chp-10q_20190630.htm

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.

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 ☒

The number of shares of common stock of the registrant outstanding as of July 31, 2019 was 173,963,445.

	June 30,			December 31,
ASSETS	2019			2018
Real estate investment properties, net (including VIEs $143,577 and $146,341, respectively)	$	1,432,298		$	1,455,149
Assets held for sale, net (including VIEs $0 and $39,601, respectively)		146,806			1,147,645
Cash (including VIEs $523 and $342, respectively)		52,605			57,109
Other assets (including VIEs $515 and $678, respectively)		25,607			23,488
Deferred rent and lease incentives (including VIEs $7,961 and $7,160, respectively)		15,458			14,763
Restricted cash (including VIEs $541 and $208, respectively)		7,921			6,119
Intangibles, net		1,417			1,614
Total assets	$	1,682,112		$	2,705,887

LIABILITIES AND EQUITY

Liabilities:
Mortgages and other notes payable, net (including VIEs $81,423 and $102,578, respectively)	$	477,184		$	530,644
Credit facilities		262,714			425,613
Liabilities associated with assets held for sale (including VIEs $0 and $30,695, respectively)		872			774,019
Accounts payable and accrued liabilities (including VIEs $1,122 and $784, respectively)		23,433			21,882
Other liabilities (including VIEs $932 and $1,321, respectively)		9,964			8,548
Due to related parties		2,281			3,255
Total liabilities		776,448			1,763,961

Commitments and contingencies (Note 13)

Redeemable noncontrolling interest		587			579

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 and 186,626 shares issued, and 173,963 and 173,963 shares outstanding, respectively		1,740			1,740
Capital in excess of par value		1,516,949			1,516,543
Accumulated income (loss)		107,507			(233,847	)
Accumulated distributions		(722,425	)		(345,347	)
Accumulated other comprehensive income (loss)		(91	)		1,177
Total stockholders' equity		903,680			940,266
Noncontrolling interest		1,397			1,081
Total equity		905,664			941,926
Total liabilities and equity	$	1,682,112		$	2,705,887

The abbreviation VIEs above means variable interest entities.

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenues:
Rental income and related revenues	$	8,259		$	8,747		$	17,182		$	17,547
Resident fees and services		71,888			68,442			143,163			135,961
Total revenues		80,147			77,189			160,345			153,508

Operating expenses:
Property operating expenses		46,568			44,291			92,583			88,559
General and administrative expenses		5,225			3,194			8,184			6,360
Asset management fees		4,589			4,570			9,182			9,136
Property management fees		3,410			3,815			6,878			8,063
Financing coordination fees		1,878			—			1,878			—
Depreciation and amortization		12,347			13,771			24,681			28,666
Total operating expenses		74,017			69,641			143,386			140,784
Gain on sale of real estate		228			1,049			228			1,049

Operating income		6,358			8,597			17,187			13,773

Other income (expense):
Interest and other income		593			51			1,046			95
Interest expense and loan cost amortization		(11,359	)		(10,504	)		(22,648	)		(20,914	)
Equity in earnings of unconsolidated entity		98			84			194			171
Total other expense		(10,668	)		(10,369	)		(21,408	)		(20,648	)

Loss before income taxes		(4,310	)		(1,772	)		(4,221	)		(6,875	)
Income tax expense		(533	)		(928	)		(1,188	)		(1,545	)
Loss from continuing operations		(4,843	)		(2,700	)		(5,409	)		(8,420	)
Income (loss) from discontinued operations		333,370			(4,634	)		343,844			(6,812	)
Net income (loss)		328,527			(7,334	)		338,435			(15,232	)
Less: Amounts attributable to noncontrolling interest
Net loss from continuing operations		(2	)		(21	)		(2	)		(43	)
Net income (loss) from discontinued operations		257			(5	)		265			(7	)
Net income (loss) attributable to common stockholders	$	328,272		$	(7,308	)	$	338,172		$	(15,182	)

Net income (loss) per share of common stock (basic and diluted)
Continuing operations	$	(0.03	)	$	(0.02	)	$	(0.03	)	$	(0.05	)
Discontinued operations	$	1.92		$	(0.03	)	$	1.98		$	(0.04	)
Weighted average number of shares of common stock outstanding (basic and diluted)		173,963			174,201			173,963			174,526

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income (loss)	$	328,527		$	(7,334	)	$	338,435		$	(15,232	)

Other comprehensive income (loss):
Unrealized (loss) gain on derivative financial instruments, net		(130	)		496			(1,036	)		3,523
Reclassification of interest rate swaps upon derecognition		(509	)		127			(509	)		253
Reclassification of interest rate caps upon derecognition		265		―				265			—
Unrealized loss on derivative financial instruments of equity method investments		(2	)		—		12				—
Total other comprehensive income (loss)		(376	)		623			(1,268	)		3,776

Comprehensive income (loss)		328,151			(6,711	)		337,167			(11,456	)
Less: Comprehensive income (loss) attributable to noncontrolling interest		255			(26	)		263			(50	)
Comprehensive income (loss) attributable to common stockholders	$	327,896		$	(6,685	)	$	336,904		$	(11,406	)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

															Accumulated
	Redeemable		Common Stock				Capital in								Other			Total			Non-
	Noncontrolling		Number		Par		Excess of		Accumulated			Accumulated			Comprehensive			Stockholders'			controlling			Total
	Interest		of Shares		Value		Par Value		Income (Loss)			Distributions			Income (Loss)			Equity			Interest			Equity
Balance at March 31, 2019	$	574		173,963	$	1,740	$	1,516,949	$	(220,765	)	$	(365,593	)	$	285		$	932,616		$	1,154		$	934,344
Net income		13	―		―		―			328,272		―			―				328,272			242			328,527
Other comprehensive loss	―		―		―		―		―			―				(376	)		(376	)	―				(376	)
Distribution to holder of promoted interest	―		―		―		―		―			―			―			―			―			―
Distribution to holder of noncontrolling interest	―		―		―		―		―			―			―			―				(530	)		(530	)
Cash distributions declared ($2.0512 per share)	―		―		―		―		―				(356,832	)	―				(356,832	)					(356,832	)
Contribution from noncontrolling interests	―		―		―		―		―			―			―			―				531			531
Balance at June 30, 2019	$	587		173,963	$	1,740	$	1,516,949	$	107,507		$	(722,425	)	$	(91	)	$	903,680		$	1,397		$	905,664

Balance at December 31, 2018	$	579		173,963	$	1,740	$	1,516,543	$	(233,847	)	$	(345,347	)	$	1,177		$	940,266		$	1,081		$	941,926
Adoption of Lease ASU (refer to Note 2)	―		―		―		―			3,182		―			―				3,182		―				3,182
Net income		8	―		―		―			338,172		―			―				338,172			255			338,435
Other comprehensive loss	―		―		―		―		―			―				(1,268	)		(1,268	)	―				(1,268	)
Distributions to holders of promoted interest	―		―		―			406	―			―			―				406		―				406
Distribution to holder of noncontrolling interest	―		―		―		―		―			―			―			―				(530	)		(530	)
Cash distributions declared ($2.16759 per share)	―		―		―		―		―				(377,078	)	―				(377,078	)	―				(377,078	)
Contribution from noncontrolling interests	―		―		―		―		―			―			―			―				591			591
Balance at June 30, 2019	$	587		173,963	$	1,740	$	1,516,949	$	107,507		$	(722,425	)	$	(91	)	$	903,680		$	1,397		$	905,664

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST

																			Accumulated
	Redeemable			Common Stock						Capital in									Other			Total			Non-
	Noncontrolling			Number			Par			Excess of			Accumulated			Accumulated			Comprehensive			Stockholders'			controlling			Total
	Interest			of Shares			Value			Par Value			Loss			Distributions			Income (Loss)			Equity			Interest			Equity
Balance at March 31, 2018	$	427			173,991		$	1,741		$	1,517,071		$	(216,649	)	$	(284,607	)	$	2,168		$	1,019,724		$	1,137		$	1,021,288
Subscriptions received for common stock
through reinvestment plan	―				1,060			10			10,925		―			―			―				10,935		―				10,935
Redemptions of common stock	―				(1,075	)		(11	)		(10,924	)	―			―			―				(10,935	)	―				(10,935	)
Net loss		(6	)	―			―			―				(7,308	)	―			―				(7,308	)		(20	)		(7,334	)
Other comprehensive income	―			―			―			―			―			―				623			623		―				623
Distribution to holder of noncontrolling interest	―			―			―			―			―			―			―			―				(8	)		(8	)
Cash distributions declared ($0.11639 per share)	―			―			―			―			―				(20,247	)	―				(20,247	)	―				(20,247	)
Balance at June 30, 2018	$	421			173,976		$	1,740		$	1,517,072		$	(223,957	)	$	(304,854	)	$	2,791		$	992,792		$	1,109		$	994,322

Balance at December 31, 2017	$	425			174,634		$	1,747		$	1,523,372		$	(208,775	)	$	(264,283	)	$	(985	)	$	1,051,076		$	1,159		$	1,052,660
Subscriptions received for common stock
through reinvestment plan	―				2,133			21			21,992		―			―			―				22,013		―				22,013
Redemptions of common stock	―				(2,791	)		(28	)		(28,292	)	―			―			―				(28,320	)	―				(28,320	)
Net loss		(8	)	―			―			―				(15,182	)	―			―				(15,182	)		(42	)		(15,232	)
Other comprehensive income	―			―			―			―			―			―				3,776			3,776		―				3,776
Distribution to holder of noncontrolling interest	―			―			―			―			―			―			―			―				(8	)		(8	)
Cash distributions declared ($0.23278 per share)	―			―			―			―			―				(40,571	)	―				(40,571	)	―				(40,571	)
Contribution from noncontrolling interests		4		―			―			―			―			―			―			―			―				4
Balance at June 30, 2018	$	421			173,976		$	1,740		$	1,517,072		$	(223,957	)	$	(304,854	)	$	2,791		$	992,792		$	1,109		$	994,322

	Six Months Ended
	June 30,
	2019			2018
Operating activities:
Net cash flows provided by operating activities – continuing operations	$	23,084		$	17,838
Net cash flows provided by operating activities – discontinued operations		13,906			16,234
Net cash flows provided by operating activities		36,990			34,072

Investing activities:
Development of properties	―				(974	)
Capital expenditures		(2,025	)		(3,422	)
Proceeds from sale of real estate		246			5,761
Other investing activities		956			49
Net cash (used in) provided by investing activities – continuing operations		(823	)		1,414

Capital expenditures		(1,674	)		(870	)
Proceeds from sale of real estate		1,312,479		―
Other investing activities		(801	)		(1,190	)
Net cash provided by (used in) investing activities – discontinued operations		1,310,004			(2,060	)

Net cash provided by (used in) investing activities		1,309,181			(646	)

Financing activities:
Distributions to stockholders, net of distribution reinvestments		(377,078	)		(18,558	)
Redemptions of common stock	―				(29,096	)
Draws under credit facilities		25,000			15,000
Repayments on credit facilities		(434,125	)		(25,000	)
Proceeds from mortgages and other notes payable		178			40,459
Principal payments on mortgages and other notes payable		(558,156	)		(16,508	)
Payment of loan costs		(6,015	)		(919	)
Other financing activities		(730	)		(1,455	)
Net cash flows used in financing activities		(1,350,926	)		(36,077	)

Net decrease in cash and restricted cash		(4,755	)		(2,651	)
Cash and restricted cash at beginning of period, including held for sale		65,501			74,691
Cash and restricted cash at end of period, including held for sale	$	60,746		$	72,040

Supplemental disclosure of non-cash investing and financing activities:
Amounts incurred but not paid (including amounts due to related parties):
Redemptions payable	$	—		$	10,935

CNL Healthcare Properties, Inc. (“Company”) is a Maryland corporation that incorporated on June 8, 2010 and elected to be taxed as a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes beginning with the year ended December 31, 2012. The Company’s intention is 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 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 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 acquisition services were, and 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.

On September 30, 2015, the Company completed its public offerings (“Offerings”) and received aggregate subscription proceeds of approximately $1.7 billion. In October 2015, the Company deregistered the unsold shares of its common stock under its previous registration statement on Form S-11, except for 20 million shares that it registered on Form S-3 under the Securities Exchange Act of 1933 with the Securities and Exchange Commission (“SEC”) for the sale of additional shares of common stock through its distribution reinvestment plan (“Reinvestment Plan”). Effective July 11, 2018, the Company suspended both its Reinvestment Plan and its stock redemption plan (“Redemption Plan”).

In 2017, the Company began evaluating strategic alternatives to provide liquidity to its stockholders. In April 2018, the Company’s board of directors formed a special committee consisting solely of its independent directors (“Special Committee”) to consider possible strategic alternatives, including, but not limited to (i) the listing of the Company’s or one of its subsidiaries’ common stock on a national securities exchange, (ii) an orderly disposition of the Company’s assets or one or more of the Company’s asset classes and the distribution of the net sale proceeds thereof to the stockholders of the Company, and (iii) a potential business combination or other transaction with a third-party or parties that provides the stockholders of the Company with cash and/or securities of a publicly traded company (collectively, among other options, “Possible Strategic Alternatives”). The Special Committee engaged HFF Securities L.P. and KeyBanc Capital Markets Inc. to act as financial advisors in connection with exploring Possible Strategic Alternatives. As part of executing on Possible Strategic Alternatives, the Company committed to a plan to sell a total of 70 properties, classified these 70 properties as held for sale and, as of June 30, 2019, the Company had sold 59 of the aforementioned 70 properties.

In December 2018, the Company entered into an agreement of purchase and sale (“MOB Sale Agreement”) with a subsidiary of Welltower Inc. (NYSE: WELL) for the sale of 55 medical office buildings and related properties (“MOB Sale”) for a gross sales price of $1.25 billion, subject to certain pro-rations and other adjustments as described in the MOB Sale Agreement. In May 2019, the Company completed the MOB Sale and used the net cash proceeds to: (1) repay indebtedness secured by or allocated to the 55 properties comprising the MOB Sale; (2) rebalance other corporate borrowings and (3) make a special cash distribution to the Company’s stockholders.

In March 2019, the Company entered into an agreement of purchase and sale (“IRF Sale Agreement”) for the sale of four post-acute care properties (“IRF Sale”) with subsidiaries of Global Medical REIT Inc. (NYSE: GMRE) for a gross sales price of $94 million, subject to certain pro-rations and other adjustments as described in the IRF Sale Agreement. In April 2019, the Company completed the IRF Sale and used the net cash proceeds to repay indebtedness secured by or cross-collateralized with the four properties comprising the IRF Sale.

In June 2019, the Company terminated its engagement of HFF Securities L.P., one of the financial advisors to the Special Committee in connection with exploring Possible Strategic Alternatives, subject to a 12-month tail of certain fees and obligations under the terminated engagement letter.

In July 2019, the Company entered into a purchase and sale agreement (“Beaumont Sale Agreement”) with Global Medical REIT, L.P., (NYSE: GMRE) for the sale of an acute care facility in Beaumont, Texas (“Beaumont Sale”). Refer to Note 14. “Subsequent Events” for additional information.

As of June 30, 2019, including the 11 remaining properties classified as held for sale, the Company’s healthcare investment portfolio is geographically diversified with properties in 30 states and consisted of interests in 83 properties, including 72 seniors housing properties, eight post-acute care facilities and three acute care hospitals.

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 REIT Investment Diversification and Empowerment Act of 2007 (“RIDEA”) structures; however, the Company has also leased 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, although most of the Company’s investments have been wholly owned, it has invested through partnerships with other entities where it is believed to be appropriate and beneficial.

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 quarter and six months ended June 30, 2019 may not be indicative of the results that may be expected for the year ending December 31, 2019. Amounts as of December 31, 2018 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, 2018.

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.

In accordance with the guidance for the consolidation of a VIE, the Company is required to identify entities for which control is achieved through means other than voting rights and to determine the primary beneficiary of its VIEs. The Company qualitatively assesses whether it is the primary beneficiary of a VIE and considers various factors including, but not limited to, the design of the entity, its organizational structure including decision-making ability and financial agreements, its ability and the rights of others to participate in policy making decisions, as well as its ability to replace the VIE manager and/or liquidate the entity.

Reclassifications – Certain amounts in the prior year’s condensed consolidated statement of operations and statement of cash flows have been reclassified to conform to the current year’s presentation, primarily related to classification of certain properties as discontinued operations, with no effect on the other previously reported consolidated financial statements.

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.

Adopted Accounting Pronouncements — In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842): Accounting for Leases,” which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The ASU requires lessees to recognize assets and liabilities on the balance sheet for the rights and obligations created by all leases with terms of more than 12 months. The ASU further modifies lessors’ classification criteria for leases and the accounting for sales-type and direct financing leases. The ASU also requires qualitative and quantitative disclosures designed to give financial statement users additional information on the amount, timing, and uncertainty of cash flows arising from leases. In July 2018, the FASB issued ASU 2018-11, “Leases (Topic 842): Targeted Improvements,” which includes a practical expedient for lessors that allows them to elect to not separate lease and non-lease components in a contract for the purpose of revenue recognition and disclosure if certain criteria are met. The Company elected this practical expedient and applied the guidance to all of the leases that qualified under the established criteria. In December 2018, the FASB issued ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors,” which addressed challenges encountered in determining certain lessor costs paid by the lessee directly to third parties by allowing lessors to exclude these costs from its variable lease payments. This amendment did not have a material impact on the Company’s financial statements and related disclosures as it conformed Accounting Standard Codification (“ASC”) 842 to the Company’s historical accounting under ASC 840. In March 2019, the FASB issued ASU 2019-01, “Leases (Topic 842): Codification Improvements,” which clarified the transition guidance related to interim disclosure requirements for the year of adoption. All of the ASC 842 ASUs are effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company adopted these ASU’s on January 1, 2019 using a modified retrospective approach, which impacted the Company’s consolidated financial statements and related financial statement disclosures; specifically, the Company’s consolidated financial position as it relates to the required presentation for arrangements such as ground or other leases in which the Company is the lessee. However, the adoption of these ASUs did not have a material impact on the Company’s consolidated results of operations or cash flows.

More specifically, the adoption of ASC 842 resulted in the Company recording operating lease assets and liabilities on January 1, 2019 with the difference between the operating lease assets and liabilities being record as an adjustment to the Company’s beginning accumulated loss balance.

The following table provides additional details by financial statement line item of the adjusted presentation in the Company’s consolidated financial position (in thousands):

In May 2019, in connection with the MOB Sale, the Company disposed of substantially all the arrangements such as ground or other leases in which the Company is the lessee.

In June 2018, the FASB issued ASU 2018-07, “Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting,” which expands the scope to include share-based payment transactions for acquiring goods and services from nonemployees. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payments. The amendments also clarify that this ASU does not apply to share-based payments used to provide financing to the issuer or awards granted in conjunction with selling of goods or services to customers as a part of a contract accounted for under Revenue from Contracts with Customers (Topic 606). The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2018. The Company adopted this ASU prospectively on January 1, 2019; the adoption of which did not have a material impact on the Company’s consolidated results of operations or cash flows.

Recent Accounting Pronouncements — In June 2016, the FASB issued ASU No. 2016-13, “Measurement of Credit Losses on Financial Instruments (Topic 326),” which requires a new forward-looking expected loss model to be used for receivables, held-to-maturity debt, loans and other financial instruments. Previously, when credit losses were measured under current GAAP, an entity generally only considered past events and current conditions in measuring the incurred loss. The amendments eliminate the probable initial threshold for recognition of credit losses in current GAAP and, instead, reflect an entity’s current estimate of all expected credit losses over the life of the financial instrument. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2019. The Company has determined it will adopt this ASU on January 1, 2020 and is currently evaluating the impact of adoption on its consolidated financial statements.

The following table presents disaggregated revenue related to the Company’s resident fees and services during the six months ended June 30, 2019 and 2018:

The gross carrying amount and accumulated depreciation of the Company’s real estate assets as of June 30, 2019 and December 31, 2018 are as follows, excluding assets held for sale (in thousands):

Depreciation expense on the Company’s real estate investment properties, net was approximately $12.2 million and $24.5 million for the quarter and six months ended June 30, 2019, respectively, and approximately $13.2 million and $26.4 million for the quarter and six months ended June 30, 2018. These amounts include depreciation through the determination date on assets held for sale; refer to Note 5. “Assets and Associated Liabilities Held For Sale and Discontinued Operations” for additional information.

As part of executing on Possible Strategic Alternatives, the Company committed to a plan to sell a total of 70 properties, including: (1) six skilled nursing facilities located in Arkansas (“Perennial Communities”); (2) a portfolio of 53 MOBs, five post-acute care facilities and five acute care hospitals located across the U.S. (collectively, the “MOB/Healthcare Portfolio”); and (3) a post-acute care property located in Colorado (“Welbrook Senior Living Grand Junction”). As such, the Company classified a total of 70 properties as held for sale. The Company believes the sale of the MOB/Healthcare Portfolio represents a strategic shift in the Company’s operations and, therefore, classified the operations of those properties as discontinued operations. The sale of the other seven properties would not cause a strategic shift in the Company’s operations, and are not considered individually significant; therefore, those properties do not qualify as discontinued operations.

In December 2018, the Company entered into the MOB Sale Agreement related to the 55 MOBs and related properties within the MOB/Healthcare Portfolio that comprise the MOB Sale, for a gross sales price of $1.25 billion, subject to certain pro-rations and other adjustments as described in the MOB Sale Agreement. In May 2019, the Company completed the MOB Sale and recorded a gain for financial reporting purposes.

In March 2019, the Company entered into the IRF Sale Agreement related to the four post-acute care properties within the MOB/Healthcare Portfolio that comprise the IRF Sale, for a gross sales price of $94 million, subject to certain pro-rations and other adjustments as described in the IRF Sale Agreement. In April 2019, the Company completed the IRF Sale and recorded a gain for financial reporting purposes.

As of June 30, 2019, the 11 remaining properties classified as held for sale include: (1) the six Perennial Communities; (2) three acute care hospitals and one post-acute care facility within the MOB/Healthcare Portfolio; and (3) Welbrook Senior Living Grand Junction. As of June 30, 2019, the assets held for sale and the liabilities associated with those assets held for sale consisted of the following (in thousands):

As of December 31, 2018, the 70 properties classified as assets held for sale and the liabilities associated with those assets held for sale consisted of the following (in thousands):

	As of December 31, 2018
	MOB/Healthcare Portfolio		Other		Total
Real estate held for sale, net	$	952,656	$	51,339	$	1,003,995
Real estate under development		3,490		—		3,490
Intangibles, net		82,417		800		83,217
Deferred rent and lease incentives		36,562		6,501		43,063
Other assets		11,425		182		11,607
Restricted cash		2,013		260		2,273
Assets held for sale, net	$	1,088,563	$	59,082	$	1,147,645

Mortgages and other notes payable, net	$	492,701	$	8,097	$	500,798
Credit facilities		212,731		34,778		247,509
Other liabilities		16,653		634		17,287
Accounts payable and accrued liabilities		8,425		—		8,425
Liabilities associated with assets held for sale	$	730,510	$	43,509	$	774,019

The Company classified the revenues and expenses related to the 63 properties comprising its MOB/Healthcare Portfolio as discontinued operations in the accompanying condensed consolidated statements of operations, as it believes the sale of these properties represents a strategic shift in the Company’s operations. The following table summarizes the Company’s income (loss) from discontinued operations for the quarter and six months ended June 30, 2019 and 2018 (in thousands):

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Revenues:
Rental income and related revenues	$	14,997		$	28,621		$	44,593		$	56,887

Operating expenses:
Property operating expenses		4,192			7,486			11,054			15,097
General and administrative		256			455			549			763
Asset management fees		1,508			3,031			4,504			6,062
Property management fees		482			1,116			1,240			2,193
Financing coordination fees		—			2,326			—			2,326
Depreciation and amortization		—			10,683			—			21,364
Total operating expenses		6,438			25,097			17,347			47,805

Gain on sale of real estate		331,663			—			331,663			—

Operating income		340,222			3,524			358,909			9,082

Other income (expense):
Interest and other income (expense)		2			1			11			105
Interest expense and loan cost amortization ⁽¹⁾⁽²⁾		(6,629	)		(8,140	)		(14,831	)		(15,962	)
Total other expense		(6,627	)		(8,139	)		(14,820	)		(15,857	)

Income (loss) before income taxes		333,595			(4,615	)		344,089			(6,775	)
Income tax expense		(225	)		(19	)		(245	)		(37	)
Income (loss) from discontinued operations	$	333,370		$	(4,634	)	$	343,844		$	(6,812	)

As of June 30, 2019, excluding the 11 remaining properties classified as held for sale, the Company owned 15 seniors housing properties that have been leased to tenants under triple-net operating leases. Under the terms of the Company’s triple-net lease agreements, each tenant is responsible for the payment of property taxes, general liability insurance, utilities, repairs and maintenance, including structural and roof maintenance expenses. Each tenant is expected to pay real estate taxes directly to the taxing authorities and, therefore, such amounts are not included in the Company’s condensed consolidated financial statements. However, if the tenant does not pay the real estate taxes, the Company would be liable for such amounts. As of June 30, 2019, the total annualized property tax assessed on these properties is approximately $3.2 million.

As of June 30, 2019, excluding the 11 remaining properties classified as held for sale, the Company’s triple-net operating leases had a weighted average remaining lease term of 5.4 years based on annualized base rents expiring between 2022 and 2027, subject to the tenants’ options to extend the lease terms by an additional five years. In addition, certain tenants hold options to extend the lease terms for multiple five year periods, which are generally subject to similar terms and conditions provided under the initial lease term, including rent increases. The Company’s lease term is determined based on the non-cancellable lease term unless economic incentives make it reasonably certain that an extension option will be exercised, in which case the Company includes the extended lease term.

The following are future minimum lease payments to be received under non-cancellable operating leases for the remainder of 2019, each of the next four years and thereafter, in the aggregate, as of June 30, 2019, excluding the 11 remaining properties classified as held for sale (in thousands):

The above future minimum lease payments to be received exclude straight-line rent adjustments and base rent attributable to any renewal options exercised by the tenants in the future.

As of June 30, 2019 and December 31, 2018, the Company had five and eight subsidiaries, respectively, classified as VIEs. The change in the number of VIEs across periods resulted from three VIE properties being sold in connection with the MOB Sale. The aggregate carrying amount and major classifications of the consolidated assets that can be used to settle obligations of the VIEs and liabilities of the consolidated VIEs that are non-recourse to the Company as of June 30, 2019 and December 31, 2018 are as follows (in thousands):

The Company’s maximum exposure to loss as a result of its involvement with these VIEs is limited to its net investment in these entities which totaled approximately $67.6 million as of June 30, 2019. The Company’s exposure is limited because of the non-recourse nature of the borrowings of the VIEs.

As of June 30, 2019, the Company had five subsidiaries which are classified as VIEs due to the following factors and circumstances:

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

In May 2019, as further described in Note 1. “Organization,” the Company completed the MOB Sale and used a portion of the net cash proceeds from the MOB Sale to repay the Company’s unsecured credit facilities which, including indebtedness allocated to certain of the 55 properties comprising the MOB Sale, resulted in total repayments on the Company’s unsecured credit facilities as follows: (1) approximately $229.1 million on the Company’s senior unsecured revolving line of credit (“2014 Revolving Credit Facility”); (2) $175 million on

the Company’s initial senior unsecured term loan facility (“First Term Loan Facility”); and (3) $275 million on the Company’s additional senior unsecured term loan facility (“Second Term Loan Facility” and, collectively with the 2014 Revolving Credit Facility and First Term Loan Facility, “2014 Credit Facilities”). Lastly, the Company strategically paid down approximately $28.6 million of indebtedness secured by other properties. In connection with the refinancing of the 2014 Credit Facilities and the strategic pay down of indebtedness, the Company wrote-off approximately $0.7 million in unamortized loan costs as a loss on the early extinguishment of debt, which is included in interest expense and loan cost amortization in the accompanying condensed consolidated statements of operations for the quarter and six months ended June 30, 2019.

Concurrently, in May 2019, the Company entered into new unsecured credit facilities, which include: (1) a $250 million senior unsecured revolving credit facility (“2019 Revolving Credit Facility”) and (2) a $265 million senior unsecured term loan facility (“2019 Term Loan Facility” and together with the 2019 Revolving Credit Facility, “2019 Credit Facilities”). The 2019 Revolving Credit Facility has an initial four-year term through May 2023, plus one 12-month extension option, and the 2019 Term Loan Facility has an initial five-year term through May 2024. The 2019 Credit Facilities bear interest based on 30-day LIBOR plus a spread that varies with the Company’s leverage ratio. In connection with the refinancing of the 2014 Credit Facilities, the Company paid financing coordination fees to the Advisor of approximately $5.2 million; refer to Note 9. “Related Party Arrangements” for additional information.

The following table provides details of the Company’s indebtedness as of June 30, 2019 and December 31, 2018, excluding indebtedness associated with assets held for sale (in thousands):

The following is a schedule of future principal payments and maturity for the Company’s total indebtedness for the remainder of 2019, each of the next four years and thereafter, in the aggregate, as of June 30, 2019 (in thousands):

The following table provides details of the fair market value and carrying value of the Company’s indebtedness as of June 30, 2019 and December 31, 2018 (in millions):

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. The estimated fair value of accounts payable and accrued liabilities approximates the carrying value as of June 30, 2019 and December 31, 2018 because of the relatively short maturities of the obligations.

All of the Company’s mortgage and construction 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 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 and (viii) 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 June 30, 2019, the Company was not in compliance with the debt service coverage ratio on its Waterstone on Augusta loan. However, the Company was able to subsequently cure this covenant through the pay down of the outstanding debt in August 2019. As of June 30, 2019, the Company was in compliance with all other financial covenants.

In April 2018, the Company and CNL Healthcare Manager Corp. (“Property Manager”) agreed not to renew the property management agreement beyond its expiration date in June 2018. In addition, in May 2019, the Company’s board of directors approved the renewal of its advisory agreement with the Advisor through June 2020.

During the quarter and six months ended June 30, 2019, the Company paid approximately $2.7 million and $2.9 million, respectively, of cash distributions on restricted stock issued pursuant to the Advisor expense support agreement, which includes the special cash distribution as described further in Note 11 “Stockholders’ Equity.” During the quarter and six months ended June 30, 2018, the Company paid approximately $0.2 million and $0.3 million, respectively, of cash distributions on restricted stock issued 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, including amounts included in income (loss) from discontinued operations for the quarter and six months ended June 30, 2019 and 2018, and related amounts unpaid as of June 30, 2019 and December 31, 2018 are as follows (in thousands):

	Quarter ended				Six Months Ended				Unpaid amounts as of ⁽¹⁾
	June 30,				June 30,				June 30,		December 31,
	2019		2018		2019		2018		2019		2018
Reimbursable expenses:
Operating expenses ⁽²⁾	$	1,472	$	1,604	$	2,739	$	3,228	$	667	$	722
		1,472		1,604		2,739		3,228		667		722
Investment services fees ⁽³⁾		—		60		—		60		—		—
Financing coordination fees ⁽⁴⁾		5,150		2,326		5,351		2,326		—		—
Property management fees ⁽⁵⁾		—		1,154		—		2,323		—		—
Asset management fees		6,088		7,601		13,685		15,198		1,614		2,533
Disposition fees ⁽⁶⁾		2,957		58		2,957		58		—		—
	$	15,667	$	12,803	$	24,732	$	23,193	$	2,281	$	3,255

The following summarizes the terms of the Company’s, or its equity method investment’s, derivative financial instruments and the corresponding asset (liability) as of June 30, 2019 and December 31, 2018 (in thousands):

												Fair value asset (liability) as of
Notional Amount			Strike ⁽¹⁾			Credit Spread ⁽¹⁾			Trade date	Forward date	Maturity date	June 30, 2019		December 31, 2018
$	—	(2) (3)		2.3	%		2.4	%	9/12/2014	8/1/2015	7/15/2019	$	—	$	168
$	—	(2)		1.6	%		2.0	%	12/23/2014	12/19/2014	2/19/2019	$	—	$	220
$	—	(2) (3)		1.7	%		2.0	%	1/9/2015	12/10/2015	12/22/2019	$	—	$	966
$	117,000	(4)		2.3	%		—	%	8/29/2017	8/29/2017	9/1/2019	$	19	$	247
$	223,000	(3) (4)		3.0	%		—	%	3/28/2018	11/30/2018	12/19/2019	$	—	$	44
$	—	(3) (4)		3.0	%		—	%	3/28/2018	7/10/2018	12/19/2019	$	—	$	6
$	—	(3) (4)		3.0	%		—	%	3/28/2018	2/19/2019	12/19/2019	$	—	$	19
$	—	(3) (4)		3.0	%		—	%	5/4/2018	5/4/2018	12/19/2019	$	—	$	6
$	10,500	(4)		3.3	%		—	%	2/28/2019	3/1/2019	9/1/2021	$	1	$	—

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

Distribution Reinvestment Plan — In July 2018, in light of the Company’s decision to proceed with the exploration of Possible Strategic Alternatives, the Company suspended the Reinvestment Plan and the Redemption Plan. As such, there were no such proceeds received for the quarter and six months ended June 30, 2019. For the quarter and six months ended June 30, 2018, the Company received proceeds through its Reinvestment Plan of approximately $10.9 million and $22.0 million, respectively.

Distributions — During the quarter and six months ended June 30, 2019, the Company declared cash distributions of approximately $356.8 million and $377.1 million, respectively, which included a special cash distribution funded with proceeds from the sale of real estate and all of which were paid in cash to stockholders. During the quarter and six months ended June 30, 2018, the Company declared cash distributions of approximately $20.2 million and $40.6 million, respectively, of which approximately $9.3 million and $18.6 million, respectively, were paid in cash to stockholders. For the quarter and six months ended June 30, 2018, approximately $10.9 million and $22.0 million, respectively, was reinvested pursuant to the Reinvestment Plan. No amounts distributed to stockholders during the quarter and six months ended June 30, 2019 and 2018 were required to be or have been treated as a return of capital for purposes of calculating the stockholders’ return on their invested capital as described in the advisory agreement.

Redemptions — In July 2018, in light of the Company’s decision to proceed with the exploration of Possible Strategic Alternatives, the Company suspended the Reinvestment Plan and the Redemption Plan. No requests for redemptions have been accepted subsequent to suspension of the Redemption Plan. As such, there were no requests for the redemption of common stock during the quarter and six months ended June 30, 2019. During the quarter and six months ended June 30, 2018, the Company received requests for the redemption of common stock of approximately $22.6 million and $40.0 million, respectively, of which $10.9 million and $28.3 million of these requests were approved for redemption at an average price of $10.17 and $10.14 per share, respectively.

During the quarter and six months ended June 30, 2018, as a result of the Redemption Plan being suspended, approximately $11.7 million in unsatisfied redemption requests were placed in the redemption queue and will remain there until such time, if at all, that the Company’s board of directors reinstates the Redemption Plan. Unless the Redemption Plan is reinstated by the Company’s board of directors, the Company will not as a general matter, accept or otherwise process any additional redemption requests received after July 11, 2018. There can be no guarantee that the Redemption Plan will be reinstated by the Company’s board of directors.

Other comprehensive income (loss)— The following table reflects the effect of derivative financial instruments held by the Company, or its equity method investment, and included in the condensed consolidated statements of comprehensive income (loss) for the quarter and six months ended June 30, 2019 and 2018 (in thousands):

Derivative financial instruments	Gain (loss) recognized in other comprehensive loss on derivative financial instruments					Location of gain (loss) reclassified into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings
	Quarter Ended						Quarter Ended
	June 30,						June 30,
	2019			2018			2019			2018
Interest rate swaps	$	325		$	340	Interest expense and loan cost amortization	$	124		$	548
Interest rate caps		(455	)		156	Interest expense and loan cost amortization		85			(501	)
Reclassification of interest rate swaps upon derecognition		(509	)		127	Interest expense and loan cost amortization		509			(127	)
Reclassification of interest rate caps upon derecognition		265		―		Interest expense and loan cost amortization		(265	)	―
Interest rate cap held by unconsolidated joint venture		(2	)	―		Interest expense and loan cost amortization		2		―
Total	$	(376	)	$	623		$	455		$	(80	)

Derivative financial instruments	Gain (loss) recognized in other comprehensive loss on derivative financial instruments					Location of gain (loss) reclassified into earnings	Gain (loss) reclassified from accumulated other comprehensive loss into earnings
	Six Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Interest rate swaps	$	(336	)	$	2,307	Interest expense and loan cost amortization	$	813		$	320
Interest rate caps		(700	)		1,216	Interest expense and loan cost amortization		137			(920	)
Reclassification of interest rate swaps upon derecognition		(509	)		253	Interest expense and loan cost amortization		509			(253	)
Reclassification of interest rate caps upon derecognition		265		―		Interest expense and loan cost amortization		(265	)	―
Interest rate cap held by unconsolidated joint venture		12		―		Interest expense and loan cost amortization		(12	)	―
Total	$	(1,268	)	$	3,776		$	1,182		$	(853	)

The accompanying condensed consolidated financial statements include an interim tax provision for the quarter and six months ended June 30, 2019 and 2018. The Company recorded a total provision for income taxes of approximately $0.5 million and $1.2 million for the quarter and six months ended June 30, 2019, respectively, and $0.9 million and $1.5 million for the quarter and six months ended June 30, 2018, respectively. Of the total provision for income taxes for the quarter and six months ended June 30, 2019, approximately $0.2 million and $0.3 million, respectively, represents current income tax expense, and approximately $0.3 million and $0.9 million, respectively, represents a decrease to the Company’s net deferred tax assets which is primarily due to the utilization of a portion of the Company’s TRS’s federal and state net operating loss carry-forwards. Of the total provision for income taxes for the quarter and six months ended June 30, 2018, approximately $0.2 million and $0.2 million, respectively, represents current income tax expense, and approximately $0.8 million and $1.3 million, respectively, represents a decrease to the Company’s net deferred tax assets which is primarily due to the utilization of a portion of the Company’s TRS’s federal and state net operating loss carry-forwards.

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. The Company has six remaining promoted interest agreements with third-party developers pursuant to which certain operating targets have been established that, upon meeting such targets, result in the developer being entitled to additional payments based on enumerated percentages of the assumed net proceeds of a deemed sale, subject to achievement of an established internal rate of return on the Company’s investment in the development. As of June 30, 2019, one property had met its established performance metrics, but no promoted interest obligation was currently owed pursuant to the distribution calculation; whereas for the remaining five promoted interest agreements, the established performance metrics were not met nor probable of being met as of June 30, 2019.

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 9. “Related Party Arrangements” for information on distributions declared related to these restricted stock shares.

In July 2019, the Company entered into the Beaumont Sale Agreement for a gross sales price of $33.6 million, subject to certain pro-rations and other adjustments as described in the Beaumont Sale Agreement. The closing of the Beaumont Sale is subject to the completion of due diligence and customary closing conditions, governmental and other third-party consents. There can be no assurance that the closing conditions will be satisfied or that the Beaumont Sale will be consummated. Approximately $0.3 million has been placed by the buyer in escrow and will be either applied to the purchase price at closing or refunded. The anticipated net sales proceeds from the Beaumont Sale are expected to exceed the net carrying value of the property.

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

Statements contained under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this Quarterly Report on Form 10-Q for the quarter and six months ended June 30, 2019 that are not statements of historical or current fact may constitute “forward-looking statements” within the meaning of the Federal Private Securities Litigation Reform Act of 1995. The Company intends that such forward-looking statements be subject to the safe harbor created by Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are statements that do not relate strictly to historical or current facts, but reflect management’s current understandings, intentions, beliefs, plans, expectations, assumptions and/or predictions regarding the future of the Company’s business and its performance, the economy, and other future conditions and forecasts of future events and circumstances. Forward-looking statements are typically identified by words such as “believes,” “expects,” “anticipates,” “intends,” “estimates,” “plans,” “continues,” “pro forma,” “may,” “will,” “seeks,” “should,” and “could” and words and terms of similar substance in connection with discussions of future operating or financial performance, business strategy and portfolios, projected growth prospects, cash flows, costs and financing needs, legal proceedings, amount and timing of anticipated future distributions, estimated net asset value (“NAV”) 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: a worsening economic environment in the U.S. or globally, including financial market fluctuations; risks associated with the Company’s investment strategy, including its concentration in the healthcare 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 NAV; 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; 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; risks related to property expansions and renovations; risks related to development projects or acquired property value-add conversions, if applicable, including construction delays, cost overruns, the Company’s inability to obtain necessary permits, and/or public opposition to these activities; competition for properties and/or tenants; defaults on or non-renewal of leases by tenants; failure to lease properties on favorable terms or at all; the impact of current and future environmental, zoning and other governmental regulations affecting the Company’s properties; the impact of changes in accounting rules; inaccuracies of the Company’s accounting estimates; unknown liabilities of acquired properties or liabilities caused by property managers or operators; material adverse actions or omissions by any joint venture partners; consequences of the Company’s net operating losses; increases in operating costs and other expenses; uninsured losses or losses in excess of the Company’s insurance coverage; the impact of outstanding and/or potential litigation; risks associated with the Company’s tax structuring; failure to qualify for and maintain the Company’s qualification as a REIT for federal income tax purposes; and the Company’s inability to protect its intellectual property and the value of its brand. Given these uncertainties, the Company cautions you not to place undue reliance on forward-looking information.

For further information regarding risks and uncertainties associated with the Company’s business, and other important factors that could cause the Company’s actual results to vary materially from those expressed or implied in its forward-looking statements, please refer to the factors listed and described in the Company’s reports filed from time to time with the U.S. SEC, including, but not limited to, the Company’s quarterly reports on Form 10-Q and the Company’s annual reports on Form 10-K, copies 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.

The following discussion is based on the condensed consolidated financial statements as of June 30, 2019 (unaudited) and December 31, 2018. Amounts as of December 31, 2018 included in the unaudited condensed consolidated financial statements have been derived from the audited consolidated financial statements as of that date. This information should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto, as well as the audited consolidated financial statements, notes and management’s discussion and analysis included in our Annual Report on Form 10-K for the year ended December 31, 2018.

CNL Healthcare Properties, Inc. is a Maryland corporation that incorporated on June 8, 2010. We elected to be taxed as a REIT for U.S. federal income tax purposes beginning with the year ended December 31, 2012 and our intention is 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.

We are externally managed and advised by our Advisor, CNL Healthcare Corp. 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 and dispositions on our behalf pursuant to an advisory agreement. In May 2019, we extended the advisory agreement with our Advisor through June 2020. For additional information on our Advisor, its affiliates or other related parties, as well as the fees and reimbursements we pay, see Note 9. “Related Party Arrangements.”

On September 30, 2015, we completed our Offerings and received aggregate subscription proceeds of approximately $1.7 billion. In October 2015, we deregistered the unsold shares of our common stock under our previous registration statement on Form S-11, except for 20 million shares that we registered on Form S-3 under the Securities Exchange Act of 1933 with the SEC for the sale of additional shares of common stock through our Reinvestment Plan. As part of moving forward with the consideration of Possible Strategic Alternatives, as described below under “Strategic Alternatives,” effective July 11, 2018, we suspended our Reinvestment Plan and, effective with the suspension of our Reinvestment Plan, stockholders who were participants in our Reinvestment Plan now receive cash distributions instead of additional shares of our common stock.

In 2017, we began evaluating strategic alternatives to provide liquidity to the Company’s stockholders. In April 2018, our board of directors formed a Special Committee to consider Possible Strategic Alternatives, including, but not limited to (i) the listing of the Company’s or one of its subsidiaries’ common stock on a national securities exchange, (ii) an orderly disposition of the Company’s assets or one or more of the Company’s asset classes and the distribution of the net sale proceeds thereof to the stockholders of the Company and (iii) a potential business combination or other transaction with a third-party or parties that provides the stockholders of the Company with cash and/or securities of a publicly traded company. The Special Committee engaged HFF Securities L.P. and KeyBanc Capital Markets Inc. to act as financial advisors in connection with exploring our Possible Strategic Alternatives. As part of executing on Possible Strategic Alternatives, we had committed to a plan to sell a total of 70 properties, classified these 70 properties as held for sale, and, as of June 30, 2019, we had sold 59 of the aforementioned 70 properties.

In connection with our consideration of the Possible Strategic Alternatives, we suspended both our Reinvestment Plan and our Redemption Plan effective July 11, 2018.

In December 2018, we entered into the MOB Sale Agreement with a subsidiary of Welltower Inc. (NYSE: WELL) for the MOB Sale, consisting of 55 properties within our MOB/Healthcare Portfolio, for a gross sales price of $1.25 billion, subject to certain pro-rations and other adjustments as described in the MOB Sale Agreement. In May 2019, we completed the MOB Sale and used the net cash proceeds to: (1) repay indebtedness secured by or allocated to the 55 properties comprising the MOB Sale; (2) rebalance other corporate borrowings and (3) make a special cash distribution to our stockholders.

In March 2019, we entered into the IRF Sale Agreement with subsidiaries of Global Medical REIT Inc. (NYSE: GMRE) related to the IRF Sale, consisting of four post-acute care properties within our MOB/Healthcare Portfolio, for a gross sales price of $94 million, subject to certain pro-rations and other adjustments as described in the IRF Sale Agreement. In April 2019, we completed the IRF Sale and used the net cash proceeds to repay indebtedness secured by or cross-collateralized with the four properties comprising the IRF Sale.

In June 2019, we terminated our engagement of HFF Securities L.P., one of the financial advisors to our Special Committee in connection with exploring Possible Strategic Alternatives, subject to a 12-month tail of certain fees and obligations under the terminated engagement letter.

In July 2019, we entered into the Beaumont Sale Agreement with Global Medical REIT, L.P., (NYSE: GMRE) related to the Beaumont Sale for a gross sales price of approximately $33.6 million, subject to certain pro-rations and other adjustments as described in the Beaumont Sale Agreement. The closing of the Beaumont Sale is subject to the completion of due diligence and customary closing conditions, governmental and other third-party consents. There can be no assurance that the closing conditions will be satisfied or that the Beaumont Sale will be consummated. To date, approximately $0.3 million has been placed by the buyer in escrow and will be either applied to the purchase price at closing or refunded.

As discussed above under “Strategic Alternatives,” we completed the IRF Sale in April 2019 and the MOB Sale in May 2019, which together consisted of 59 properties within the total 70 properties that we had previously classified as held for sale. As of June 30, 2019, including the 11 remaining properties classified as held for sale, our healthcare investment portfolio consisted of interests in 83 properties, comprising 72 seniors housing properties, eight post-acute care facilities and three acute care hospitals. Of our properties held as of June 30, 2019, five of our 72 seniors housing properties were owned through an unconsolidated joint venture and one was comprised of unimproved land. During the remainder of 2019, we intend to continue executing on our plan to sell the 11 remaining properties classified as held for sale.

We believe demographic trends and compelling supply and demand indicators presented a strong case for an investment focus on healthcare real estate and real estate-related assets. Our remaining healthcare investment portfolio is geographically diversified with properties in 30 states. The map below shows our remaining healthcare investment portfolio across geographic regions as of June 30, 2019:

The following table summarizes our remaining healthcare portfolio, after the completion of the IRF Sale and the MOB Sale, by asset class and investment structure as of June 30, 2019:

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

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

When evaluating the performance of our healthcare portfolio within the seniors housing and post-acute care asset classes, management reviews occupancy levels and monthly revenue per occupied unit, which we define as total revenue divided by average number of occupied units or beds and is considered a performance metric within these asset classes. Similarly, 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.

Our real estate portfolio is operated by a mix of national or regional operators and the following represent the significant tenants and operators that lease or manage 5% or more of our rentable space as of June 30, 2019, excluding the four remaining properties within our MOB/Healthcare Portfolio, which were classified as discontinued operations:

Tenants	Number of Properties		Rentable Square Feet (in thousands)		Percentage of Rentable Square Feet			Lease Expiration Year
TSMM Management, LLC		13		1,261		62.7	%	2022-2025
Wellmore, LLC		2		366		18.2	%	2026-2027
Community Compassion ⁽¹⁾		6		261		12.9	%		2023
Welbrook Senior Living, LLC ⁽¹⁾		1		125		6.2	%		2032
		22		2,013		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		31.1	%	2019-2024
Prestige Senior Living, LLC		13		895		14.3	%	2020-2024
Morningstar Senior Management, LLC		4		834		13.3	%		2023
SLH Austin Manager, LLC		3		431		6.9	%	2020-2023
Parc Communities, LLC		2		385		6.2	%	2020-2023
Harborchase Retirement, LLC		4		380		6.1	%	2023-2029
Other operators ⁽²⁾		18		1,382		22.1	%	2020-2027
		51		6,255		100.0	%

As of June 30, 2019, excluding the remaining four properties classified as discontinued operations, we owned 22 properties consisting of 15 seniors housing properties and the seven post-acute care properties, which are classified as held for sale, that have been leased to tenants under triple-net operating leases. During the six months ended June 30, 2019, our rental income from continuing operations represented approximately 10.3% of our total revenues from continuing operations.

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 would be liable.

Our asset management team collaborates with existing tenants to understand their current and anticipated space needs in advance of their lease term renewal date. As of June 30, 2019, none of our rental income from continuing operations was scheduled to expire until 2022. Therefore, we do not expect lease turnover to have a significant impact on our cash flows from operations in the near term. We work with and begin lease-related negotiations well in advance of the lease expirations or renewal period options in order for us to maintain a balanced lease rollover schedule and high occupancy levels, as well as to enhance the value of our properties through extended lease terms. Lease extensions are likely to create an obligation to pay lease commissions, lease incentives and/or tenant improvements and may also provide our tenants with some periods of reduced and/or “free rent.” Certain amendments or modifications to the terms of existing leases could require lender approval.

In March 2019, we entered into lease amendments for each of the five properties comprising our Primrose II Communities which, among other things, extended the respective lease terms from the initial expiration dates in December 2022 to amended expiration dates in December 2025.

The following table lists, on an aggregate basis, scheduled expirations for the remainder of 2019, each of the next nine years and thereafter on our consolidated healthcare investment portfolio, excluding the remaining four properties classified as discontinued operations and assuming that none of the tenants exercise any of their renewal options (in thousands, except for number of tenants and percentages) as of June 30, 2019:

Year of Expiration ⁽¹⁾	Number of Tenants		Expiring Leased Square Feet		Expiring Annualized Base Rents ⁽²⁾		Percentage of Expiring Annual Base Rents
2019		—		—	$	—		—
2020		—		—		—		—
2021		—		—		—		—
2022		5		518		8,184		24.7	%
2023		6		261		6,315		19.1	%
2024		—		—		—		—
2025		8		743		11,478		34.7	%
2026		1		137		3,200		9.7	%
2027		1		229		2,566		7.8	%
2028		—		—		—		—
Thereafter		1		125		1,365		4.0	%
Total		22		2,013	$	33,108		100.0	%

Weighted Average Remaining Lease Term (in years): ⁽³⁾ 5.4 years

Our ongoing primary sources of capital include proceeds from collateralized or uncollateralized financings from banks or other lenders, other assets and undistributed operating cash flows, and as part of executing on Possible Strategic Alternatives as described above under “Strategic Alternatives,” proceeds from the sales of real estate. Our primary use of capital includes the payment of distributions, payment of operating expenses, funding capital improvements to existing properties and payment of debt service. If necessary, we may use financings or other sources of capital in the event of unforeseen significant capital expenditures or cover periodic shortfalls between distributions paid and cash flows from operating activities. As of June 30, 2019, we have approximately $139.2 million of undrawn availability remaining under our 2019 Revolving Credit Facility, as discussed below.

We have pledged 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 which result in lenders reducing or limiting funds available for loans, including loans collateralized by real estate. We may also be negatively impacted by rising interest rates on our unhedged variable rate debt or the timing of when we seek to refinance existing debt. In addition, we will continue to evaluate the need for additional interest rate protection in the form of interest rate swaps or caps on unhedged variable rate debt.

Our cash flows from operating and investing activities described within “Sources of Liquidity and Capital Resources” and “Uses of Liquidity and Capital Resources” represent cash flows from continuing operations and exclude the 63 properties classified as discontinued operations. The following discussion and analysis should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and the notes thereto.

In July 2018, in light of our decision to proceed with the exploration of Possible Strategic Alternatives, we suspended our Reinvestment Plan and our Redemption Plan. As such, there were no proceeds from our Reinvestment Plan for the six months ended June 30, 2019. For the six months ended June 30, 2018, we received proceeds from our Reinvestment Plan of approximately $22.0 million.

During the six months ended June 30, 2019 and 2018, we borrowed proceeds of approximately $25.2 million and $55.5 million, respectively. During the six months ended June 30, 2019, we refinanced our 2014 Credit Facilities and entered into our new 2019 Credit Facilities, which are comprised of the 2019 Term Loan of approximately $265 million and the 2019 Revolving Line of Credit of approximately $250 million. The 2019 Revolving Credit Facility has an initial four-year term through May 2023, plus one 12-month extension option, and the 2019 Term Loan Facility has an initial five-year term through May 2024. The 2019 Credit Facilities bear interest based on 30-day LIBOR plus a spread that varies with our leverage ratio.

During the six months ended June 30, 2018, we borrowed money to fund capital expenditures at our properties and intend to continue borrowing money, to a lesser extent, to fund other enhancements to our portfolio, as well as to cover periodic shortfalls between distributions paid and cash flows from operating activities. Generally, we expect to meet short-term working capital needs from our cash flows from operations.

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 our 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 June 30, 2019 and December 31, 2018, we had an aggregate debt leverage ratio of approximately 37.4% and 54.9%, respectively, of our aggregate gross asset values (as defined in our credit facilities).

We experienced positive cash flow from operating activities for the six months ended June 30, 2019 and 2018 of approximately $23.1 million and $17.8 million, respectively. The increase in cash flows from operating activities for the six months ended June 30, 2019 as compared to the same period in 2018 was primarily the result of the following:

In June 2019, we sold a small parcel of vacant land at our Brookridge Heights Assisted Living & Memory Care property and received net sales proceeds of approximately $0.2 million. In May 2018, we completed the sale of Physicians Regional Medical Center – Central Wing (“Physicians Regional”) and received net sales proceeds of approximately $5.8 million, which were used to pay down the related mortgage loan.

In December 2018, we signed the MOB Sale Agreement related to the MOB Sale, consisting of 55 properties within our MOB/Healthcare Portfolio. In May 2019, we completed the MOB Sale and received net sales proceeds of approximately $1.2 billion, which were used to: (1) repay indebtedness secured by or allocated to the 55 properties comprising the MOB Sale; (2) rebalance other corporate borrowings and (3) make a special cash distribution to the Company’s stockholders.

In March 2019, we entered into the IRF Sale Agreement relate to the IRF Sale, consisting of four properties within our MOB/Healthcare Portfolio. In April 2019, we completed the IRF Sale and received net sales proceeds of approximately $93.2 million, which were used to repay indebtedness secured by or cross-collateralized with the four properties comprising the IRF Sale.

We paid approximately $2.0 million and $3.4 million in capital expenditures during the six months ended June 30, 2019 and 2018, respectively.

During the six months ended June 30, 2019, we paid approximately $992.3 million of total repayments which was comprised of approximately $457.3 million of repayments in connection with indebtedness secured by the 59 properties that were part of the IRF Sale and the MOB Sale, approximately $83.7 million of indebtedness secured by other properties that we strategically paid down using net sales proceeds received in connection with the IRF Sale and MOB Sale, approximately $434.1 million in repayments related to the refinancing of our 2014 Credit Facilities, and approximately $17.2 million in scheduled repayments on our mortgages and other notes payable. In connection with the refinancing of our 2014 Credit Facilities, we paid approximately $7.6 million in lender fees and other loan-related costs. During the six months ended June 30, 2018, we paid approximately $41.5 million of total repayments which was comprised of $25.0 million in repayments on our 2014 Revolving Credit Facility, approximately $5.8 million in repayments on our mortgage loan for Physicians Regional and approximately $10.7 million in scheduled repayments on our mortgages and other notes payable.

As of June 30, 2019, we have approximately $48.6 million of debt obligations, including liabilities associated with assets held for sale, coming due in 2019. We will continue to explore various financing scenarios which includes obtaining debt 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 (“Other Sources”).

In August 2019, we repaid our Waterstone on Augusta loan, which as of June 30, 2019 had a balance of approximately $18.5 million, as well as our Wellmore of Lexington loan, which as of June 30, 2019 had a balance of approximately $21.0 million.

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.

The adjustment to our regular cash distributions was the result of a reduction in our remaining earnings base and operating cash flows given the associated impact of the sale of real estate on our operating cash flows. No amounts distributed to stockholders during the quarter and six months ended June 30, 2019 and 2018 were required to be or have been treated as a return of capital for purposes of calculating the stockholders’ return on their invested capital as described in the advisory agreement.

The following table represents total cash distributions declared, distributions reinvested and cash distributions per share for the quarter and six months ended June 30, 2019 and 2018 (in thousands, except per share data):

			Distributions Paid ⁽¹⁾
Periods	Cash Distributions per Share		Total Cash Distributions Declared ⁽²⁾		Reinvested via Reinvestment Plan		Cash Distributions net of Reinvestment Proceeds		Cash Flows Provided by Operating Activities ⁽³⁾
2019 Quarters
First	$	0.11639	$	20,246	$	—	$	20,246	$	26,155
Second ⁽⁴⁾		2.05120		356,832		—		356,832		10,835
Total	$	2.16759	$	377,078	$	—	$	377,078	$	36,990

2018 Quarters
First	$	0.10581	$	20,324	$	11,078	$	9,246	$	17,787
Second		0.10581		20,247		10,935		9,312		16,285
Total	$	0.21162	$	40,571	$	22,013	$	18,558	$	34,072

In May 2019, we used a portion of the net sales proceeds received from the MOB Sale to pay a special cash distribution. Our board of directors declared a special cash distribution of $2.00 per share to the holders of record of our common stock, for an aggregate total distribution of approximately $347.9 million. Additionally, as a result of the IRF Sale and the MOB Sale, our board of directors adjusted our regular quarterly cash distribution to an amount equal to $0.0512 per share, compared to $0.1164 per share in effect since the third quarter of 2017. The adjustment to our regular cash distributions was the result of a reduction in our remaining earnings base and operating cash flows given the associated impact of the sale of real estate on our operating cash flows. No amounts distributed to stockholders during the quarter and six months ended June 30, 2019 and 2018 were required to be or have been treated as a return of capital for purposes of calculating the stockholders’ return on their invested capital as described in the advisory agreement.

In July 2018, in light of our decision to proceed with the exploration of Possible Strategic Alternatives, we suspended our Reinvestment Plan and our Redemption Plan. No requests for redemptions have been accepted subsequent to suspension of the Redemption Plan in July 2018. As such, there were no requests for the redemption of common stock during the six months ended June 30, 2019. During the six months ended June 30, 2018, we received requests for the redemption of common stock of approximately $40.0 million, of which $28.3 million was approved for redemption at an average price of $10.14 per share, a portion of which was paid in July 2018. During the six months ended June 30, 2018, we paid approximately $29.1 million for the redemption of common stock, which included approximately $11.7 million of redemptions payable from the fourth quarter of 2017.

In July 2018, as a result of the Redemption Plan being suspended, approximately $16.4 million in unsatisfied redemption requests were placed in the redemption queue and will remain there until such time, if at all, that the Company’s board of directors reinstates the Redemption Plan. Unless the Redemption Plan is reinstated by the Company’s board of directors, the Company will not as a general matter, accept or otherwise process any additional redemption requests received after July 11, 2018. There can be no guarantee that the Redemption Plan will be reinstated by the Company’s board of directors.

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

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

Quarter and six months ended June 30, 2019 as compared to the quarter and six months ended June 30, 2018

As of June 30, 2019, excluding properties classified as discontinued operations, unconsolidated investments and unimproved land, we owned 73 consolidated operating real estate investment properties and our portfolio consisted of units operated under management agreements with third-party operators and approximately 2.0 million rentable square feet that was 100% leased to third-party tenants.

Rental Income and Related Revenues. Rental income and related revenues was approximately $8.3 million and $17.2 million, respectively, for the quarter and six months ended June 30, 2019 as compared to approximately $8.7 million and $17.5 million, respectively, for the quarter and six months ended June 30, 2018. We expect rental income and related revenues to decrease in future periods once we complete the disposal of the seven post-acute care properties held for sale.

Resident Fees and Services. Resident fees and services income was approximately $71.9 million and $143.2 million, respectively, for the quarter and six months ended June 30, 2019 as compared to approximately $68.4 million and $136.0 million, respectively, for the quarter and six months ended June 30, 2018. The increase in resident fees and services is primarily a result of year-over-year growth in occupancy rates resulting from the continued lease-up of additional seniors housing units at our completed developments and expansion projects.

Property Operating Expenses. Property operating expenses were approximately $46.6 million and $92.6 million, respectively, for the quarter and six months ended June 30, 2019 as compared to approximately $44.3 million and $88.6 million, respectively, for the quarter and six months ended June 30, 2018. The increase in property operating expenses is primarily a result of year-over-year growth in occupancy rates resulting from the continued lease-up of additional seniors housing units at our completed developments and expansion projects.

General and Administrative Expenses. General and administrative expenses were approximately $5.2 million and $8.2 million, respectively, for the quarter and six months ended June 30, 2019, as compared to approximately $3.2 million and $6.4 million, respectively, for the quarter and six months ended June 30, 2018. The increase in general and administrative expenses across periods was primarily attributable to stock compensation expense incurred during the quarter and six months ended June 30, 2019 related to the special cash distribution on restricted stock issued pursuant to the Advisor expense support agreement as well as additional expenses related to the evaluation and execution of Possible Strategic Alternatives discussed above under “Strategic Alternatives.”

Property Management Fees. We incurred property management fees of approximately $3.4 million and $6.9 million for the quarter and six months ended June 30, 2019 payable to our third-party property managers, respectively, as compared to approximately $3.8 million and $8.1 million payable to both our third-party property managers as well as our Property Manager, an affiliate of our Advisor, respectively, for the quarter and six months ended June 30, 2018. The decrease in property management fees resulted from the property management agreement with our Property Manager not being renewed beyond its expiration date in June 2018.

Financing Coordination Fees. We incurred financing coordination fees primarily related to the refinancing of our credit facilities of approximately $5.2 million and $5.4 million, respectively, of which approximately $3.3 million and $3.5 million were capitalized in the accompanying condensed consolidated balance sheets for the quarter and six months ended June 30, 2019. No financing coordination fees were incurred during the quarter and six months ended June 30, 2018.

Depreciation and Amortization. Depreciation and amortization expenses were approximately $12.3 million and $24.7 million, respectively, for the quarter and six months ended June 30, 2019, as compared to approximately $13.8 million and $28.7 million, respectively, for the quarter and six months ended June 30, 2018. 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 in depreciation and amortization expense across periods resulted from several intangible assets related to our seniors housing investments being fully amortized, as well as there being no depreciation and amortization expense in 2019 for Welbrook Senior Living Grand Junction as a result of classifying that property as held for sale in December 2018.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost amortization were approximately $11.4 million and $22.6 million, respectively, for the quarter and six months ended June 30, 2019, as compared to approximately $10.5 million and $20.9 million, respectively, for the quarter and six months ended June 30, 2018. The increase in interest expense and loan cost amortization was primarily the result of an increase in the London interbank offered rate (“LIBOR”) for the quarter and six months ended June 30, 2019, as compared to the quarter and six months ended June 30, 2018, combined with an increase in our average debt outstanding across periods as well as the write-off of unamortized loan costs resulting from the refinancing of our credit facilities and the early extinguishment of other property-level debt. We expect ongoing interest expense to decrease due to the refinancing of our credit facilities and the pay down of debt with net sales proceeds from the IRF Sale and MOB Sale.

Gain on Sale of Real Estate. Gain on sale of real estate was approximately $0.2 million for the quarter and six months ended June 30, 2019, as compared to approximately $1.0 million for the quarter and six months ended June 30, 2018. In June 2019, we sold a small parcel of vacant land at our Brookridge Heights Assisted Living & Memory Care property; whereas, in May 2018, we sold our Physicians Regional property.

Income (Loss) from Discontinued Operations. As discussed above under “Strategic Alternatives,” we classified the revenues and expenses related to our MOB/Healthcare Portfolio as discontinued operations as we believe the sale of these properties represents a strategic shift in our operations. We had income from discontinued operations of approximately $333.4 million and $343.8 million for the quarter and six months ended June 30, 2019, respectively, as compared to a loss from discontinued operations of approximately $4.6 million and $6.8 million, respectively, for the quarter and six months ended June 30, 2018. The increase in income (loss) from discontinued operations across periods was primarily the result of the following:

Refer to Note 5. “Assets and Associated Liabilities Held For Sale and Discontinued Operations” for additional information.

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. In addition, we have aggregated NOI on a “same-store” basis only for comparable properties that we have owned during the entirety of all periods presented. Non-same-store NOI represents NOI from a property that was sold in May 2018, as we did not own that property during the entirety of all periods presented. The chart below presents a reconciliation of our net income (loss) to NOI for the quarter and six months ended June 30, 2019 and 2018 (in thousands) and the amount invested in properties as of June 30, 2019 and 2018 (in millions), excluding properties classified as discontinued operations:

	Quarter Ended											Six Months Ended
	June 30,						Change					June 30,						Change
	2019			2018			$		%			2019			2018				$	%
Net income (loss)	$	328,527		$	(7,334	)						$	338,435		$	(15,232	)
Adjusted to exclude:
General and administrative expenses		5,225			3,194								8,184			6,360
Asset management fees		4,589			4,570								9,182			9,136
Financing coordination fees		1,878			—								1,878			—
Depreciation and amortization		12,347			13,771								24,681			28,666
Gain on sale of real estate		(228	)		(1,049	)							(228	)		(1,049	)
Other expenses, net of other income		10,668			10,369								21,408			20,648
Income tax expense		533			928								1,188			1,545
(Income) loss from discontinued operations		(333,370	)		4,634								(343,844	)		6,812
NOI		30,169			29,083		$	1,086		3.7	%		60,884			56,886		$	3,998		7.0	%
Less: Non-same-store NOI		—			(65	)							—			(170	)
Same-store NOI	$	30,169		$	29,018		$	1,151		4.0	%	$	60,884		$	56,716		$	4,168		7.3	%
Invested in operating properties, end of period (in millions)	$	1,809		$	1,809							$	1,809		$	1,809

Overall, our NOI for the six months ended June 30, 2019 increased by approximately $4.0 million, or 7.0%, as compared to the same period in the prior year. Our non-same-store NOI of approximately $0.2 million for the six months ended June 30, 2018 primarily related to the sale of our Physicians Regional property in May 2018. Our same-store NOI for the six months ended June 30, 2019 increased by approximately $4.2 million, or 7.3%, as compared to the same period in the prior year. The increases in our NOI and same-store NOI are primarily attributable to the continued lease-up of additional seniors housing units at our completed developments and expansion projects; most notably, at our Raider Ranch and Tranquillity at Fredericktowne properties. In addition, the increases in our NOI and same-store NOI are partly attributable to a decrease in property management fees paid to the Property Manager, an affiliate of our Advisor, as a result of the property management agreement not being renewed and expiring in June 2018.

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

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

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

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

We define MFFO, a non-GAAP measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: MFFO, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income or loss: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted from a GAAP accrual basis in order to 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, and in particular, now that the offering and acquisition stages are complete and the estimated net asset value (“NAV”) is disclosed. FFO and MFFO are not useful measures in evaluating NAV because impairments are taken into account in determining NAV but not in determining FFO and MFFO.

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

The following table presents a reconciliation of net loss to FFO and MFFO for the quarter and six months ended June 30, 2019 and 2018 (in thousands, except per share data):

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income (loss) attributable to common stockholders	$	328,272		$	(7,308	)	$	338,172		$	(15,182	)
Adjustments:
Depreciation and amortization:
Continuing operations		12,347			13,771			24,681			28,666
Discontinued operations		—			10,683			—			21,364
Gain on sale of real estate:
Continuing operations		(228	)		(1,049	)		(228	)		(1,049	)
Discontinued operations		(331,663	)		—			(331,663	)		—
FFO adjustments attributable to noncontrolling interests:
Continuing operations		(47	)		(48	)		(95	)		(96	)
Discontinued operations		261			(12	)		261			(24	)
FFO adjustments from unconsolidated entities: ⁽¹⁾		276			140			609			278
FFO attributable to common stockholders		9,218			16,177			31,737			33,957
Straight-line rent adjustments: ⁽²⁾
Continuing operations		(37	)		(559	)		(219	)		(1,244	)
Discontinued operations		(433	)		52			(1,199	)		268
Amortization of above and below market intangibles: ⁽³⁾
Continuing operations		(11	)		(13	)		(21	)		(20	)
Discontinued operations		—			141			—			297
Unrealized loss (gain) from mark-to-market adjustments on swaps: ⁽⁴⁾
Continuing operations		—			(2	)		—			—
Discontinued operations		—			—			—			(26	)
Realized income (loss) on extinguishment of hedges or other derivatives: ⁽⁵⁾
Continuing operations		(197	)		127			(197	)		253
Discontinued Operations		441			—			441			—
Loss on extinguishment of debt: ⁽⁶⁾
Continuing operations		654			—			654			—
Discontinued operations		3,340			—			3,340			—
MFFO adjustments attributable to noncontrolling interests:
Continuing operations		(3	)		—			(5	)		1
Discontinued operations		(10	)		(1	)		(9	)		(2	)
MFFO attributable to common stockholders	$	12,962		$	15,922		$	34,522		$	33,484
Weighted average number of shares of common stock outstanding (basic and diluted)		173,963			174,201			173,963			174,526
Net income (loss) per share (basic and diluted)	$	1.89		$	(0.04	)	$	1.94		$	(0.09	)
FFO per share (basic and diluted)	$	0.05		$	0.09		$	0.18		$	0.19
MFFO per share (basic and diluted)	$	0.07		$	0.09		$	0.20		$	0.19

The following table presents our contractual obligations by payment periods as of June 30, 2019, including liabilities associated with assets held for sale (in thousands):

As of June 30, 2019, our off-balance sheet and other arrangements were not materially different from the amounts reported for the year ended December 31, 2018. Refer to our Annual Report on Form 10-K for a summary of our off-balance sheet and other arrangements.

See Item 1. “Condensed Consolidated Financial Information” and our Annual Report on Form 10-K for the year ended December 31, 2018 for a summary of our related party transactions.

See Item 1. “Condensed Consolidated Financial Information” and our Annual Report on Form 10-K for the year ended December 31, 2018 for a summary of our critical accounting policies and estimates.

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

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. Our management objectives related to interest rate risk is to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. 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 June 30, 2019, of our fixed and variable rate debt maturities for the remainder of 2019, and each of the next four years and thereafter (principal maturities only), including liabilities associated with assets held for sale (in thousands):

Assuming no interest rate protection, management estimates that a one-percentage point increase or decrease in LIBOR in 2019, compared to LIBOR rates as of June 30, 2019, would result in fluctuation of interest expense on our variable rate debt of approximately $3.9 million for the year ending December 31, 2019. 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 does not factor in a potential change in variable rate debt levels, any offsetting gains on interest rate swap contracts, or the impact of any LIBOR floors or caps.

As of June 30, 2019, the Company’s debt is comprised of approximately 47.5% in fixed rate debt, approximately 45.7% in variable rate debt with current interest rate protection and approximately 6.8% of unhedged variable rate debt. The remaining unhedged variable rate debt primarily relates to our construction loans. 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.

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.

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.

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.

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, 2018.

During the six months ended June 30, 2019 and 2018, there were approximately 121,000 shares and 12,000 shares transferred between investors, respectively, at an average sales price per share of approximately $7.85 and $7.98, 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.

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.

The following exhibits are included, or incorporated by reference in this Quarterly Report on Form 10-Q for the quarter and six months ended June 30, 2019 (and are numbered in accordance with Item 601 of Regulation S-K).

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 14th day of August 2019.

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

		Page
PART I. FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Information (unaudited):	2
	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 and Redeemable Noncontrolling Interest	5
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risks	42
Item 4.	Controls and Procedures	42

PART II. OTHER INFORMATION		43

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43

Exhibit Index		44
Signatures		45

	As Filed			Effect of		As Adjusted
	December 31,			ASC 842		January 1,
	2018			Adoption		2019
Assets held for sale, net	$	1,147,645		$	403	$	1,148,048
Total assets	$	2,705,887		$	403	$	2,706,290

Liabilities associated with assets held for sale	$	(774,019	)	$	2,779	$	(771,240	)
Total liabilities	$	(1,763,961	)	$	2,779	$	(1,761,182	)
Accumulated loss	$	(233,847	)	$	3,182	$	(230,665	)
Total equity	$	(941,926	)	$	3,182	$	(938,744	)

	Six Months Ended June 30,
	Number of Units				Revenues (in millions)				Percentage of Revenues
Resident fees and services:	2019		2018		2019		2018		2019			2018
Independent living		2,261		2,261	$	37.0	$	35.2		25.8	%		25.9	%
Assisted living		2,966		2,966		69.6		68.0		48.6	%		50.0	%
Memory care		853		853		29.7		26.4		20.8	%		19.4	%
Other revenues	―		―			6.9		6.4		4.8	%		4.7	%
		6,080		6,080	$	143.2	$	136.0		100.0	%		100.0	%


	June 30,			December 31,
	2019			2018
Land and land improvements	$	130,218		$	130,133
Building and building improvements		1,476,195			1,475,789
Furniture, fixtures and equipment		82,804			81,666
Less: accumulated depreciation		(256,919	)		(232,439	)
Real estate investment properties, net	$	1,432,298		$	1,455,149

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


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

	As of June 30, 2019
	MOB/Healthcare Portfolio		Other		Total
Real estate investment properties, net	$	76,728	$	51,339	$	128,067
Intangibles, net		6,252		800		7,052
Deferred rent and lease incentives		3,597		6,554		10,151
Other assets		1,075		241		1,316
Restricted cash		75		145		220
Assets held for sale, net	$	87,727	$	59,079	$	146,806

Other liabilities	$	25	$	634	$	659
Accounts payable and accrued liabilities		213	―			213
Liabilities associated with assets held for sale	$	238	$	634	$	872

2019	$	13,679
2020		28,526
2021		29,128
2022		21,541
2023		20,912
Thereafter		50,948
	$	164,734

2019	$	48,551
2020		113,861
2021		11,352
2022		282,216
2023		22,873
Thereafter		265,000
	$	743,853

Type of Investment	Number of Investments		Amount of Investments (in millions)		Percentage of Total Investments
Consolidated investments:
Seniors housing leased ⁽¹⁾		15	$	311.0		16.0	%
Seniors housing managed ⁽²⁾		51		1,427.8		73.4	%
Seniors housing unimproved land		1		1.1		0.1	%
Post-acute care leased ^{(1) (3)}		8		99.1		5.1	%
Acute care leased ^{(1) (3)}		3		73.1		3.8	%
Unconsolidated investments:
Seniors housing managed ⁽⁴⁾		5		31.1		1.6	%
		83	$	1,943.2		100.0	%

	Investment count as of June 30,
Consolidated operating investment types:	2019		2018
Seniors housing leased		15		15
Seniors housing managed		51		51
Post-acute care leased ⁽¹⁾		7		7
		73		73

	Payments Due by Period
	2019		2020-2021		2022-2023		Thereafter		Total
Mortgages and other notes payable (principal and interest)	$	59,280	$	155,221	$	308,937	$	—	$	523,438
Credit facilities (principal and interest)		5,336		21,342		21,342		275,671		323,691
	$	64,616	$	176,563	$	330,279	$	275,671	$	847,129

	Expected Maturities
	2019			2020			2021			2022			2023			Thereafter		Total			Fair Value ⁽¹⁾
Fixed rate debt	$	5,521		$	31,402		$	11,352		$	282,216		$	22,873		$	—	$	353,364		$	356,000
Weighted average interest rate on fixed debt		4.27	%		3.98	%		4.29	%		4.27	%		4.68	%		—		4.27	%
Variable rate debt	$	43,030		$	82,459		$	—		$	—		$	—		$	265,000	$	390,489		$	391,000
Average interest rate on variable rate debt	LIBOR + 2.17%			LIBOR + 2.11%				—			—			—		LIBOR + 1.95%		LIBOR + 2.09%

Exhibit No.

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 quarter and six months ended June 30, 2019, formatted in XBRL (Extensible Business Reporting Language); (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Comprehensive Income (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.

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)