UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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

For the quarterly period ended March 31, 2023

OR

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

For the transition period from ______ to ______

Commission file number: 000-54685

CNL Healthcare Properties, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

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

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

The number of shares of common stock of the registrant outstanding as of May 10, 2023 was 173,960,540.

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

INDEX

		Page
PART I. FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Information (unaudited):
	Condensed Consolidated Balance Sheets	2
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Statements of Stockholders’ Equity	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	26
Item 4.	Controls and Procedures	26
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
Exhibit Index		28
Signatures		29
Exhibits

PART I. FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Information

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except per share data)

ASSETS	March 31, 2023		December 31, 2022
Real estate investment properties, net (including VIEs $30,711 and $30,906, respectively)	$	1,302,979	$	1,313,438
Cash (including VIEs $488 and $646, respectively)	43,986		69,504
Restricted cash (including VIEs $11 and $9, respectively)	3,192		4,070
Other assets (including VIEs $170 and $554, respectively)	38,439		36,868
Deferred rent, lease incentives and intangibles, net	12,466		13,423
Total assets	$	1,401,062	$	1,437,303
LIABILITIES AND EQUITY
Liabilities:
Mortgages and other notes payable, net (including VIEs $21,015 and $21,142, respectively)	$	37,230	$	61,773
Credit facilities	546,442		546,100
Accounts payable and accrued liabilities (including VIEs $589 and $533, respectively)	28,127		30,270
Other liabilities (including VIEs $202 and $91, respectively)	8,200		7,469
Due to related parties	1,444		1,397
Total liabilities	621,443		647,009
Commitments and contingencies (Note 7)
Stockholders' equity:
Preferred stock, $0.01 par value per share, 200,000 shares authorized; none issued or outstanding	―		—
Excess shares, $0.01 par value per share, 300,000 shares authorized; none issued or outstanding	―		—
Common stock, $0.01 par value per share, 1,120,000 shares authorized, 186,626 shares issued and 173,960 shares outstanding	1,740		1,740
Capital in excess of par value	1,516,926		1,516,926
Accumulated income	94,557		100,408
Accumulated distributions	(833,760)		(829,307)
Accumulated other comprehensive income	(344)		(16)
Total stockholders' equity	779,119		789,751
Noncontrolling interest	500		543
Total equity	779,619		790,294
Total liabilities and equity	$	1,401,062	$	1,437,303
The abbreviation VIEs above means variable interest entities.

See accompanying notes to condensed consolidated financial statements.

2

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share data)

	Three Months Ended
	March 31,
	2023		2022
Revenues:
Rental income and related revenues	$	6,714	$	6,865
Resident fees and services	76,945		71,732
Total revenues	83,659		78,597
Operating expenses:
Property operating expenses	57,867		55,333
General and administrative expenses	2,244		2,631
Asset management fees	3,476		3,579
Property management fees	3,816		3,517
Depreciation and amortization	13,410		13,642
Total operating expenses	80,813		78,702
Operating income (loss)	2,846		(105)
Other income (expense):
Interest and other income	1,066		5
Interest expense and loan cost amortization	(9,654)		(3,863)
Gain on change of control of a joint venture	—		8,376
Total other (expense) income	(8,588)		4,518
(Loss) income before income taxes	(5,742)		4,413
Income tax expense	(111)		(85)
Net (loss) income	(5,853)		4,328
Less: Amounts attributable to noncontrolling interests	(2)		25
Net (loss) income attributable to common stockholders	$	(5,851)	$	4,303
Net (loss) income per share of common stock (basic and diluted)	$	(0.03)	$	0.02
Weighted average number of shares of common stock outstanding (basic and diluted)	173,960		173,960

See accompanying notes to condensed consolidated financial statements.

3

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(in thousands)

	Three Months Ended
	March 31,
	2023		2022
Net (loss) income	$	(5,853)	$	4,328
Other comprehensive (loss) income:
Unrealized (loss) gain on derivative financial instruments, net	(328)		876
Total other comprehensive (loss) income	(328)		876
Comprehensive (loss) income	(6,181)		5,204
Less: Comprehensive (loss) income attributable to noncontrolling interest	(2)		25
Comprehensive (loss) income attributable to common stockholders	$	(6,179)	$	5,179

See accompanying notes to condensed consolidated financial statements.

4

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

THREE MONTHS ENDED MARCH 31, 2023 AND 2022 (UNAUDITED)

(in thousands, except per share data)

										Accumulated
	Common Stock			Capital in						Other		Total		Non-
	Number	Par		Excess of		Accumulated		Accumulated		Comprehensive		Stockholders'		controlling		Total
	of Shares	Value		Par Value		Income		Distributions		Income (Loss)		Equity		Interest		Equity
Balance at December 31, 2022	173,960	$	1,740	$	1,516,926	$	100,408	$	(829,307)	$	(16)	$	789,751	$	543	$	790,294
Net loss	—	—		—		(5,851)		—		—		(5,851)		(2)		(5,853)
Other comprehensive loss	—	—		—		—		—		(328)		(328)		—		(328)
Distributions to noncontrolling interests	—	—		—		—		—		—		—		(41)		(41)
Cash distributions declared ($0.0256 per share)	—	—		—		—		(4,453)		—		(4,453)		—		(4,453)
Balance at March 31, 2023	173,960	$	1,740	$	1,516,926	$	94,557	$	(833,760)	$	(344)	$	779,119	$	500	$	779,619

										Accumulated
	Common Stock			Capital in						Other		Total		Non-
	Number	Par		Excess of		Accumulated		Accumulated		Comprehensive		Stockholders'		controlling		Total
	of Shares	Value		Par Value		Income		Distributions		Income (Loss)		Equity		Interest		Equity
Balance at December 31, 2021	173,960	$	1,740	$	1,516,926	$	101,861	$	(811,493)	$	10	$	809,044	$	1,717	$	810,761
Net income	—	—		—		4,303		—		—		4,303		25		4,328
Other comprehensive income	—	—		—		—		—		876		876		—		876
Cash distributions declared ($0.0256 per share)	—	—		—		—		(4,453)		—		(4,453)		—		(4,453)
Balance at March 31, 2022	173,960	$	1,740	$	1,516,926	$	106,164	$	(815,946)	$	886	$	809,770	$	1,742	$	811,512

See accompanying notes to condensed consolidated financial statements.

5

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended March 31,
	2023		2022
Operating activities:
Net cash flows provided by operating activities	$	5,328	$	8,236
Investing activities:
Acquisition of joint venture interest, net of cash acquired	—		(1,134)
Capital expenditures	(2,028)		(3,579)
Proceeds from maturity of short-term securities	2,500		—
Net cash provided by (used in) investing activities	472		(4,713)
Financing activities:
Distributions to stockholders	(4,453)		(4,453)
Purchase of interest rate cap	(3,128)		—
Principal payments on mortgages and other notes payable	(24,552)		(642)
Distributions to noncontrolling interests	(41)		—
Other financing activities	(22)		5
Net cash flows used in financing activities	(32,196)		(5,090)
Net decrease in cash and restricted cash	(26,396)		(1,567)
Cash and restricted cash at beginning of period	73,574		57,681
Cash and restricted cash at end of period	$	47,178	$	56,114
Supplemental disclosure of non-cash investing and financing activities:
Real estate investment properties	$	—	$	29,384
Intangibles	—		4,281
Mortgages and notes payable	—		(18,468)
Net assets recognized upon the change in control of the Windsor Manor Joint Venture	$	—	$	15,197

See accompanying notes to condensed consolidated financial statements.

6

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED)

1.Organization

CNL Healthcare Properties, Inc. (the “Company”) is a Maryland corporation that elected to be taxed as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. The Company has been and intends to continue to be organized and operate in a manner that allows it to remain qualified as a REIT for U.S. federal income tax purposes. The Company conducts substantially all of its operations either directly or indirectly through: (1) an operating partnership, CHP Partners, LP (“Operating Partnership”), in which the Company is the sole limited partner and its wholly-owned subsidiary, CHP GP, LLC, is the sole general partner; (2) a wholly-owned taxable REIT subsidiary (“TRS”), CHP TRS Holding, Inc.; (3) property owner and lender subsidiaries, which are single purpose entities; and (4) investments in joint ventures.

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

In 2017, the Company began evaluating possible strategic alternatives to provide liquidity to the Company’s stockholders. As part of executing under possible strategic alternatives, the Company’s board of directors committed to a plan to sell 70 properties, which included medical office buildings, post-acute care facilities and acute care hospitals across the U.S., collectively (the “MOB/Healthcare Portfolio”), plus several skilled nursing facilities. The Company completed the sale of the last of the 70 properties in 2022.

As of March 31, 2023, the Company’s seniors housing portfolio was geographically diversified with properties in 26 states and consisted of interests in 70 properties, including 69 seniors housing communities and one vacant land parcel. The Company has primarily leased its seniors housing properties to wholly-owned TRS entities and engaged independent third-party managers under management agreements to operate the properties under the RIDEA structures; however, the Company has also leased some of its properties to third-party tenants under triple-net or similar lease structures, where the tenant bears all or substantially all of the costs (including cost increases, for real estate taxes, utilities, insurance and ordinary repairs). In addition, most of the Company’s investments have been wholly owned, although, it has, to a lesser extent, invested through partnerships with other entities where it was believed to be appropriate and beneficial.

2.Summary of Significant Accounting Policies

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

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

7

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED)

2.Summary of Significant Accounting Policies (continued)

Grant Income — In response to the coronavirus pandemic, the federal government and some states provided funds to providers of seniors housing communities. These funds were deemed federal/state governmental grants and provided that the recipients attest to and comply with certain terms and conditions. Grant income is recognized upon receipt of the funds and when all the conditions of the grant have been met. During the three months ended March 31, 2023, the Company recorded approximately $0.6 million as other income in the accompanying condensed consolidated statements of operations as all conditions of the grant had been met. There was no grant income recorded during the three months ended March 31, 2022.

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

Variable Interest Entities — As of March 31, 2023 and December 31, 2022, the Company had net assets in one and two subsidiaries, respectively, classified as VIEs. These subsidiaries are joint ventures in which the equity interest consists of non-substantive protective voting rights. As of March 31, 2023, the Company determined it is the primary beneficiary and held a controlling financial interest in one subsidiary due to its power to direct the activities that most significantly impact the economic performance of this entity, as well as its obligation to absorb the losses and its right to receive benefits from this entity that could potentially be significant to this entity. As such, the transactions and accounts of this VIE are included in the accompanying condensed consolidated financial statements. The Company’s maximum exposure to loss as a result of its involvement with this VIE is limited to its net investment in this entity which totaled approximately $9.1 million as of March 31, 2023. The Company’s exposure is limited because of the non-recourse nature of the borrowings of this VIE.

3.Revenue

The following table presents disaggregated revenue related to the Company’s resident fees and services during the three months ended March 31, 2023 and 2022:

	Three Months Ended March 31,
	Number of Units		Revenues (in millions)				Percentage of Revenues
Resident fees and services:	2023	2022	2023		2022		2023		2022
Independent living	2,222	2,243	$	19.6	$	18.0	25.5	%	25.1	%
Assisted living	3,039	3,096	38.4		35.5		49.9		49.5
Memory care	932	972	15.2		14.8		19.8		20.6
Other revenues	—	—	3.7		3.4		4.8		4.8
	6,193	6,311	$	76.9	$	71.7	100.0	%	100.0	%

4.Real Estate Assets, net

The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of March 31, 2023 and December 31, 2022 are as follows (in thousands):

	March 31, 2023		December 31, 2022
Land and land improvements	$	136,682	$	136,416
Building and building improvements	1,496,933		1,495,552
Furniture, fixtures and equipment	105,953		105,784
Less: accumulated depreciation	(436,589)		(424,314)
Real estate investment properties, net	$	1,302,979	$	1,313,438

Depreciation expense on the Company’s real estate investment properties, net was approximately $12.6 million and $12.8 million for the three months ended March 31, 2023 and 2022, respectively.

8

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED)

5.Indebtedness

During the three months ended March 31, 2023, the Company paid approximately $24.6 million in principal payments, which included the repayment of a mortgage loan of approximately $22.8 million collateralized by one property in advance of its scheduled maturity of June 2023, the repayment of $1.4 million of unscheduled principal payments relating to a mortgage loan collateralized by five properties and $0.4 million of scheduled principal payments. During the three months ended March 31, 2023, the Company also exercised its one-year extension option for the $133.0 million outstanding under the Company’s Revolving Credit Facility, which extended the maturity date to May 2024. The Company has $0.9 million of scheduled principal payments coming due during the rest of 2023.

During the three months ended March 31, 2023, the Company purchased a short-term interest rate cap for approximately $3.1 million, which has a notional value of $420.0 million and a strike price of 3.5%, to hedge the majority of its Credit Facilities. The interest rate cap matures in August 2023. The value of this cash flow hedge is included in other assets in the accompanying condensed consolidated balance sheets as of March 31, 2023.

The following is a schedule of future principal payments for the Company’s total indebtedness for the remainder of 2023, each of the next four years and thereafter, in the aggregate, as of March 31, 2023 (in thousands):

2023	$	909
2024	584,480
2025	—
2026	—
2027	—
Thereafter	—
	$	585,389

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

The following table provides the details of the fair market value and carrying value of the Company’s indebtedness as of March 31, 2023 and December 31, 2022 (in millions):

	March 31, 2023				December 31, 2022
	Fair Value		Carrying Value		Fair Value		Carrying Value
Mortgages and other notes payable, net	$	36.4	$	37.2	$	60.8	$	61.8
Credit facilities, net	$	548.0	$	546.4	$	548.0	$	546.1

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

Generally, the loan agreements for the Company’s mortgage loans contain customary financial covenants and ratios; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc. The loan agreements also contain customary events of default and remedies for the lenders. As of March 31, 2023, the Company was in compliance with all financial covenants related to its mortgage loans.

9

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED)

5.Indebtedness (continued)

The Credit Facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage, (viii) maximum unsecured indebtedness ratio, and (ix) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the Credit Facilities, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits. The limitations on distributions generally include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the Credit Facilities) and the minimum amount of distributions required to maintain the Company’s REIT status. As of March 31, 2023, the Company was in compliance with all financial covenants related to its Credit Facilities.

6.Related Party Arrangements

The Company paid approximately $0.03 million during each of the three months ended March 31, 2023 and 2022, of cash distributions on Restricted Stock issued through March 2017 pursuant to the Advisor expense support agreement. These amounts have been recognized as compensation expense and included in general and administrative expenses in the accompanying condensed consolidated statements of operations.

The expenses and fees incurred by and reimbursable to the Company’s related parties for the three months ended March 31, 2023 and 2022, and related amounts unpaid as of March 31, 2023 and December 31, 2022 are as follows (in thousands):

	Three Months Ended				Unpaid amounts as of (1)
	March 31,				March 31, 2023		December 31, 2022
	2023		2022
Reimbursable expenses:
Operating expenses (2)	$	722	$	807	$	285	$	238
	722		807		285		238
Investment services fee (3)	—		60		—		—
Asset management fees	3,476		3,579		1,159		1,159
	$	4,198	$	4,446	$	1,444	$	1,397

______________________________

FOOTNOTES:

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

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

(3)For the three months ended March 31, 2022, the Company incurred approximately $0.1 million in investment services fees, all of which was capitalized and included in real estate assets, net in the accompanying condensed consolidated balance sheets. For the three months ended March 31, 2023, the Company did not incur any investment services fees.

10

CNL HEALTHCARE PROPERTIES, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2023 (UNAUDITED)

7.Commitments and Contingencies

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

As a result of the Company’s completed seniors housing developments continuing to move towards or achieving stabilization, the Company monitors the lease-up of these properties to determine whether the established performance metrics have been met as of each reporting period. As of March 31, 2023, the Company had one remaining promoted interest agreement with third-party developers pursuant to which certain operating targets have been established that, upon meeting such targets, the developer will be entitled to additional payments based on enumerated percentages of the assumed net proceeds of a deemed sale, subject to achievement of an established internal rate of return on the Company’s investment in the development. The established performance metrics were not met or probable of being met as of March 31, 2023.

The Company’s Advisor has approximately 1.3 million contingently issuable Restricted Stock shares for financial reporting purposes that were issued pursuant to the Advisor expense support agreement. Refer to Note 6. “Related Party Arrangements” for information on distributions declared related to these Restricted Stock shares.

11

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

Caution Concerning Forward-Looking Statements

Statements contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q for the three months ended March 31, 2023 that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “projects,” “continues,” “may,” “will,” “seeks,” and “could” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated net asset value per share of the Company’s common stock, and/or other matters. The Company’s forward-looking statements are not guarantees of future performance. While the Company’s management believes its forward-looking statements are reasonable, such statements are inherently susceptible to uncertainty and changes in circumstances. As with any projection or forecast, forward-looking statements are necessarily dependent on assumptions, data and/or methods that may be incorrect or imprecise, and may not be realized. The Company’s forward-looking statements are based on management’s current expectations and a variety of risks, uncertainties and other factors, many of which are beyond the Company’s ability to control or accurately predict. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, the Company’s actual results could differ materially from those set forth in the forward-looking statements due to a variety of risks, uncertainties and other factors.

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

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

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

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

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

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

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

•risks associated with real estate markets, including declining real estate values;

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

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

•disruptions from cybersecurity incidents;

•costs resulting from damaging weather events and climate change;

•the use of debt to finance the Company’s business activities, including refinancing and interest rate risk and the Company’s failure to comply with debt covenants;

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

•the Company’s inability to make necessary improvements to properties on a timely or cost-efficient basis;

•competition for properties and/or tenants;

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

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

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

•the impact of changes in accounting rules;

•inaccuracies of the Company’s accounting estimates;

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

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

•consequences of the Company’s net operating losses;

•increases in operating costs and other expenses;

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

•the impact of outstanding and/or potential litigation;

•risks associated with the Company’s tax structuring;

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

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

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

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

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

Introduction

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

Overview

CNL Healthcare Properties, Inc. is a Maryland corporation that elected to be taxed as a REIT for U.S. federal income tax purposes. We have and intend to continue to be organized and operate in a manner that allows us to remain qualified as a REIT for federal income tax purposes. The terms “us,” “we,” “our,” “Company” and “CNL Healthcare Properties” include CNL Healthcare Properties, Inc. and each of its subsidiaries.

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

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

As of March 31, 2023, our seniors housing investment portfolio consisted of interests in 70 properties, consisting of a geographically diversified portfolio of 69 seniors housing communities and one vacant land parcel in 26 states. The types of seniors housing properties that we own include independent and assisted living facilities, continuing care retirement communities and Alzheimer’s/memory care facilities.

Market Conditions

Since the last half of 2021, we have experienced a challenging labor market that has resulted in higher labor costs due to increases throughout all wage classifications within our communities and an increased focus on attracting and retaining staff at our communities. The “great resignation” resulted in an increase in the number of vacant positions at our communities. This led to an increase in the usage of temporary agency labor which led to incremental, measurable labor costs. Our intensified focus of hiring and filling some of the vacant staff roles has resulted in ongoing reductions in our reliance on temporary agency labor. However, historically low unemployment rates, wage pressures, overtime pay and some continued reliance on temporary agency labor resulted in high labor costs. In addition, since the last half of 2021, we have experienced the impact of elevated inflation levels in the form of higher food costs and virtually all other operating expenses. Elevated labor costs and operating expenses could impact the rate of recovery of net operating income (“NOI”) margins during the remainder of 2023.

Macro-economic and geopolitical events around the globe have contributed to volatile credit markets. As part of its effort to reduce the rising levels of inflation, the Federal Reserve has enacted several interest rate increases since 2022 with additional rate increases projected to continue into 2023. The interest rate increases to date and any further interest rate increases will contribute to higher interest expense on our unhedged variable rate debt. We have interest rate caps in place for interest rate protection on a portion of our variable rate debt and continue to monitor opportunities to further protect the remaining unhedged variable rate debt.

Possible Strategic Alternatives

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

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

During the COVID-19 pandemic, we shifted our focus away from the pursuit of larger strategic alternatives to provide further liquidity to our stockholders due to the market and industry disruptions in the seniors housing sector from COVID-19. However, our Special Committee continued working and continues to work with our financial advisor to carefully study market data. We remain fully committed to the active study and pursuit of additional strategic opportunities to provide incremental liquidity to our stockholders as economic and transactional environments permit.

Seniors Housing Portfolio

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

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

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

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

Portfolio Overview

As of March 31, 2023, our healthcare investment portfolio consisted of interests in 70 properties, comprising 69 seniors housing communities and one vacant land parcel.

We believe demographic trends and compelling supply and demand indicators present a strong case for an investment focus on seniors housing real estate and real estate-related assets. Our seniors housing investment portfolio is geographically diversified with properties in 26 states. The map below shows our seniors housing investment portfolio across geographic regions as of May 10, 2023:

The following table summarizes our seniors housing investment portfolio by investment structure as of May 10, 2023:

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

________________________________

FOOTNOTES:

(1)Properties that are leased to third-party tenants for which we report rental income and related revenues.

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

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Portfolio Evaluation

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

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

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

Significant Tenants and Operators

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

Tenants	Number of Properties	Rentable Square Feet (in thousands)	Percentage of Rentable Square Feet		Lease Expiration Year
TSMM Management, LLC	13	1,261	77.5	%	2025
Wellmore, LLC	2	366	22.5		2031-2032
	15	1,627	100.0	%
Operators	Number of Properties	Rentable Square Feet (in thousands)	Percentage of Rentable Square Feet		Operator Expiration Year
Integrated Senior Living, LLC	7	1,948	30.8	%	2023-2024
Prestige Senior Living, LLC	13	895	14.2		2023-2024
Morningstar Senior Management, LLC	4	834	13.2		2023
Other operators (1)	30	2,645	41.8		2023-2029
	54	6,322	100.0	%

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FOOTNOTE:

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

Tenant Lease Expirations

As of March 31, 2023, we owned 15 seniors housing properties that were leased to third party tenants under triple-net operating leases. During the three months ended March 31, 2023, our rental income from continuing operations represented approximately 8.0% of our total revenues from continuing operations.

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Under the terms of our triple-net lease agreements, each tenant is responsible for payment of property taxes, general liability insurance, utilities, repairs and maintenance, including structural and roof expenses. Each tenant is expected to pay real estate taxes directly to the taxing authorities. However, if the tenant does not pay the real estate taxes, we are liable.

We work with our tenants in advance of the lease expirations or renewal period options in order for us to maintain a balanced lease rollover schedule and high occupancy levels, as well as to enhance the value of our properties through extended lease terms. Certain amendments or modifications to the terms of existing leases could require lender approval.

The following table lists, on an aggregate basis, scheduled expirations for the remainder of 2023, each of the next nine years and thereafter on our consolidated seniors housing portfolio, assuming that none of the tenants exercise any of their renewal options (in thousands, except for number of properties and percentages):

Year of Expiration (1)	Number of Properties	Expiring Leased Square Feet	Expiring Annualized Base Rents (2)		Percentage of Expiring Annual Base Rents
2023	—	—	$	—	—	%
2024	—	—	—		—
2025	13	1,261	18,339		68.6
2026	—	—	—		—
2027	—	—	—		—
2028	—	—	—		—
2029	—	—	—		—
2030	—	—	—		—
2031	1	137	3,602		13.5
2032	1	229	4,793		17.9
Thereafter	—	—	—		—
Total	15	1,627	$	26,734	100.0	%
Weighted Average Remaining Lease Term: (3)			4.4 years

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FOOTNOTES:

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

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

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

Operator Expirations

As of December 31, 2022, we had 54 seniors housing properties managed by third-party operators. All of our management agreements have been in place for multiple years and some include annual auto-renewal clauses which are effective unless a notice of termination is provided by either party. We work with our operators in advance of management agreement expirations or renewal period options in order for us to maintain a balanced operator rollover schedule, which provides us flexibility to execute on possible strategic alternatives, minimize potential early termination fees and align with the broader industry. The management agreements of 30 of our managed seniors housing properties were scheduled to expire within one year or less as of March 31, 2023, all of which are expected to be renewed.

Liquidity and Capital Resources

General

Our ongoing primary source of capital is proceeds from operating cash flows. Our primary uses of capital include the payment of distributions, payment of operating expenses, funding capital improvements to existing properties and payment of debt service. Generally, we expect to meet short-term working capital needs from our cash flows from operations. Our ongoing sources and uses of capital have been and will continue to be impacted by the rate of occupancy recovery from the COVID-19 pandemic, and by rising interest rates and rising inflation levels. As necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures or to cover periodic shortfalls between distributions paid and cash flows from operating activities.

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Weighted average occupancy was higher during the quarter ended March 31, 2023 as compared to the quarter ended March 31, 2022. We implemented rate increases at our properties as part of ongoing resident lease renewals during 2022 and continued to implement rate increases during 2023, which when combined with improved occupancy, resulted in an increase in revenues during the three months ended March 31, 2023. Labor costs remained at elevated levels during this period due to increased wages in a tight labor market. The “great resignation” resulted in an increase in the number of vacant positions at our communities, which led to increased reliance on temporary agency personnel to temporarily fill vacancies. Our intensified focus since 2022 of hiring and filling some of the vacant staff roles resulted in ongoing reductions in our reliance on temporary agency labor. We expect that increases in occupancy and resident rate increases will increase revenue streams during 2023. However, we anticipate that labor costs and operating expenses will remain at elevated levels and could impact the rate of margin recovery in 2023.

As of March 31, 2023, we had approximately $183.1 million of liquidity (consisting of $44.0 million cash on hand, $22.1 million invested in short term securities and $117.0 million in undrawn availability under the Revolving Credit Facility). We remain focused on maintaining liquidity and financial flexibility and continue to monitor developments as we continue to recover from the disruptions in occupancy from COVID-19, continue to navigate through rising labor costs during a tight labor market, increased operating expenses from current inflation levels and the increase in interest costs from a rising interest rate environment. The rate of occupancy recovery from COVID-19, a tight labor market, inflation, the volatility in the credit markets and a rising interest rate environment may have an impact on our financial condition, results of operations and cash flows.

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

Our cash flows from operating and investing activities as described within “Sources of Liquidity and Capital Resources” and “Uses of Liquidity and Capital Resources” represent cash flows from continuing operations.

Sources of Liquidity and Capital Resources

Borrowings

There were no borrowings during the three months ended March 31, 2023 and 2022. We may borrow money to fund enhancements to our portfolio, as well as to cover periodic shortfalls between distributions paid and cash flows from operating activities to the extent impacted by compressed property NOI margins from rising labor costs, inflationary pressures on other operating expenses and an increased interest rate environment.

Maturity of Short-Term Securities

During the three months ended March 31, 2023, we received approximately $2.5 million from the maturity of short-term securities. We did not own investments in any securities during the three months ended March 31, 2022.

Net Cash Provided by Operating Activities – Continuing Operations

Cash flows from operating activities for the three months ended March 31, 2023 and 2022 were approximately $5.3 million and $8.2 million, respectively. The change in cash flows from operating activities for the three months ended March 31, 2023 as compared to the same period in 2022 was primarily the result of the following:

•higher interest expense due to the rising interest rate environment; partially offset by

•an increase in property NOI, related to our seniors housing properties due to higher average occupancy and rate increases subsequent to March 31, 2022, offset by the sale of three properties subsequent to March 31, 2022.

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Uses of Liquidity and Capital Resources

Acquisition of Joint Venture Interest

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

Capital Expenditures

We paid approximately $2.0 million and $3.6 million in capital expenditures during the three months ended March 31, 2023 and 2022, respectively. We continue to invest in capital improvements to maintain and improve our properties.

Purchase of Interest Rate Cap

During the three months ended March 31, 2023, we paid approximately $3.1 million to purchase a short-term interest rate cap with a notional value of $420.0 million and a strike price of 3.5%, to hedge the majority of our variable rate interest exposure relating to our Credit Facilities. The interest rate cap matures in August 2023. During the three months ended March 31, 2023, we received $0.6 million from the interest rate cap counterparty. We did not purchase any interest rate caps during the three months ended March 31, 2022.

Debt Repayments

During the three months ended March 31, 2023, we paid approximately $24.6 million in principal payments, which included the repayment of a mortgage loan of approximately $22.8 million collateralized by one property in advance of its scheduled maturity of June 2023, the repayment of $1.4 million of unscheduled principal payments relating to a mortgage loan collateralized by five properties and $0.4 million of scheduled principal payments. During the three months ended March 31, 2023, we exercised our one-year extension option and extended the maturity date of our Revolving Credit Facility from May 2023 to May 2024. During the three months ended March 31, 2022, we paid approximately $0.6 million of scheduled repayments on our mortgages and other notes payable.

The following is a schedule of future principal payments for our total indebtedness for the remainder of 2023, each of the next four years and thereafter, in the aggregate, as of March 31, 2023 (in thousands):

2023	$	909
2024	584,480
2025	—
2026	—
2027	—
Thereafter	—
	$	585,389

As of March 31, 2023, we had approximately $183.1 million of liquidity (consisting of $44.0 million cash on hand, $22.1 million invested in short term securities and $117.0 million available under the Revolving Credit Facility) and were well positioned to manage our near-term debt maturities. We have $0.9 million of scheduled payments coming due during the rest of 2023. We have a mortgage loan of approximately $16.3 million, collateralized by five properties, scheduled to mature in February 2024. We have been working with our lender and anticipate entering into an agreement with our existing lender during 2023 to extend the maturity date through February 2026.

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

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

The aggregate amount of long-term financing is not expected to exceed 60% of our gross asset values (as defined in our Credit Facilities) on an annual basis. As of March 31, 2023 and December 31, 2022, we had aggregate debt leverage ratios of approximately 31.1% and 31.9%, respectively, of the aggregate carrying value of our assets.

Generally, the loan agreements for our mortgage loans contain customary financial covenants and ratios; including (but not limited to) the following: debt service coverage ratio, minimum occupancy levels, limitations on incurrence of additional indebtedness, etc. The loan agreements also contain customary performance criteria and remedies for the lenders. As of March 31, 2023, we were in compliance with all financial covenants related to our mortgage loans.

The Credit Facilities contain affirmative, negative, and financial covenants which are customary for loans of this type, including (but not limited to): (i) maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum consolidated net worth, (iv) restrictions on payments of cash distributions except if required by REIT requirements, (v) maximum secured indebtedness, (vi) maximum secured recourse debt, (vii) minimum unsecured interest coverage, (viii) maximum unsecured indebtedness ratio and (ix) limitations on certain types of investments and with respect to the pool of properties supporting borrowings under the Credit Facilities, minimum weighted average occupancy, and remaining lease terms, as well as property type, MSA, operator, and asset value concentration limits. The limitations on distributions generally include a limitation on the extent of allowable distributions, which are not to exceed the greater of 95% of adjusted FFO (as defined per the Credit Facilities) and the minimum amount of distributions required to maintain the Company’s REIT status. As of March 31, 2023, we were in compliance with all financial covenants related to our Credit Facilities.

Distributions

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

The following table presents total cash distributions declared, distributions reinvested and cash distributions per share on a quarterly basis for the three months ended March 31, 2023 and 2022 (in thousands, except per share data):

Periods	Cash Distributions per Share		Total Cash Distributions Declared (1)		Cash Flows Provided by Operating Activities (2)
2023 Quarters
First	$	0.02560	$	4,453	$	5,328
Total	$	0.02560	$	4,453	$	5,328
2022 Quarters
First	$	0.02560	$	4,453	$	8,236
Total	$	0.02560	$	4,453	$	8,236

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FOOTNOTES:

(1)For the three months ended March 31, 2023 and 2022, our net (loss) income attributable to common stockholders was approximately $(5.9) million and $4.3 million, respectively, while total cash distributions declared were approximately $4.5 million and $4.5 million, respectively. For the three months ended March 31, 2023 and 2022, approximately 100% of cash distributions declared to stockholders were considered to be funded with cash provided by operating activities as calculated on a quarterly basis for GAAP purposes.

(2)Amounts herein include cash flows from discontinued operations. Cash flows from operating activities calculated in accordance with GAAP are not necessarily indicative of the amount of cash available to pay distributions and as such our board of directors uses other measures such as FFO and MFFO in order to evaluate the level of distributions.

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Results of Operations

Except for the impact of elevated labor costs, inflation and a rising interest rate environment, we are not aware of other material trends or uncertainties, favorable or unfavorable, that may be reasonably anticipated to have a material impact on either capital resources or the revenues or income to be derived from the operation of properties, other than those referred to in the risk factors identified in “Part II, Item 1A” of this report and the “Risk Factors” section of our Annual Report.

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

Three months ended March 31, 2023 as compared to the three months ended March 31, 2022

As of March 31, 2023 and 2022, excluding our vacant land, we owned 69 and 72, consolidated operating investment properties, respectively.

	Investment count as of March 31,
Consolidated operating investment types:	2023	2022
Seniors housing leased	15	15
Seniors housing managed	54	56
Acute care leased	—	1
	69	72

Rental Income and Related Revenues. Rental income and related revenues were approximately $6.7 million for the three months ended March 31, 2023, as compared to approximately $6.9 million for the three months ended March 31, 2022. The decrease in revenue during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 was primarily due to reduced rent related to new leases in February 2022 at five seniors housing properties.

Resident Fees and Services. Resident fees and services income was approximately $76.9 million for the three months ended March 31, 2023, as compared to approximately $71.7 million for the three months ended March 31, 2022. The increase in revenue during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022 was primarily due to an increase in average occupancy and increases in rates charged to our residents. The increase was partially offset by the sale of two properties in August 2022.

Property Operating Expenses. Property operating expenses were approximately $57.9 million for the three months ended March 31, 2023, as compared to approximately $55.3 million for the three months ended March 31, 2022, respectively. Property operating expenses increased during the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily due to an increase in average occupancy and increased labor costs. The increase in property operating expenses was partially offset by the sale of two properties in August 2022.

General and Administrative Expenses. General and administrative expenses were approximately $2.2 million for the three months ended March 31, 2023, as compared to approximately $2.6 million for the three months ended March 31, 2022. General and administrative expenses were comprised primarily of personnel expenses of affiliates of our Advisor, directors’ and officers’ insurance, franchise taxes, sales taxes, accounting and legal fees, and board of director fees.

Asset Management Fees. We incurred asset management fees of approximately $3.5 million for the three months ended March 31, 2023, as compared to approximately $3.6 million for the three months ended March 31, 2022. Asset management fees are paid to our Advisor for the management of our real estate assets and other permitted investments. Asset management fees decreased during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, as a result of the sale of three properties in 2022.

Property Management Fees. We incurred property management fees payable to our third-party property managers of approximately $3.8 million for the three months ended March 31, 2023, as compared to approximately $3.5 million for the three months ended March 31, 2022. The property management fees are based on a percentage of revenues under the property management agreement and the increase across periods is reflective of the increase in average occupancy and resident fees and service revenue over the same period as described above.

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Depreciation and Amortization. Depreciation and amortization expenses were approximately $13.4 million for the three months ended March 31, 2023, as compared to approximately $13.6 million for the three months ended March 31, 2022. Depreciation and amortization expenses are comprised of depreciation and amortization of the buildings, equipment, land improvements and in-place leases related to our real estate portfolio. The decrease is primarily due to assets from property acquisitions becoming fully depreciated subsequent to March 31, 2022, as well as the sale of three properties in 2022. The decrease in depreciation and amortization expense was partially offset by investments of approximately $16.2 million in capital improvements to maintain and improve our properties subsequent to March 31, 2022.

Interest and Other Income. Interest and other income was approximately $1.1 million and $5 thousand for the three months ended March 31, 2023 and 2022, respectively. The increase in interest and other income is primarily due to interest from investments in short term securities during the three months ended March 31, 2023.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization were approximately $9.7 million for the three months ended March 31, 2023, as compared to approximately $3.9 million for the three months ended March 31, 2022. The increase in interest expense and loan cost amortization for the quarter ended March 31, 2023 is primarily due to the rising interest rate environment. During the three months ended March 31, 2023 and 2022, we were able to partially mitigate the full impact from the rise in interest rates due to the interest rate caps in place as part of our overall variable debt hedging strategy.

Gain on Change of Control of a Joint Venture. During the three months ended March 31, 2022, we recognized a gain of approximately $8.4 million as part of acquiring the remaining 25% interest in the Windsor Manor Joint Venture from our joint venture partner, resulting in us owning a 100% controlling interest in the Windsor Manor Joint Venture and derecognizing our equity method investment in the Windsor Manor Joint Venture. We did not record such gains during the three months ended March 31, 2023.

Net Operating Income

We generally expect to meet future cash needs for general and administrative expenses, debt service and distributions from NOI. We define NOI, a non-GAAP measure, as total revenues less the property operating expenses and property management fees from managed properties. We use NOI as a key performance metric for internal monitoring and planning purposes, including the preparation of annual operating budgets and monthly operating reviews, as well as to facilitate analysis of future investment and business decisions. It does not represent cash flows from operating activities in accordance with GAAP and should not be considered to be an alternative to net income or loss (determined in accordance with GAAP) as an indication of our operating performance or to be an alternative to cash flows from operating activities (determined in accordance with GAAP) as a measure of our liquidity. We believe the presentation of this non-GAAP measure is important to the understanding of our operating results for the periods presented because it is an indicator of the return on property investment and provides a method of comparing property performance over time. We aggregate NOI on a “same store” basis for comparable properties that we have owned during the entirety of all periods presented. Non-same-store NOI includes NOI from the Hurst Specialty Hospital sold in April 2022 and two properties sold in August 2022, as we did not own these properties during the entirety of all periods presented. The chart below presents a reconciliation of our net income to NOI for the three months ended March 31, 2023 and 2022 (in thousands) and the amount invested in properties as of March 31, 2023 and 2022 (in millions):

	Three Months Ended
	March 31,				Change
	2023		2022		$		%
Net (loss) income	$	(5,853)	$	4,328
Adjusted to exclude:
General and administrative expenses	2,244		2,631
Asset management fees	3,476		3,579
Depreciation and amortization	13,410		13,642
Other expense (income)	8,588		(4,518)
Income tax expense	111		85
NOI	$	21,976	$	19,747	$	2,229	11.3	%
Less: Non-same-store NOI	—		332
Same-store NOI	$	21,976	$	19,415	$	2,561	13.2	%
Invested in operating properties,    end of period (in millions)	$	1,739	$	1,795

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Overall, our same-store NOI for the three months ended March 31, 2023 increased by approximately $2.6 million, as compared to the three months ended March 31, 2022. Same store NOI increased primarily due to an increase in average occupancy and increases in rates charged to our residents, partially offset by an increase in operating expenses due to inflation and increased labor costs.

Funds from Operations and Modified Funds from Operations

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

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

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

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

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

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

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

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

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

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

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The following table presents a reconciliation of net income to FFO and MFFO for the three months ended March 31, 2023 and 2022 (in thousands, except per share data):

	Three Months Ended
	March 31,
	2023		2022
Net (loss) income attributable to common stockholders	$	(5,851)	$	4,303
Adjustments:
Depreciation and amortization	13,410		13,642
Gain on change of control of a joint venture(1)	—		(8,376)
FFO adjustments attributable to noncontrolling interests	(12)		(35)
FFO attributable to common stockholders	7,547		9,534
Straight-line rent adjustments(2)	467		351
Amortization of premium for debt investments	(17)		(10)
Realized loss on extinguishment of debt(3)	11		—
MFFO adjustments attributable to noncontrolling interests	(1)		(9)
MFFO attributable to common stockholders	$	8,007	$	9,866
Weighted average number of shares of common    stock outstanding (basic and diluted)	173,960		173,960
Net (loss) income per share (basic and diluted)	$	(0.03)	$	0.02
FFO per share (basic and diluted)	$	0.04	$	0.05
MFFO per share (basic and diluted)	$	0.05	$	0.06

______________________________

FOOTNOTES:

(1)Management believes that adjusting for the gain on change of control of a joint venture is appropriate because the adjustment is not reflective of our ongoing operating performance and, as a result, the adjustment better aligns results with management’s analysis of operating performance.

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

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

Related Party Transactions

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

Critical Accounting Policies and Estimates

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

Recent Accounting Pronouncements

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

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Item 3. Quantitative and Qualitative Disclosures about Market Risks

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

The following is a schedule as of March 31, 2023 of our fixed and variable rate debt maturities for the remainder of 2023, and each of the next four years and thereafter (principal maturities only) (in thousands):

	Expected Maturities
	2023			2024			2025			2026			2027			Thereafter			Total			Fair Value(1)
Fixed rate debt	$	419		$	20,668		$	—		$	—		$	—		$	—		$	21,087		$	20,100
Weighted average interest rate on fixed rate debt	3.25		%	3.25		%	—		%	—		%	—		%	—		%	3.25		%
Variable rate debt	$	490		$	563,812		$	—		$	—		$	—		$	—		$	564,302		$	564,300
Average interest rate on variable rate debt(2)	1.55% + Variable Rate			1.55% + Variable Rate			—			—			—			—			1.55% + Variable Rate

____________

FOOTNOTES:

(1)The estimated fair value of our fixed and variable rate debt was determined using discounted cash flows based on market interest rates as of March 31, 2023. We determined market rates through discussions with our existing lenders by pricing our loans with similar terms and current rates and spreads.

(2)Variable rates applicable to our variable rate debt include LIBOR and SOFR.

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

As of March 31, 2023, the Company’s debt is comprised of approximately 3.6% in fixed rate debt, approximately 74.3% in variable rate debt with current interest rate protection and approximately 22.1% of unhedged variable rate debt. The remaining unhedged variable rate debt primarily relates to our Credit Facilities. Overall, we believe longer term fixed rate debt could be beneficial in a rising interest rate or rising inflation rate environment and as such we continue to evaluate the need for additional interest rate protection on unhedged variable rate debt or variable rate debt with interest rate protection scheduled to mature.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control over Financial Reporting

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

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes in our assessment of our risk factors from those set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

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

Unregistered Sales of Equity Securities – None

Issuer Purchases of Equity Securities – None

Secondary Sales of Registered Shares between Investors

During the three months ended March 31, 2023 and 2022, there were approximately 332,000 shares and 361,000 shares transferred between investors, respectively, at an average sales price per share of approximately $5.37 and $4.52, respectively. We are not aware of any other trades of our shares, other than previous purchases made in our Offerings and/or redemptions of shares by us.

Item 3. Defaults Upon Senior Securities – None

Item 4. Mine Safety Disclosure – Not Applicable

Item 5. Other Information – None

Item 6. Exhibits

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

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EXHIBIT INDEX

Exhibits

The following exhibits are included, or incorporated by reference in this Quarterly Report on Form 10-Q for the three months ended March 31, 2023 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit No.	Description
3.1	Third Articles of Amendment and Restatement of CNL Healthcare Properties, Inc. (Previously filed as Exhibit 3.1 to the Current Report on Form 8-K filed July 25, 2016 and incorporated herein by reference.)
3.2	Third Amended and Restated Bylaws of CNL Healthcare Properties, Inc., effective June 27, 2013. (Previously filed as Exhibit 3.2 to the Current Report on Form 8-K filed July 2, 2013 and incorporated herein by reference.)
4.1	Statement regarding restrictions on transferability of shares of common stock (to appear on stock certificate or to be sent upon request and without charge to stockholders issued shares without certificates). (Previously filed as Exhibit 4.5 to the Pre-effective Amendment One to the Registration Statement on Form S-11 (File No. 333-168129) filed October 20, 2010 and incorporated herein by reference.)
31.1	Certification of Chief Executive Officer of CNL Healthcare Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
31.2	Certification of Chief Financial Officer of CNL Healthcare Properties, Inc., Pursuant to Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
32.1	Certification of Chief Executive Officer and Chief Financial Officer of CNL Healthcare Properties, Inc., Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Filed herewith.)
101	The following materials from CNL Healthcare Properties, Inc. Quarterly Report on Form 10-Q for the three months ended March 31, 2023, formatted in iXBRL (Inline eXtensible Business Reporting Language); (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Loss, (iv) Condensed Consolidated Statements of Stockholders’ Equity and Redeemable Noncontrolling Interest, (v) Condensed Consolidated Statements of Cash Flows, and (vi) Notes to the Condensed Consolidated Financial Statements.
104	Cover Page Interactive Data File included as Exhibit 101 (embedded within the Inline XBRL document)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized, on the 11th day of May 2023.

CNL HEALTHCARE PROPERTIES, INC.
By:	/s/ Stephen H. Mauldin
	STEPHEN H. MAULDIN
	Chief Executive Officer and President
	(Principal Executive Officer)
By:	/s/ Ixchell C. Duarte
	IXCHELL C. DUARTE
	Chief Financial Officer, Senior Vice President and Treasurer
	(Principal Financial Officer and Principal Accounting Officer)

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