands):


	June 30, 2023		December 31, 2022
Integrated senior health campuses	$	2,159,186	$	2,157,748
MOBs	1,307,564		1,379,502
SHOP	594,980		635,190
Senior housing — leased	252,658		249,576
SNFs	218,278		245,717
Hospitals	106,667		106,067
Other	27,051		12,898
Total assets	$	4,666,384	$	4,786,698

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

As of and for the six months ended June 30, 2023 and 2022, goodwill by reportable segment was as follows (in thousands):


	Integrated Senior Health Campuses		SHOP		MOBs		Senior Housing — Leased		SNFs		Hospitals		Total






Balance — December 31, 2022	$	164,846	$	—	$	47,812	$	5,924	$	8,640	$	4,389	$	231,611
Goodwill acquired	3,331		—		—		—		—		—		3,331




Balance — June 30, 2023	$	168,177	$	—	$	47,812	$	5,924	$	8,640	$	4,389	$	234,942


	Integrated Senior Health Campuses		SHOP		MOBs		Senior Housing — Leased		SNFs		Hospitals		Total






Balance — December 31, 2021	$	119,856	$	23,277	$	47,812	$	5,924	$	8,640	$	4,389	$	209,898
Goodwill acquired	2,816		—		—		—		—		—		2,816




Balance — June 30, 2022	$	122,672	$	23,277	$	47,812	$	5,924	$	8,640	$	4,389	$	212,714

See Note 3, Real Estate Investments, Net and Business Combinations, for a further discussion of goodwill recognized in connection with our business combinations.

Our portfolio of properties and other investments are located in the United States, the UK and Isle of Man. Revenues and grant income and assets are attributed to the country in which the property is physically located. The following is a summary of geographic information for our operations for the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Revenues and grant income:
United States	$	466,397	$	387,120	$	917,489	$	761,999
International	1,174		1,179		2,308		2,431
	$	467,571	$	388,299	$	919,797	$	764,430

The following is a summary of real estate investments, net by geographic regions as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Real estate investments, net:
United States	$	3,439,139	$	3,539,453
International	43,665		42,156
	$	3,482,804	$	3,581,609

17. Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily our debt security investment, cash and cash equivalents, restricted cash and accounts and other receivables. We are exposed to credit risk with respect to our debt security investment, but we believe collection of the outstanding amount is probable. Cash and cash equivalents are generally invested in investment-grade, short-term instruments with a maturity of three months or less when purchased. We have cash and cash equivalents in financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. As of June 30, 2023 and December 31, 2022, we had cash and cash equivalents in excess of FDIC insured limits. We believe this risk is not significant. Concentration of credit risk with respect to accounts receivable from tenants and residents is limited. We perform credit evaluations of prospective tenants and security deposits are obtained at the time of property acquisition and upon lease execution.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Based on leases as of June 30, 2023, properties in two states in the United States accounted for 10.0% or more of our total consolidated property portfolio’s annualized base rent or annualized NOI, which is based on contractual base rent from leases in effect for our non-RIDEA properties and annualized NOI for our SHOP and integrated senior health campuses as of June 30, 2023. Properties located in Indiana and Michigan accounted for 34.6% and 10.9%, respectively, of our total consolidated property portfolio’s annualized base rent or annualized NOI. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.

Based on leases in effect as of June 30, 2023, our six reportable business segments, integrated senior health campuses, MOBs, SNFs, SHOP, senior housing — leased and hospitals accounted for 44.4%, 35.0%, 7.3%, 6.1%, 4.1% and 3.1%, respectively, of our total consolidated property portfolio’s annualized base rent or annualized NOI. As of June 30, 2023, none of our tenants at our properties accounted for 10.0% or more of our total consolidated property portfolio’s annualized base rent or annualized NOI.

18. Per Share Data

Basic earnings (loss) per share for all periods presented are computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of our common stock outstanding during the period. Net income (loss) applicable to common stock is calculated as net income (loss) attributable to controlling interest less distributions allocated to participating securities of $962,000 and $1,498,000 for the three months ended June 30, 2023 and 2022, respectively, and $1,888,000 and $2,988,000 for the six months ended June 30, 2023 and 2022, respectively. Diluted earnings (loss) per share are computed based on the weighted average number of shares of our common stock and all potentially dilutive securities, if any. TBUs, nonvested shares of our RSAs and limited partnership units of our operating partnership are participating securities and give rise to potentially dilutive shares of our common stock.

As of June 30, 2023 and 2022, there were 188,368 and 221,740 nonvested shares, respectively, of our RSAs outstanding, but such shares were excluded from the computation of diluted earnings (loss) per share because such shares were anti-dilutive during these periods. As of both June 30, 2023 and 2022, there were 3,501,976 limited partnership units of our operating partnership outstanding, but such units were also excluded from the computation of diluted earnings (loss) per share because such units were anti-dilutive during these periods. As of June 30, 2023 and 2022, there were 163,133 and 19,200 nonvested time-based restricted stock units outstanding, respectively, but such units were excluded from the computation of diluted earnings (loss) per share because such restricted stock units were anti-dilutive during the period.

As of June 30, 2023, there were 70,751 nonvested performance-based restricted stock units outstanding, which were treated as contingently issuable shares pursuant to ASC Topic 718, Compensation — Stock Compensation. Such contingently issuable shares were excluded from the computation of diluted earnings (loss) per share because they were anti-dilutive during the period.

19. Subsequent Event

Interest Rate Swap

We, through our operating partnership, entered into an interest rate swap transaction, or the Swap, with Regions Bank with an effective date of August 8, 2023 and a maturity date of January 19, 2026. We entered into the Swap to mitigate the risk associated with the remaining $275,000,000 of our floating-rate term loan that was unhedged (without incurring substantial prepayment penalties or defeasance costs typically associated with fixed-rate indebtedness) under our existing 2022 Credit Facility. Beginning on September 1, 2023, we are required to make monthly fixed-rate payments at a rate of 4.41% while the counterparty is obligated to make monthly floating-rate payments based on Term SOFR, which was 5.30% as of August 8, 2023.

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

The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. and its subsidiaries, including American Healthcare REIT Holdings, LP, except where otherwise noted.

The following Management's Discussion and Analysis of Financial Condition and Results of Operations is intended to promote understanding of our results of operations and financial condition. Such discussion is provided as a supplement to, and should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2022 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or SEC, on March 17, 2023. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of June 30, 2023 and December 31, 2022, together with our results of operations and cash flows for the three and six months ended June 30, 2023 and 2022. Our results of operations and financial condition, as reflected in the accompanying condensed consolidated financial statements and related notes, are subject to management’s evaluation and interpretation of business conditions, changing capital market conditions, and other factors that could affect the ongoing viability of our tenants and residents.

Forward-Looking Statements

Certain statements contained in this report, other than historical facts, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995 (collectively with the “Securities Act and Exchange Act, or the Acts”). We intend for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in the Acts. Such forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “can,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” “continue,” “possible,” “initiatives,” “focus,” “seek,” “objective,” “goal,” “strategy,” “plan,” “potential,” “potentially,” “preparing,” “projected,” “future,” “long-term,” “once,” “should,” “could,” “would,” “might,” “uncertainty,” or other similar words. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date this report is filed with the SEC.

Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate, and beliefs of, and assumptions made by, our management and involve uncertainties that could significantly affect our financial results. Such statements include, but are not limited to: (i) statements about our plans, strategies, initiatives and prospects, including our proposed listing and future capital-raising initiatives and planned or future acquisitions or dispositions of properties and other assets; (ii) statements about the coronavirus, or COVID-19, pandemic, including its duration and potential or expected impact on our business and our view on forward trends as well as the termination of the federally declared public health emergency; and (iii) statements about our future results of operations, capital expenditures and liquidity. Such statements are subject to known and unknown risks and uncertainties, which could cause actual results to differ materially from those projected or anticipated, including, without limitation: changes in economic conditions generally and the real estate market specifically; the continuing adverse effects of the COVID-19 pandemic, including its effects on the healthcare industry, senior housing and skilled nursing facilities, or SNFs, and the economy in general; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs; the availability of capital; our ability to pay down, refinance, restructure or extend our indebtedness as it becomes due; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; changes in interest rates, including uncertainties about whether and when interest rates will continue to increase, and foreign currency risk; competition in the real estate industry; changes in GAAP policies and guidelines applicable to REITs; the success of our investment strategy; information technology security breaches; our ability to retain our executive officers and key employees; and unexpected labor costs and inflationary pressures. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and undue reliance should not be placed on such statements. We undertake no obligation to update any such statements that may become untrue because of subsequent events. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

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Overview and Background

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed REIT that owns a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, or MOBs, senior housing, SNFs, hospitals and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). Our healthcare facilities operated under a RIDEA structure include our senior housing operating properties, or SHOP, and our integrated senior health campuses. We have originated and acquired secured loans and may also originate and acquire other real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

Operating Partnership

We conduct substantially all of our operations through our operating partnership, and we are the sole general partner of our operating partnership. As of both June 30, 2023 and December 31, 2022, we owned 95.0% of the partnership units, or OP units, in our operating partnership, and the remaining 5.0% limited OP units, were owned by AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer and President, and Mathieu B. Streiff, one of our directors; Platform Healthcare Investor TII, LLC; Flaherty Trust; and a wholly owned subsidiary of Griffin Capital Company, LLC, or collectively, the NewCo Sellers. See Note 11, Redeemable Noncontrolling Interests, and Note 12, Equity — Noncontrolling Interests in Total Equity, to our accompanying condensed consolidated financial statements for a further discussion of the ownership in our operating partnership.

Public Offerings

As of June 30, 2023, after taking into consideration the Merger and the impact of the reverse stock split as discussed below, we had issued 65,445,557 shares for a total of $2,737,716,000 of common stock since February 26, 2014 in our initial public offerings and our distribution reinvestment plan, or DRIP, offerings (includes historical offering amounts sold by GAHR III and GAHR IV prior to the Merger).

On September 16, 2022, we filed with the SEC a Registration Statement on Form S-11 (File No. 333-267464), and on July 14, 2023, we filed with the SEC Amendment No. 1 to the Registration Statement on Form S-11, with respect to a proposed public offering by us of our shares of common stock in conjunction with a contemplated listing of our common stock on the New York Stock Exchange, or the Proposed Listing. Such registration statement and contemplated listing are not yet effective.

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On March 15, 2023, our board, at the recommendation of the audit committee of our board, which is comprised solely of independent directors, unanimously approved and established an updated estimated per share net asset value, or NAV, of our common stock of $31.40. We provide this updated estimated per share NAV annually to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231 with respect to customer account statements. The updated estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, 2022. The valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC. See our Current Report on Form 8-K filed with the SEC on March 17, 2023 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our updated estimated per share NAV.

Our Real Estate Investments Portfolio

Critical Accounting Estimates

Our accompanying condensed consolidated financial statements are prepared in conformity with GAAP, which requires management to make estimates and assumptions that affect the amounts reported in our financial statements and accompanying footnotes. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions. The complete listing of our Critical Accounting Estimates was previously disclosed in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023, and there have been no material changes to our Critical Accounting Estimates as disclosed therein, except as included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements.

Interim Unaudited Financial Data

For a discussion of interim unaudited financial data, see Note 2, Summary of Significant Accounting Policies — Interim Unaudited Financial Data, to our accompanying condensed consolidated financial statements. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023.

Acquisitions and Dispositions in 2023

For a discussion of our acquisitions and dispositions of investments in 2023, see Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements.

Factors Which May Influence Results of Operations

Other than the effects of inflation and the lasting effects of the COVID-19 pandemic discussed below, as well as other national economic conditions affecting real estate generally, or as otherwise disclosed in our risk factors, we are not aware of any material trends or uncertainties that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, disposition, management and operation of our properties. For a further discussion of these and other factors that could impact our future results or performance, see “Forward-Looking Statements” above and Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and those Risk Factors previously disclosed in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023.

COVID-19

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COVID-19 pandemic have subsided, the timing and extent of the economic recovery towards pre-pandemic norms is dependent upon many factors, including the emergence and severity of future COVID-19 variants, the effectiveness and frequency of booster vaccinations, the duration and implications of ongoing or future restrictions and safety measures, the availability of ongoing government financial support to our tenants, operating partners and managers and the overall pace of economic recovery, among others. As an owner and operator of healthcare facilities, we expect to continue to be adversely affected by the long-term effects of the COVID-19 pandemic for some period of time; however, it is not possible to predict the full extent of its future impact on us, the operations of our properties or the markets in which they are located, or the overall healthcare industry. COVID-19 is particularly dangerous among the senior population and results in heightened risk to our senior housing and SNFs, and we continue to work diligently to maintain aggressive protocols at such facilities as well as actively collaborate with our tenants, operating partners and managers to respond and take action to mitigate the impact of the COVID-19 pandemic.

The COVID-19 pandemic resulted in a significant decline in resident occupancy at our senior housing — leased facilities, SNFs, SHOP and integrated senior health campuses and an increase in COVID-19-related operating expenses. Among other things, due to the shortage of healthcare personnel, the pandemic caused higher labor costs that continue to adversely affect us, including those related to greater reliance on agency staffing and more costly short-term hires. Expenses also increased due to pandemic-related costs (e.g., heightened cleaning and sanitation protocols) and the ongoing inflationary environment. This has, in general, resulted in decreased net operating income, or NOI, and margin at these properties relative to pre-pandemic levels. Therefore, our focus at such properties continues to be on improving occupancy and managing operating expenses. While occupancy has generally been improving, it has not returned to pre-pandemic levels across all asset types, and labor costs remain elevated, as we have had difficulty filling open positions and experienced increased labor costs. The timing and extent of any further improvement in occupancy or relief from these labor pressures remains unclear.

As a result of the federal government's COVID-19 public health emergency declaration in January 2020 and its COVID-19 national emergency declaration in March 2020, certain federal and state pandemic-related relief measures, such as funding, procedural waivers and/or reimbursement increases, became available to us and some of our tenants and operators. These declarations expired on May 11, 2023 and April 10, 2023, respectively, and certain relief measures have been wound down and others are being phased out. It is unclear what pandemic related relief measures, including funding, waiver and reimbursement programs, that we and certain of our tenants and operators benefited from will continue to be available or the extent they will be available. The impact on individual skilled nursing facilities’ operators will vary, and therefore it is not possible to quantify the financial impact it will have on resident occupancies.

See the “Results of Operations” and “Liquidity and Capital Resources” sections below, for further discussion.

Inflation

During the six months ended June 30, 2023 and 2022, inflation has affected our operations. The annual rate of inflation in the United States was 3.2% in July 2023, as measured by the Consumer Price Index. We believe inflation has impacted our operations such that we have experienced, and continue to experience, increases in the cost of labor, services, energy and supplies, and therefore continued inflationary pressures on our integrated senior health campuses and SHOP could continue to impact our profitability in future periods. However, an inflationary environment has also impacted our operations at such properties in that we have the ability to seek increases in rent when relatively short-term resident leases expire (typically one year or less), which will improve our operating performance at such properties, as well as increase rent coverage and the stability of our real estate revenue in our senior housing — leased and SNF segments over time.

For properties that are not operated under a RIDEA structure, there are provisions in the majority of our tenant leases that help us mitigate the impact of inflation. These provisions include negotiated rental increases, which historically range from 2% to 3% per year, reimbursement billings for operating expense pass-through charges and real estate tax and insurance reimbursements. However, due to the long-term nature of existing leases, among other factors, the leases may not reset frequently enough to cover inflation.

In addition, inflation also caused an increase in the cost of our variable-rate debt due to rising interest rates. See Item 3. Quantitative and Qualitative Disclosures About Market Risk — Interest Rate Risk section below, for further discussion.

Scheduled Lease Expirations

Excluding our SHOP and integrated senior health campuses, as of June 30, 2023, our properties were 92.5% leased, and during the remainder of 2023, 4.0% of the leased GLA is scheduled to expire. Our leasing strategy focuses on negotiating

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renewals for leases scheduled to expire during the next twelve months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. As of June 30, 2023, our remaining weighted average lease term was 6.9 years, excluding our SHOP and integrated senior health campuses.

Our combined SHOP and integrated senior health campuses were 82.6% leased as of June 30, 2023. Substantially all of our leases with residents at such properties are for a term of one year or less.

Results of Operations

Comparison of Three and Six Months Ended June 30, 2023 and 2022

Our primary sources of revenue include rent generated by our leased, non-RIDEA properties, and resident fees and services revenue from our RIDEA properties. Our primary expenses include property operating expenses and rental expenses.

We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. As of June 30, 2023, we operated through six reportable business segments: integrated senior health campuses, MOBs, SNFs, SHOP, senior housing — leased and hospitals.

Except where otherwise noted, the changes in our consolidated results of operations for 2023 as compared to 2022 are primarily due to the adverse effect of inflation, which resulted in increases in the cost of labor, services, energy and supplies for the three and six months ended June 30, 2023 compared to the same period last year. There were also changes in our results of operations due to our acquisitions and dispositions of investments subsequent to June 30, 2022, as well as the transition of the operations of skilled nursing facilities within our Central Wisconsin Senior Care Portfolio on March 1, 2023 to a RIDEA structure, which facilities are included within our SHOP segment as of June 30, 2023. See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions during 2023. As of June 30, 2023 and 2022, we owned and/or operated the following types of properties (dollars in thousands):


	June 30,
	2023					2022
	Number of Buildings/ Campuses	Aggregate Contract Purchase Price		Leased %		Number of Buildings/ Campuses	Aggregate Contract Purchase Price		Leased %
Integrated senior health campuses	123	$	1,910,251	(1)		122	$	1,865,787	(1)
MOBs	93	1,318,915		89.7	%	105	1,378,995		90.3	%
SHOP	47	745,567		(2)		47	706,871		(2)
Senior housing — leased	20	179,285		100	%	20	179,285		100	%
SNFs	15	223,500		100	%	17	249,200		100	%
Hospitals	2	139,780		100	%	2	139,780		100	%
Total/weighted average(3)	300	$	4,517,298	92.5	%	313	$	4,519,918	93.1	%

___________

(1)The leased percentage for the resident units of our integrated senior health campuses was 83.9% and 81.7% as of June 30, 2023 and 2022, respectively.

(2)The leased percentage for the resident units of our SHOP was 78.6% and 73.7% as of June 30, 2023 and 2022, respectively.

(3)Leased percentage includes all third-party leased space at our non-RIDEA properties (including master leases), and excludes our SHOP and integrated senior health campuses where leased percentage represents resident occupancy of the available units/beds therein.

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Revenues and Grant Income

Our primary sources of revenue include resident fees and services revenue generated by our RIDEA properties and rent from our leased, non-RIDEA properties. For the three and six months ended June 30, 2023 and 2022, resident fees and services revenue primarily consisted of rental fees related to resident leases, extended health care fees and other ancillary services, and real estate revenue primarily consisted of base rent and expense recoveries. The amount of revenues generated by our RIDEA properties depends principally on our ability to maintain resident occupancy rates. The amount of revenues generated by our non-RIDEA properties is dependent on our ability to maintain tenant occupancy rates of currently leased space and to lease available space at the then existing rental rates. We also receive grant income. Revenues and grant income by reportable segment consisted of the following for the periods then ended (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Resident Fees and Services Revenue
Integrated senior health campuses	$	362,856	$	287,582	$	724,626	$	568,594
SHOP	47,766		38,643		94,626		76,605
Total resident fees and services revenue	410,622		326,225		819,252		645,199
Real Estate Revenue
MOBs	36,640		36,833		74,123		74,670
SNFs	6,090		6,599		4,458		12,992
Senior housing — leased	5,392		5,262		10,668		10,560
Hospitals	2,446		2,411		4,915		4,826
Total real estate revenue	50,568		51,105		94,164		103,048
Grant Income
Integrated senior health campuses	6,381		10,969		6,381		16,065
SHOP	—		—		—		118
Total grant income	6,381		10,969		6,381		16,183
Total revenues and grant income	$	467,571	$	388,299	$	919,797	$	764,430

Resident Fees and Services Revenue

For our integrated senior health campuses segment, we experienced an increase in resident fees and services revenue of $40,636,000 and $83,754,000, respectively, for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to: (i) our acquisition of the remaining 50.0% interest in a privately held company, RHS Partners, LLC, or RHS, on August 1, 2022, which owns and/or operates 16 integrated senior health campuses located in Indiana; (ii) improved resident occupancy and higher resident fees as a result of an increase in billing rates; and (iii) an increase of $12,259,000 and $27,224,000 for the three and six months ended June 30, 2023, respectively, due to the expansion of our customer base, expansion of services offered and an increase in billing rates for such services at an ancillary business unit within Trilogy Investors, LLC, or Trilogy. Such amounts were partially offset by a decrease in total resident fees and services revenue of $4,479,000 and $8,464,000 for the three and six months ended June 30, 2023, respectively, due to dispositions within our integrated senior health campuses segment during the third and fourth quarter of 2022.

For our SHOP segment, we experienced an increase in resident fees and services revenue of $6,721,000 and $13,557,000, respectively, for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to our acquisition of a portfolio of seven senior housing facilities in Texas within our SHOP segment on December 5, 2022, as well as an increase of $3,334,000 and $4,722,000, respectively, for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023. The remaining increase in resident fees and services revenue for our SHOP segment was primarily attributable to improved resident occupancy and higher resident fees as a result of an increase in billing rates. Such amounts were partially offset by a decrease of $2,782,000 and $4,094,000, respectively, for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, due to real estate dispositions within our SHOP segment during the three months ended December 31, 2022 and the six months ended June 30, 2023.

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Real Estate Revenue

For the three and six months ended June 30, 2023, we experienced a decrease in real estate revenue for our SNFs segment of $444,000 and $8,233,000, respectively, due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023, which amount predominantly included the full amortization of $8,073,000 of above-market leases. We also experienced a net decrease in real estate revenue for our MOBs segment for both the three and six months ended June 30, 2023, primarily due to real estate dispositions of MOBs during the fourth quarter of 2022 and the second quarter of 2023, which was partially offset by fixed rent escalations.

Grant Income

For the three months ended June 30, 2023 and 2022, we recognized $6,381,000 and $10,969,000, respectively, of grant income at our integrated senior health campuses related to government grants received through the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, economic stimulus programs. For the six months ended June 30, 2023 and 2022, we recognized $6,381,000 and $16,183,000, respectively, of grant income at our integrated senior health campuses and SHOP related to government grants received through the CARES Act economic stimulus programs. As of April 2023, the federal government’s COVID-19 public health emergency declaration expired and certain relief measures have been wound down and others are being phased out.

Property Operating Expenses and Rental Expenses

Property operating expenses and property operating expenses as a percentage of resident fees and services revenue and grant income, as well as rental expenses and rental expenses as a percentage of real estate revenue, by reportable segment consisted of the following for the periods then ended (dollars in thousands):


	Three Months Ended June 30,								Six Months Ended June 30,
	2023				2022				2023				2022
Property Operating Expenses
Integrated senior health campuses	$	328,696	89.0	%	$	258,934	86.7	%	$	657,057	89.9	%	$	512,084	87.6	%
SHOP	43,853		91.8	%	37,125		96.1	%	85,638		90.5	%	71,135		92.7	%
Total property operating expenses	$	372,549	89.3	%	$	296,059	87.8	%	$	742,695	90.0	%	$	583,219	88.2	%

Rental Expenses
MOBs	$	13,927	38.0	%	$	13,791	37.4	%	$	28,335	38.2	%	$	28,104	37.6	%
SNFs	378		6.2	%	521		7.9	%	847		19.0	%	1,207		9.3	%
Senior housing — leased	229		4.2	%	212		4.0	%	428		4.0	%	391		3.7	%
Hospitals	119		4.9	%	139		5.8	%	238		4.8	%	248		5.1	%
Total rental expenses	$	14,653	29.0	%	$	14,663	28.7	%	$	29,848	31.7	%	$	29,950	29.1	%

Integrated senior health campuses and SHOP typically have a higher percentage of direct operating expenses to revenue than MOBs, hospitals, and leased senior housing and SNFs due to the nature of RIDEA-type facilities where we conduct day-to-day operations. For the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, the increase in total property operating expenses for our integrated senior health campuses segment was predominately due to an increase of $40,253,000 and $81,257,000, respectively, in property operating expenses attributable to our acquisition of the 50.0% interest in RHS on August 1, 2022. Further, we experienced higher operating expenses as a result of increased occupancy and an increase of $11,993,000 and $27,198,000 in operating expenses for the three and six months ended June 30, 2023, respectively, within Trilogy’s ancillary business unit due to higher labor costs associated with the expansion of services offered and inflation impacting the cost of goods sold. Such amounts were partially offset by a decrease in total property operating expenses of $3,239,000 and $6,459,000, respectively, due to dispositions within our integrated senior health campuses segment during the third and fourth quarters of 2022.

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For the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, total property operating expenses for our SHOP segment primarily increased due to: (i) an increase of $5,707,000 and $10,889,000, respectively, due to the acquisition of a portfolio of seven senior housing facilities within our SHOP segment in Texas on December 5, 2022; (ii) an increase of $4,049,000 and $5,261,000, respectively, due to transitioning the SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure in March 2023; (iii) higher operating expenses as a result of increased occupancy; and (iv) higher labor costs due to an increase in employee wages. Such amounts were partially offset by a decrease in total property operating expenses for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, of $3,343,000 and $4,717,000, respectively, due to real estate dispositions within our SHOP segment during the three months ended December 31, 2022 and during the six months ended June 30, 2023.

General and Administrative

For the three months ended June 30, 2023, general and administrative expenses were $11,774,000 compared to $10,928,000 for the three months ended June 30, 2022. The increase in general and administrative expenses of $846,000 was primarily the result of an increase of $592,000 in stock compensation expenses.

For the six months ended June 30, 2023, general and administrative expenses were $24,827,000 compared to $22,047,000 for the six months ended June 30, 2022. The increase in general and administrative expenses of $2,780,000 was primarily the result of an increase of: (i) $1,247,000 in professional fees and legal fees; and (ii) $887,000 in stock compensation expenses.

Business Acquisition Expenses

For the three and six months ended June 30, 2023, we recorded business acquisition expenses of $888,000 and $1,220,000, respectively, primarily incurred in pursuit of real estate-related investment opportunities. For the three and six months ended June 30, 2022, we recorded business acquisition expenses of $1,757,000 and $1,930,000, respectively, primarily incurred in connection with $938,000 in transaction costs related to the acquisition of a pharmaceutical business in April 2022 and $596,000 and $719,000, respectively, of costs incurred in the pursuit of real estate investments that did not close. See Note 3, Real Estate Investments, Net and Business Combinations — Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisition of a pharmaceutical business.

Depreciation and Amortization

For the three months ended June 30, 2023 and 2022, depreciation and amortization was $44,701,000 and $39,971,000, respectively, which primarily consisted of depreciation on our operating properties of $37,139,000 and $34,328,000, respectively, and amortization of our identified intangible assets of $6,852,000 and $5,008,000, respectively. For the six months ended June 30, 2023 and 2022, depreciation and amortization was $89,371,000 and $82,282,000, respectively, which primarily consisted of depreciation on our operating properties of $73,038,000 and $68,750,000, respectively, and amortization of our identified intangible assets of $14,840,000 and $12,133,000, respectively.

For the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, the increase in depreciation and amortization of $4,730,000 and $7,089,000, respectively, was primarily due to: (i) an increase in depreciation and amortization within our SHOP segment and our integrated senior health campuses segment as a result of acquisitions that occurred subsequent to June 30, 2022, as well as development and capital expenditures since June 30, 2022; (ii) the full amortization of $885,000 of in-place leases related to transition of SNFs within the Central Wisconsin Senior Care Portfolio to a RIDEA structure; and (iii) the full amortization of $529,000 of depreciable assets as a result of storm damage affecting our properties in Texas and Louisiana. Such amounts were partially offset by a decrease in depreciation and amortization as a result of real estate dispositions within our SHOP segment and our MOBs segment subsequent to June 30, 2022.

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Interest Expense

Interest expense, including gain or loss in fair value of derivative financial instruments, consisted of the following for the periods presented (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Interest expense:
Lines of credit and term loan and derivative financial instruments	$	24,420	$	9,027	$	47,689	$	16,576
Mortgage loans payable	13,935		9,608		27,095		19,152
Amortization of deferred financing costs:
Lines of credit and term loan	949		724		1,805		1,533
Mortgage loans payable	559		492		1,136		933
Amortization of debt discount/premium, net	890		347		1,775		330
Gain in fair value of derivative financial instruments	(4,993)		—		(4,798)		(500)
(Gain) loss on extinguishments of debt	—		(181)		—		4,410
Interest on finance lease liabilities	66		66		157		140
Interest expense on financing obligations and other liabilities	171		262		344		596
Total	$	35,997	$	20,345	$	75,203	$	43,170

The increase in total interest expense for the three and six months ended June 30, 2023, as compared to the three and six months ended June 30, 2022, was primarily due to an increase in debt balances since June 30, 2022 and a higher weighted average effective interest rate on our variable debt, which was 7.25% and 3.59% as of June 30, 2023 and 2022, respectively. Such increases in total interest expense for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, were primarily offset by: (i) a $4,298,000 increase in gain in fair value of our derivative financial instrument; (ii) $895,000 of net proceeds from our interest rate swap; and (iii) a $4,410,000 decrease in loss on extinguishments of debt. See Note 7, Mortgage Loans Payable, Net, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for a further discussion on debt extinguishments.

Gain or Loss on Dispositions of Real Estate Investments

For the three months ended June 30, 2023, we recognized an aggregate net loss on dispositions of our real estate investments of $2,072,000 primarily related to the sale of four SHOP within our Central Florida Senior Housing Portfolio and 11 MOBs. For the six months ended June 30, 2023, we recognized an aggregate net loss on dispositions of our real estate investments of $2,204,000 primarily related to the sale of five SHOP within our Central Florida Senior Housing Portfolio and 11 MOBs. See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for further discussion.

For the six months ended June 30, 2022, we recognized a gain on dispositions of our real estate investments of $683,000 related to the sale of 77.0% ownership interests in several real estate assets for development in February 2022, within our integrated senior health campuses segment.

Impairment of Real Estate Investments

For both the three and six months ended June 30, 2023, we did not recognize impairment charges on real estate investments. For both the three and six months ended June 30, 2022, we recognized an impairment charge of $17,340,000 on four of our SHOP within the Central Florida Senior Housing Portfolio. Such SHOP were subsequently disposed in the fourth quarter of 2022 and first quarter of 2023. See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for further discussion.

Gain on Re-measurement of Previously Held Equity Interest

For the six months ended June 30, 2023, we recognized a $726,000 gain on re-measurement of the fair value of our previously held equity interest in Memory Care Partners, LLC, or MCP. For the six months ended June 30, 2022, we did not recognize a gain on re-measurement of previously held equity interest. See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for further discussion.

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Liquidity and Capital Resources

Our principal sources of liquidity are cash flows from operations, borrowings under our lines of credit and proceeds from dispositions of real estate investments. For the next 12 months, our principal liquidity needs are to: (i) fund property operating expenses and general and administrative expenses; (ii) meet our debt service requirements (including principal and interest); (iii) fund development activities and capital expenditures; and (iv) make distributions to our stockholders, as required for us to continue to qualify as a REIT. We believe that the sources of liquidity described above will be sufficient to satisfy our cash requirements for the next 12 months and the longer term thereafter. We do not have any material off-balance sheet arrangements that we expect would materially affect our liquidity and capital resources.

Material Cash Requirements

Capital Improvement Expenditures

A capital plan for each investment is established upon acquisition that contemplates the estimated capital needs of that investment, including costs of refurbishment, tenant improvements or other major capital expenditures. The capital plan also sets forth the anticipated sources of the necessary capital, which may include operating cash generated by the investment, capital reserves, a line of credit or other loan established with respect to the investment, other borrowings or additional equity investments from us and joint venture partners. The capital plan for each investment is adjusted through ongoing, regular reviews of our portfolio or as necessary to respond to unanticipated additional capital needs. As of June 30, 2023, we had $16,556,000 of restricted cash in loan impounds and reserve accounts to fund a portion of such capital expenditures. Based on the budget for the properties we owned as of June 30, 2023, we estimated that unspent discretionary expenditures for capital and tenant improvements as of such date are equal to $69,420,000 for the remaining six months of 2023, although actual expenditures are dependent on many factors which are not presently known.

Contractual Obligations

The following table provides information with respect to: (i) the maturity and scheduled principal repayment of our secured mortgage loans payable and our lines of credit and term loan; (ii) interest payments on our mortgage loans payable and lines of credit and term loan, excluding the effect of our interest rate swap (for information on our interest rate swap, see Note 9, Derivative Financial Instrument, to our accompanying condensed consolidated financial statements); (iii) ground and other lease obligations; and (iv) financing obligations as of June 30, 2023 (in thousands):


	Payments Due by Period
	2023		2024-2025		2026-2027		Thereafter		Total
Principal payments — fixed-rate debt	$	9,821	$	210,014	$	190,394	$	519,212	$	929,441
Interest payments — fixed-rate debt	15,615		53,944		37,574		237,868		345,001
Principal payments — variable-rate debt	370,478		288,987		926,765		27,292		1,613,522
Interest payments — variable-rate debt (based on rates in effect as of June 30, 2023)	50,001		140,744		45,148		6,491		242,384
Ground and other lease obligations	19,240		75,032		75,146		229,084		398,502
Financing obligations	27,505		5,228		3,732		14,963		51,428
Total	$	492,660	$	773,949	$	1,278,759	$	1,034,910	$	3,580,278

Distributions and Share Repurchases

For information on distributions, see the “Distributions” section below. For information on our share repurchase plan, see Note 12, Equity — Share Repurchase Plan, to our accompanying condensed consolidated financial statements.

Credit Facilities

We are party to a credit agreement, as amended, with an aggregate maximum principal amount up to $1,050,000,000, or the 2022 Credit Facility. In addition, we are party to an agreement, as amended, regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $400,000,000, or the 2019 Trilogy Credit Facility, which is scheduled to mature on September 5, 2023. See Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements for further discussion. We intend to satisfy the conditions pursuant to the 2019 Trilogy Credit Facility and pay the required extension fee in order to exercise our option to extend the maturity date for one 12-month period.

As of June 30, 2023, our aggregate borrowing capacity under the 2022 Credit Facility and the 2019 Trilogy Credit Facility was $1,450,000,000. As of June 30, 2023, our aggregate borrowings outstanding under our credit facilities was $1,282,534,000 and we had an aggregate of $167,466,000 available on such facilities.

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Cash Flows

The following table sets forth changes in cash flows (in thousands):


	Six Months Ended June 30,
	2023		2022
Cash, cash equivalents and restricted cash — beginning of period	$	111,906	$	125,486
Net cash provided by operating activities	43,642		56,138
Net cash provided by (used in) investing activities	9,687		(97,364)
Net cash (used in) provided by financing activities	(71,575)		19,924
Effect of foreign currency translation on cash, cash equivalents and restricted cash	90		(8)
Cash, cash equivalents and restricted cash — end of period	$	93,750	$	104,176

The following summary discussion of our changes in our cash flows is based on our accompanying condensed consolidated statements of cash flows and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below.

Operating Activities

For the six months ended June 30, 2023 and 2022, cash flows provided by operating activities were primarily related to the cash flows provided by our property operations, offset by payments of general and administrative expenses and interest payments on our outstanding indebtedness. In general, cash flows from operating activities are affected by the timing of cash receipts and payments. See the “Results of Operations” section above for further discussion.

Investing Activities

For the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, the change from net cash used in investing activities to net cash provided by investing activities was primarily due to a $73,444,000 increase in proceeds from dispositions of real estate investments and a $62,792,000 decrease in cash paid to acquire real estate investments. Such amounts were partially offset by a $16,566,000 increase in development and capital expenditures and an $11,800,000 increase in investments in unconsolidated entities. See Note 3, Real Estate Investments, Net and Business Combinations, to our accompanying condensed consolidated financial statements for a further discussion of our acquisitions and dispositions.

Financing Activities

For the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, the change from net cash provided by financing activities to net cash used in financing activities was primarily due to a decrease in net borrowings under our mortgage loans payable of $43,100,000 and a decrease in net borrowings under our lines of credit and term loans of $41,100,000 and a $15,954,000 payment to redeem a portion of the equity interests owned by members of Trilogy Investors, LLC management. Such amounts were partially offset by a $10,418,000 decrease in repurchases of our common stock.

Distributions

Our board authorized record date distributions to our Class T common stockholders and Class I common stockholders of record as of each monthly record date from January 2022 through June 2022, equal to $0.133333332 per share of our common stock, which was equal to an annualized distribution rate of $1.60 per share. The distributions were paid in cash or shares of our common stock pursuant to the DRIP offering. Effective beginning with the third quarter of 2022, distributions, if any, were or shall be authorized by our board on a quarterly basis, in such amounts as our board determined or shall determine, and each quarterly record date for the purposes of such distributions was or shall be determined and authorized by our board in the last month of each calendar quarter until such time as our board changes our distribution policy. Our board authorized a quarterly distribution to our Class T common stockholders and Class I common stockholders of record as of the close of business on September 29, 2022. Such quarterly distribution was equal to $0.40 per share of our common stock, which was equal to an annualized distribution rate of $1.60 per share and paid in cash or shares of our common stock pursuant to the DRIP offering, only from legally available funds.

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On November 14, 2022, our board suspended the DRIP offering beginning with distributions declared for the quarter ended December 31, 2022. As a result of the suspension of the DRIP offering, unless and until our board reinstates the DRIP offering, stockholders who are current participants in the DRIP will be paid distributions in cash. Our board authorized a quarterly distribution to our Class T common stockholders and Class I common stockholders of record as of the close of business on December 29, 2022. Such quarterly distribution was equal to $0.40 per share of our common stock, which was equal to an annualized distribution rate of $1.60 per share and paid in cash, only from legally available funds.

In response to interest rates that have increased drastically since the beginning of 2022, and greater uncertainty surrounding further interest rate movements, our board elected to reduce our quarterly distribution to $0.25 per share in order to preserve our liquidity, better align distributions with available cash flows and position our company for its long-term strategic goals. Therefore, our board authorized a quarterly distribution equal to $0.25 per share to our Class T common stockholders and Class I common stockholders of record as of the close of business on each of April 4, 2023 and June 28, 2023, which distributions were paid on April 18, 2023 and July 13, 2023, respectively. Such quarterly distributions were equal to an annualized distribution rate of $1.00 per share and paid in cash, only from legally available funds. See our Current Reports on Form 8-K filed with the SEC on March 17, 2023 and June 16, 2023 for more information.

The following tables reflect distributions we paid for the six months ended June 30, 2023 and 2022, along with the amount of distributions reinvested pursuant to the DRIP and the sources of distributions as compared to cash flows from operations or funds from operations attributable to controlling interest, or FFO, a non-GAAP financial measure (dollars in thousands):


	Six Months Ended June 30,
	2023				2022
Distributions paid in cash	$	43,086			$	30,247
Distributions reinvested	—				22,447
	$	43,086			$	52,694
Sources of distributions:
Cash flows from operations	$	43,086	100	%	$	52,694	100	%
Proceeds from borrowings	—		—		—		—

	$	43,086	100	%	$	52,694	100	%


	Six Months Ended June 30,
	2023				2022
Distributions paid in cash	$	43,086			$	30,247
Distributions reinvested	—				22,447
	$	43,086			$	52,694
Sources of distributions:
FFO attributable to controlling interest	$	39,265	91.1	%	$	52,694	100	%
Proceeds from borrowings	3,821		8.9		—		—

	$	43,086	100	%	$	52,694	100	%

As of June 30, 2023, any distributions of amounts in excess of our current and accumulated earnings and profits have resulted in a return of capital to our stockholders, and some portion of a distribution to our stockholders may have been paid from borrowings. For a further discussion of FFO, including a reconciliation of our GAAP net loss to FFO, see “Funds from Operations and Normalized Funds from Operations” below.

Financing

We anticipate that our overall leverage will approximate 50.0% of the combined fair market value of all of our properties, and other real estate-related investments, as determined at the end of each calendar year. For these purposes, the market value of each asset will be equal to the contract purchase price paid for the asset or, if the asset was appraised subsequent to the date of purchase, then the market value will be equal to the value reported in the most recent independent appraisal of the asset. Our policies do not limit the amount we may borrow with respect to any individual investment. As of June 30, 2023, our aggregate borrowings were 53.6% of the combined market value of all of our real estate and real estate-related investments.

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Mortgage Loans Payable, Net

For a discussion of our mortgage loans payable, see Note 7, Mortgage Loans Payable, Net, to our accompanying condensed consolidated financial statements.

Lines of Credit and Term Loan

For a discussion of our lines of credit and term loan, see Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

REIT Requirements

In order to maintain our qualification as a REIT for U.S. federal income tax purposes, we are required to distribute to our stockholders a minimum of 90.0% of our REIT taxable income. Existing Internal Revenue Service, or IRS, guidance includes a safe harbor pursuant to which publicly offered REITs can satisfy the distribution requirement by distributing a combination of cash and stock to stockholders. In general, to qualify under the safe harbor, each stockholder must elect to receive either cash or stock, and the aggregate cash component of the distribution to stockholders must represent at least 20.0% of the total distribution. In the event that there is a shortfall in net cash available due to factors including, without limitation, the timing of such distributions or the timing of the collection of receivables, we may seek to obtain capital to make distributions by means of secured and unsecured debt financing through one or more unaffiliated third parties. We may also make distributions with cash from capital transactions including, without limitation, the sale of one or more of our properties.

Commitments and Contingencies

For a discussion of our commitments and contingencies, see Note 10, Commitments and Contingencies, to our accompanying condensed consolidated financial statements.

Debt Service Requirements

A significant liquidity need is the payment of principal and interest on our outstanding indebtedness. As of June 30, 2023, we had $1,260,429,000 of fixed-rate and variable-rate mortgage loans payable outstanding secured by our properties. As of June 30, 2023, we had $1,282,534,000 outstanding and $167,466,000 remained available under our lines of credit. The weighted average effective interest rate on our outstanding debt, factoring in our interest rate swap, was 5.69% per annum as of June 30, 2023. See Note 7, Mortgage Loans Payable, Net, and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

We are required by the terms of certain loan documents to meet various financial and non-financial covenants, such as leverage ratios, net worth ratios, debt service coverage ratios and fixed charge coverage ratios. As of June 30, 2023, we were in compliance with all such covenants and requirements on our mortgage loans payable and our lines of credit and term loan. If any future covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur. However, there can be no assurances that management will be able to effectively achieve such plans.

Funds from Operations and Normalized Funds from Operations

Due to certain unique operating characteristics of real estate companies, the National Association of Real Estate Investment Trusts, or NAREIT, an industry trade group, has promulgated a measure known as funds from operations, a non-GAAP financial measure, which we believe to be an appropriate supplemental performance measure to reflect the operating performance of a REIT. The use of funds from operations is recommended by the REIT industry as a supplemental performance measure, and our management uses FFO to evaluate our performance over time. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on funds from operations approved by the Board of Governors of NAREIT, or the White Paper. The White Paper defines funds from operations as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of certain real estate assets, gains or losses upon consolidation of a previously held equity interest, and impairment writedowns of certain real estate assets and investments, plus depreciation and amortization related to real estate, and after adjustments for unconsolidated partnerships and joint ventures. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that impairments are based on estimated future undiscounted cash flows. Adjustments for unconsolidated partnerships and joint ventures are calculated to reflect funds from operations. Our FFO calculation complies with NAREIT’s policy described above.

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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 and impairments, provides a further understanding of our operating performance to investors, industry analysts and to our 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 (loss).

We define normalized FFO attributable to controlling interest, or NFFO, as FFO further adjusted for the following items included in the determination of GAAP net income (loss): expensed acquisition fees and costs, which we refer to as business acquisition expenses; amounts relating to changes in deferred rent and amortization of above- and below-market leases (which are adjusted in order to reflect such payments from a GAAP accrual basis); the non-cash impact of changes to our equity instruments; non-cash or non-recurring income or expense; the non-cash effect of income tax benefits or expenses; capitalized interest; impairment of goodwill; amortization of closing costs on debt investments; mark-to-market adjustments included in net income (loss); gains or losses included in net income (loss) 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 after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect NFFO on the same basis.

However, FFO and NFFO should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) as an indicator of our operating performance or GAAP cash flows from operations as an indicator of our liquidity. 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 NFFO measures and the adjustments to GAAP in calculating FFO and NFFO. Presentation of this information is intended to provide useful information to management, investors and industry analysts as they compare the operating performance used by the REIT industry, although it should be noted that not all REITs calculate funds from operations and normalized funds from operations the same way, so comparisons with other REITs may not be meaningful. None of the SEC, NAREIT, or any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or NFFO. In the future, the SEC, NAREIT, or another regulatory body may decide to standardize the allowable adjustments across the REIT industry and we would have to adjust our calculation and characterization of FFO.

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The following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to FFO and NFFO for the periods presented below (in thousands except for share and per share amounts):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(11,867)	$	(15,542)	$	(39,482)	$	(16,439)

Depreciation and amortization related to real estate — consolidated properties	44,663		39,939		89,295		82,250
Depreciation and amortization related to real estate — unconsolidated entities	95		420		158		846
Impairment of real estate investments — consolidated properties	—		17,340		—		17,340

Loss (gain) on dispositions of real estate investments — consolidated properties	2,072		73		2,204		(683)
Net (income) loss attributable to noncontrolling interests	(316)		(1,768)		1,427		(3,827)
Gain on re-measurement of previously held equity interest	—		—		(726)		—
Depreciation, amortization, impairments, gain/loss on dispositions and gain on re-measurement — noncontrolling interests	(7,073)		(7,744)		(13,611)		(14,153)
FFO attributable to controlling interest	$	27,574	$	32,718	$	39,265	$	65,334

Business acquisition expenses	$	888	$	1,757	$	1,220	$	1,930
Amortization of above- and below-market leases	455		699		9,130		1,204
Amortization of closing costs	68		58		133		114
Change in deferred rent	(180)		(1,278)		(240)		(2,304)

Non-cash impact of changes to equity instruments	1,593		1,001		2,665		1,779
Capitalized interest	(54)		(14)		(80)		(78)

(Gain) loss on debt extinguishments	—		(181)		—		4,410
Gain in fair value of derivative financial instruments	(4,993)		—		(4,798)		(500)
Foreign currency (gain) loss	(1,068)		3,607		(2,076)		4,994
Adjustments for unconsolidated entities	(179)		70		(253)		168
Adjustments for noncontrolling interests	43		(680)		(590)		(1,503)
NFFO attributable to controlling interest	$	24,147	$	37,757	$	44,376	$	75,548
Weighted average Class T and Class I common shares outstanding — basic and diluted	66,033,345		65,754,423		66,029,779		65,692,159
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted	$	(0.19)	$	(0.26)	$	(0.58)	$	(0.31)
FFO per Class T and Class I common share attributable to controlling interest — basic and diluted	$	0.42	$	0.50	$	0.59	$	0.99
NFFO per Class T and Class I common share attributable to controlling interest — basic and diluted	$	0.37	$	0.57	$	0.67	$	1.15

Net Operating Income

NOI is a non-GAAP financial measure that is defined as net income (loss), computed in accordance with GAAP, generated from properties before general and administrative expenses, business acquisition expenses, depreciation and amortization, interest expense, gain or loss on dispositions, income or loss from unconsolidated entities, gain on re-measurement of previously held equity interest, foreign currency gain or loss, other income and income tax benefit or expense.

NOI is not equivalent to our net income (loss) as determined under GAAP and may not be a useful measure in measuring operational income or cash flows. Furthermore, NOI should not be considered as an alternative to net income (loss) as an indication of our operating performance or as an alternative to cash flows from operations as an indication of our liquidity. NOI should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income (loss) or in its applicability in evaluating our operating performance. Investors are also cautioned that NOI should only be used to assess our operational performance in periods in which we have not incurred or accrued any business acquisition expenses.

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We believe that NOI is an appropriate supplemental performance measure to reflect the performance of our operating assets because NOI excludes certain items that are not associated with the operations of the properties. We believe that NOI is a widely accepted measure of comparative operating performance in the real estate community. However, our use of the term NOI may not be comparable to that of other real estate companies as they may have different methodologies for computing this amount.

To facilitate understanding of this financial measure, the following is a reconciliation of net income or loss, which is the most directly comparable GAAP financial measure, to NOI for the periods presented below (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Net loss	$	(11,867)	$	(15,542)	$	(39,482)	$	(16,439)
General and administrative	11,774		10,928		24,827		22,047
Business acquisition expenses	888		1,757		1,220		1,930
Depreciation and amortization	44,701		39,971		89,371		82,282
Interest expense	35,997		20,345		75,203		43,170
Loss (gain) on dispositions of real estate investments	2,072		73		2,204		(683)
Impairment of real estate investments	—		17,340		—		17,340
Loss (income) from unconsolidated entities	113		(638)		419		(2,024)
Gain on re-measurement of previously held equity interest	—		—		(726)		—
Foreign currency (gain) loss	(1,068)		3,607		(2,076)		4,994
Other income	(2,589)		(469)		(4,197)		(1,729)
Income tax expense	348		205		491		373
Net operating income	$	80,369	$	77,577	$	147,254	$	151,261

Subsequent Event

For a discussion of our subsequent event, see Note 19, Subsequent Event, to our accompanying condensed consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk. There were no material changes in our market risk exposures, or in the methods we use to manage market risk, from those that were provided for in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023.

Interest Rate Risk

We are exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire and develop properties and other investments. Our interest rate risk is monitored using a variety of techniques. Our interest rate risk management objectives are to limit the impact of interest rate increases on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk. To achieve our objectives, we may borrow or lend at fixed or variable rates.

We have entered into, and may continue to enter into, derivative financial instruments such as interest rate swaps and interest rate caps in order to mitigate our interest rate risk on a related financial instrument, and for which we have not and may not elect hedge accounting treatment. We did not elect to apply hedge accounting treatment to these derivatives; therefore, changes in the fair value of interest rate derivative financial instruments were recorded as a component of interest expense in gain or loss in fair value of derivative financial instruments in our accompanying condensed consolidated statements of operations and comprehensive loss. As of June 30, 2023, our interest rate swap is recorded in other assets, net in our accompanying condensed consolidated balance sheet at its fair value of $4,798,000. We do not enter into derivative transactions for speculative purposes. For information on our interest rate swaps, see Note 9, Derivative Financial Instrument, and Note 19, Subsequent Event — Interest Rate Swap, to our accompanying condensed consolidated financial statements.

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As of June 30, 2023, the table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes, excluding the effect of our interest rate swap (dollars in thousands):


	Expected Maturity Date
	2023			2024			2025			2026			2027			Thereafter			Total			Fair Value
Assets
Debt security held-to-maturity	$	—		$	—		$	93,433		$	—		$	—		$	—		$	93,433		$	92,998
Weighted average interest rate on maturing fixed-rate debt security	—		%	—		%	4.24		%	—		%	—		%	—		%	4.24		%	—
Liabilities
Fixed-rate debt — principal payments	$	9,821		$	74,086		$	135,928		$	155,560		$	34,834		$	519,212		$	929,441		$	760,299
Weighted average interest rate on maturing fixed-rate debt	3.24		%	3.57		%	4.29		%	2.99		%	3.33		%	3.14		%	3.37		%	—
Variable-rate debt — principal payments	$	370,478		$	258,824		$	30,163		$	376,576		$	550,189		$	27,292		$	1,613,522		$	1,620,218
Weighted average interest rate on maturing variable-rate debt (based on rates in effect as of June 30, 2023)	7.94		%	7.73		%	7.57		%	6.85		%	6.80		%	7.30		%	7.25		%	—

Debt Security Investment, Net

As of June 30, 2023, the net carrying value of our debt security investment was $84,933,000. As we expect to hold our debt security investment to maturity and the amounts due under such debt security investment would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our debt security investment, would have a significant impact on our operations. See Note 13, Fair Value Measurements, to our accompanying condensed consolidated financial statements, for a discussion of the fair value of our investment in a held-to-maturity debt security. The effective interest rate on our debt security investment was 4.24% per annum as of June 30, 2023.

Mortgage Loans Payable, Net and Lines of Credit and Term Loan

Mortgage loans payable were $1,260,429,000 ($1,237,565,000, net of discount/premium and deferred financing costs) as of June 30, 2023. As of June 30, 2023, we had 71 fixed-rate mortgage loans payable and 12 variable-rate mortgage loans payable with effective interest rates ranging from 2.21% to 8.01% per annum and a weighted average effective interest rate of 4.51%. In addition, as of June 30, 2023, we had $1,282,534,000 ($1,281,683,000, net of deferred financing fees) outstanding under our lines of credit and term loan, at a weighted average interest rate of 7.13% per annum.

As of June 30, 2023, the weighted average effective interest rate on our outstanding debt, factoring in our fixed-rate interest rate swap, was 5.69% per annum. An increase in the variable interest rate on our variable-rate mortgage loans payable and lines of credit and term loan constitutes a market risk. As of June 30, 2023, a 0.50% increase in the market rates of interest would have increased our overall annualized interest expense on all of our other variable-rate mortgage loans payable and lines of credit and unhedged term loan by $6,786,000, or 4.6% of total annualized interest expense on our mortgage loans payable and lines of credit and term loan. See Note 7, Mortgage Loans Payable, Net and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements.

Other Market Risk

In addition to changes in interest rates and foreign currency exchange rates, the value of our future investments is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants, which may affect our ability to refinance our debt if necessary.

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Item 4. Controls and Procedures.

(a) Evaluation of disclosure controls and procedures. We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, an evaluation as of June 30, 2023 was conducted under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures, as of June 30, 2023, were effective at the reasonable assurance level.

(b) Changes in internal control over financial reporting. There were no changes in internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of our legal proceedings, see Note 10, Commitments and Contingencies — Litigation, to our accompanying condensed consolidated financial statements.

Item 1A. Risk Factors.

There were no material changes from the risk factors previously disclosed in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023, except as noted below.

The COVID-19 pandemic and economic impact of the pandemic have adversely impacted, and continue to adversely impact, our business and financial results, and the ultimate long-term impact of the pandemic will depend on future developments, which are highly uncertain and cannot be predicted with accuracy.

Our residents, tenants, operating partners and managers, our industry and the U.S. economy continue to be adversely affected by the COVID-19 pandemic and related supply chain disruptions, inflation and labor shortages. While the immediate effects of the COVID-19 pandemic have subsided, the timing and extent of the recovery towards pre-pandemic norms is dependent upon many factors, including the emergence and severity of future COVID-19 variants, the effectiveness and frequency of booster vaccinations and the duration and implications of ongoing or future restrictions and safety measures. As an owner and operator of healthcare facilities, we expect to continue to be adversely affected by the long-term effects of the COVID-19 pandemic for some period of time; however, it is not possible to predict the full extent of its future impact on us, the operations of our properties or the markets in which they are located, or the overall healthcare industry.

The COVID-19 pandemic resulted in a significant decline in occupancy at our senior housing — leased facilities, SNFs, SHOP and integrated senior health campuses and an increase in COVID-19 related operating expenses. Among other things, due to the shortage of healthcare personnel, the pandemic caused higher labor costs that continue to adversely affect us, including those related to greater reliance on agency staffing and more costly short-term hires. Expenses also increased due to pandemic-related costs (e.g., heightened cleaning and sanitation protocols) and the ongoing inflationary environment. This has, in general, resulted in decreased NOI and margin at these properties relative to pre-pandemic levels. Therefore, our focus at such properties continues to be on improving occupancy and managing operating expenses. While occupancy has generally been improving, it has not returned to pre-pandemic levels across all asset types, and labor costs remain elevated, as we have had difficulty filling open positions and experienced increased labor costs. The timing and extent of any further improvement in occupancy or relief from these labor pressures remains unclear. No assurance can be given that recent improvements in our occupancy, margin or NOI will be maintained or will continue at the same pace or at all, or that our occupancy, margin or NOI will ever return to pre-pandemic levels.

As a result of the federal government’s COVID-19 public health emergency declaration in January 2020 and its COVID-19 national emergency declaration in March 2020, certain federal and state pandemic-related relief measures, such as funding, procedural waivers and/or reimbursement increases, became available to us and some of our tenants and operators. These declarations expired on May 11, 2023 and April 10, 2023, respectively, and certain relief measures have been wound-down and others are being phased out. It is unclear what pandemic-related relief measures, including funding, waiver and reimbursement programs, that we and certain of our tenants and operators benefited from will continue to be available or to what extent.

Certain provisions of Maryland law may make it more difficult for us to be acquired and may limit or delay our stockholders’ ability to dispose of their shares of our common stock.

Certain provisions of the Maryland General Corporation Law, or MGCL, such as the business combination statute and the control share acquisition statute, are designed to prevent, or have the effect of preventing, someone from acquiring control of us. The MGCL prohibits “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder. An “interested stockholder” is defined generally as:

•any person who beneficially owns, directly or indirectly, 10.0% or more of the voting power of the corporation’s outstanding voting stock; or

•an affiliate or associate of the corporation who, at any time within the two-year period prior to the date in question, was an interested stockholder.

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These prohibitions last for five years after the most recent date on which the interested stockholder became an interested stockholder. Thereafter, any business combination with the interested stockholder or an affiliate of the interested stockholder must be recommended by the corporation’s board and approved by the affirmative vote of at least 80.0% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares held by the interested stockholder. These requirements could have the effect of inhibiting a change in control even if a change in control were in the best interests of our stockholders.

The control share acquisition statute of the MGCL provides that, subject to certain exceptions, holders of “control shares” of a Maryland corporation (defined as voting shares of stock that, if aggregated with all other such shares of stock owned by the acquiror or in respect of which the acquiror can exercise or direct voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within specified ranges of voting power) acquired in a “control share acquisition” (defined as the acquisition of issued and outstanding control shares) have no voting rights except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter. Shares of stock owned by the acquiror, by our officers or by our employees who are also our directors are excluded from shares entitled to vote on the matter.

Pursuant to the MGCL, our bylaws contain a provision exempting from the control share acquisition provisions of the MGCL any and all acquisitions by any person of shares of our stock, which eliminates voting rights for certain levels of shares that could exercise control over us, and our Board has adopted a resolution providing that any business combination between us and any other person is exempted from the business combination statute, provided that such business combination is first approved by our Board. However, if the bylaws provision exempting us from the control share acquisition statute or our Board resolution opting out of the business combination statute were repealed in whole or in part at any time, these provisions of the MGCL could delay or prevent offers to acquire us and increase the difficulty of consummating any such offers, even if such a transaction would be in the best interests of our stockholders.

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

Recent Sales of Unregistered Securities

On April 3, 2023 and June 19, 2023, we granted an aggregate of 150,329 time-based RSUs to our executive officers and certain of our key employees pursuant to the Second Amended and Restated 2015 Incentive Plan, or the AHR Incentive Plan. Such time-based RSUs vest in three equal installments annually based on the date of grant (subject to continuous employment through each vesting date) and represent the right to receive shares of our Class T common stock upon vesting. The time-based RSUs were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

On April 3, 2023, we granted an aggregate of 41,399 performance-based RSUs representing the right to receive up to 82,798 shares of our Class T common stock upon vesting (such number of shares assumes that we issue shares of our common stock underlying such nonvested performance-based awards at maximum levels for performance and market conditions that have not yet been achieved; to the extent that performance or market conditions do not meet maximum levels, the actual number of shares of our common stock issued under the AHR Incentive Plan would be less than the amount reflected above) to our executive officers pursuant to the AHR Incentive Plan. Such performance-based RSUs will cliff vest in the first quarter of 2026 (subject to continuous employment through that vesting date) with the amount vesting dependent on certain agreed upon performance criteria. The performance-based RSUs were issued in a transaction exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

On June 15, 2023, we granted an aggregate of 24,200 shares of our restricted Class T common stock to our non-executive and independent directors pursuant to the AHR Incentive Plan as compensation for services in connection with their re-election as independent directors to our board. Such shares of restricted stock vest on June 15, 2024 and were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

Purchase of Equity Securities by the Issuer and Affiliated Purchasers

In June 2023, we repurchased 366 shares of our Class I common stock and 2,403 shares of our Class T common stock from our independent directors for an aggregate $87,000, at a repurchase price of $31.40 per share of our common stock in order to satisfy tax obligations associated with the accelerated vesting of restricted common stock issued pursuant to the AHR Incentive Plan.

Item 3. Defaults Upon Senior Securities.

None.

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Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

During the period covered by this report, none of our directors or executive officers has adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in item 408 of Regulation S-K under the Securities Exchange Act of 1934 as amended).

Item 6. Exhibits.

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


3.1			Fourth Articles of Amendment and Restatement of Griffin-American Healthcare REIT IV, Inc., dated October 1, 2021 (included as Exhibit 3.1 to our Current Report on Form 8-K (File No. 000-55775) filed October 1, 2021 and incorporated herein by reference)

3.2			Amended and Restated Bylaws of American Healthcare REIT, Inc. (included as Exhibit 3.1 to our Current Report on Form 8-K (File No. 000-55775) filed February 17, 2023 and incorporated herein by reference)

10.1*			American Healthcare REIT, Inc. Second Amended and Restated 2015 Incentive Plan

31.1*			Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2*			Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1**			Certification of Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

32.2**			Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

101.INS*			Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document

101.SCH*			Inline XBRL Taxonomy Extension Schema Document

101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document

104*			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

___________


*			Filed herewith.
**			Furnished herewith. In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

American Healthcare REIT, Inc.

(Registrant)

August 14, 2023

By:

/s/ DANNY PROSKY

Date

Danny Prosky

Chief Executive Officer, President and Director

(Principal Executive Officer)

August 14, 2023

By:

/s/ BRIAN S. PEAY

Date

Brian S. Peay

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

American Healthcare REIT - 10-Q quarterly report FY2023 Q2

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