10-Q 1 form10-q.htm 10-Q Document

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2016
 
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission file number: 000-55201
hti2a04.jpg
Healthcare Trust, Inc.
(Exact name of registrant as specified in its charter)
Maryland
  
38-3888962
(State or other  jurisdiction of incorporation or organization)
  
(I.R.S. Employer Identification No.)
405 Park Ave., 14th Floor, New York, NY      
  
10022
(Address of principal executive offices)
  
(Zip Code)
(212) 415-6500
(Registrant's telephone number, including area code)
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 x No o
Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definition of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer o
(Do not check if a smaller reporting company)
Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
As of October 31, 2016, the registrant had 88,837,166 shares of common stock outstanding.


HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


Part I — FINANCIAL INFORMATION
Item 1. Financial Statements.
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(In thousands, except for share and per share data)



 
 
September 30,
 
December 31,
 
 
2016
 
2015
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
187,868

 
$
192,790

Buildings, fixtures and improvements
 
1,871,126

 
1,885,713

Construction in progress
 
43,070

 
21,309

Acquired intangible assets
 
234,749

 
241,459

Total real estate investments, at cost
 
2,336,813

 
2,341,271

Less: accumulated depreciation and amortization
 
(218,077
)
 
(146,669
)
Total real estate investments, net
 
2,118,736

 
2,194,602

Cash and cash equivalents
 
50,434

 
24,474

Restricted cash
 
4,571

 
4,647

Investment securities, at fair value
 

 
1,078

Straight-line rent receivable, net
 
13,875

 
11,470

Prepaid expenses and other assets
 
22,202

 
21,707

Deferred costs, net
 
10,307

 
11,864

Total assets
 
$
2,220,125

 
$
2,269,842

LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net of deferred financing costs
 
$
142,627

 
$
157,305

Mortgage premiums and discounts, net
 
918

 
2,403

Credit facility
 
476,500

 
430,000

Market lease intangible liabilities, net
 
20,775

 
22,994

Accounts payable and accrued expenses (including $674 and $536 due to related parties as of September 30, 2016 and December 31, 2015, respectively)
 
28,607

 
38,449

Deferred rent
 
5,790

 
4,356

Distributions payable
 
12,346

 
12,518

Total liabilities
 
687,563

 
668,025

Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of September 30, 2016 and December 31, 2015
 

 

Common stock, $0.01 par value, 300,000,000 shares authorized, 88,574,565 and 86,135,411 shares of common stock issued and outstanding as of September 30, 2016 and December 31, 2015, respectively
 
886

 
861

Additional paid-in capital
 
1,963,398

 
1,907,549

Accumulated other comprehensive income (loss)
 

 
(6
)
Accumulated deficit
 
(440,846
)
 
(316,284
)
Total stockholders' equity
 
1,523,438

 
1,592,120

Non-controlling interests
 
9,124

 
9,697

Total equity
 
1,532,562

 
1,601,817

Total liabilities and equity
 
$
2,220,125

 
$
2,269,842

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

3

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except for share and per share data)
(Unaudited)



 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
24,980

 
$
24,495

 
$
77,984

 
$
68,282

Operating expense reimbursements
 
4,196

 
3,487

 
11,677

 
9,344

Resident services and fee income
 
46,428

 
36,011

 
137,084

 
103,004

Contingent purchase price consideration
 
(83
)
 
37

 
142

 
487

Total revenues
 
75,521

 
64,030

 
226,887

 
181,117

 
 
 
 
 
 
 
 
 
Expenses:
 
 
 
 
 
 
 
 
Property operating and maintenance
 
44,041

 
33,506

 
123,527

 
89,612

Impairment on sale of real estate investments
 

 

 
389

 

Operating fees to related parties
 
5,199

 
4,312

 
15,526

 
7,722

Acquisition and transaction related
 
958

 
3,315

 
3,059

 
8,502

General and administrative
 
2,874

 
2,442

 
9,277

 
7,574

Depreciation and amortization
 
27,347

 
34,162

 
76,245

 
97,193

Total expenses
 
80,419

 
77,737

 
228,023

 
210,603

Operating loss
 
(4,898
)
 
(13,707
)
 
(1,136
)
 
(29,486
)
Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(4,923
)
 
(3,081
)
 
(14,783
)
 
(6,838
)
Interest and other income
 
2

 
66

 
45

 
555

Gain on sale of real estate investment
 
1,330

 

 
1,330

 

Gain on sale of investment securities
 
56

 
160

 
56

 
446

Total other expenses
 
(3,535
)
 
(2,855
)
 
(13,352
)
 
(5,837
)
Loss before income tax
 
(8,433
)
 
(16,562
)
 
(14,488
)
 
(35,323
)
Income tax benefit (expense)
 
(260
)
 
369

 
1,215

 
387

Net loss
 
(8,693
)
 
(16,193
)
 
(13,273
)
 
(34,936
)
Net loss attributable to non-controlling interests
 
29

 
85

 
54

 
187

Net loss attributable to stockholders
 
(8,664
)
 
(16,108
)
 
(13,219
)
 
(34,749
)
 
 
 
 
 
 
 
 
 
Other comprehensive loss:
 
 
 
 
 
 
 
 
Unrealized gain (loss) on investment securities, net
 
(43
)
 
(177
)
 
6

 
(507
)
Comprehensive loss attributable to stockholders
 
$
(8,707
)
 
$
(16,285
)
 
$
(13,213
)
 
$
(35,256
)
 
 
 
 
 
 
 
 
 
Basic and diluted weighted-average shares outstanding
 
88,285,390

 
85,705,595

 
87,472,855

 
84,988,240

Basic and diluted net loss per share
 
$
(0.10
)
 
$
(0.19
)
 
$
(0.15
)
 
$
(0.41
)
Distributions declared per share
 
$
0.43

 
$
0.43

 
$
1.27

 
$
1.27


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


4

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 2016
(In thousands, except for share data)
(Unaudited)



 
Common Stock
 
 
 
Accumulated Other Comprehensive Income
 
 
 
 
 
 
 
 
 
Number of
Shares
 
Par Value
 
Additional
Paid-in
Capital
 
 
Accumulated Deficit
 
Total Stockholders' Equity
 
Non-controlling Interests
 
Total Equity
Balance, December 31, 2015
86,135,411

 
$
861

 
$
1,907,549

 
$
(6
)
 
$
(316,284
)
 
$
1,592,120

 
$
9,697

 
$
1,601,817

Common stock issued through distribution reinvestment plan
2,441,759

 
25

 
55,946

 

 

 
55,971

 

 
55,971

Common stock repurchases
(6,660
)
 

 
(170
)
 

 

 
(170
)
 

 
(170
)
Equity-based compensation, net
4,055

 

 
73

 

 

 
73

 

 
73

Distributions declared

 

 

 

 
(111,343
)
 
(111,343
)
 

 
(111,343
)
Distributions to non-controlling interest holders

 

 

 

 

 

 
(519
)
 
(519
)
Unrealized gain on investments

 

 

 
6

 

 
6

 

 
6

Net loss

 

 

 

 
(13,219
)
 
(13,219
)
 
(54
)
 
(13,273
)
Balance, September 30, 2016
88,574,565

 
$
886

 
$
1,963,398

 
$

 
$
(440,846
)
 
$
1,523,438

 
$
9,124

 
$
1,532,562


The accompanying notes are an integral part of this unaudited consolidated financial statement.


5

HEALTHCARE TRUST, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Nine Months Ended September 30,
 
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(13,273
)
 
$
(34,936
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
76,245

 
97,193

Amortization of deferred financing costs
 
3,373

 
2,676

Amortization of mortgage premiums and discounts, net
 
(1,485
)
 
(1,402
)
Amortization of market lease and other intangibles, net
 
113

 
(119
)
Bad debt expense
 
8,157

 
3,766

Equity-based compensation
 
73

 
36

Gain on sale of investment securities
 
(56
)
 
(446
)
Gain on sale of real estate investments, net
 
(941
)
 

Changes in assets and liabilities:
 
 
 
 
Straight-line rent receivable
 
(6,534
)
 
(7,296
)
Prepaid expenses and other assets
 
(5,146
)
 
(8,141
)
Accounts payable, accrued expenses and other liabilities
 
1,897

 
7,007

Deferred rent
 
1,434

 
(736
)
Restricted cash
 
76

 
(1,169
)
Net cash provided by operating activities
 
63,933

 
56,433

Cash flows from investing activities:
 
 
 
 
Investments in real estate
 
(21,761
)
 
(312,992
)
Deposits paid for real estate acquisitions
 

 
(3,150
)
Deposit received for unconsummated disposition
 
100

 

Capital expenditures
 
(5,727
)
 
(4,984
)
Purchases of investment securities
 

 
(93
)
Proceeds from sales of investment securities
 
1,140

 
19,278

Proceeds from sale of real estate investments
 
26,065

 

Net cash used in investing activities
 
(183
)
 
(301,941
)
Cash flows from financing activities:
 
 
 
 

Proceeds from credit facility
 
46,500

 
185,000

Payments on mortgage notes payable
 
(15,085
)
 
(6,023
)
Payments of deferred financing costs
 
(958
)
 
(12,407
)
Proceeds from issuance of common stock
 

 
6

Common stock repurchases
 
(12,184
)
 
(5,921
)
Payments of offering costs and fees related to common stock issuances
 

 
(629
)
Distributions paid
 
(55,544
)
 
(49,358
)
Contributions from non-controlling interest holders
 

 
500

Distributions to non-controlling interest holders
 
(519
)
 
(526
)
Net cash used in financing activities
 
(37,790
)
 
110,642

Net change in cash and cash equivalents
 
25,960

 
(134,866
)
Cash and cash equivalents, beginning of period
 
24,474

 
182,617

Cash and cash equivalents, end of period
 
$
50,434

 
$
47,751


6

HEALTHCARE TRUST, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Nine Months Ended September 30,
 
 
2016
 
2015
Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for interest
 
$
13,883

 
$
5,170

Cash paid for taxes
 
339

 
312

 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
Accrued repurchases included in accounts payable and accrued expenses
 
$

 
$
4,472

Assumption of mortgage notes payable used to acquire investments in real estate
 

 
38,387

Premiums on assumed mortgage notes payable
 

 
2,834

Liabilities assumed in real estate acquisitions
 

 
604

Common stock issued through distribution reinvestment plan
 
55,971

 
58,848


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


7

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)


Note 1 — Organization
Healthcare Trust, Inc. (including, as required by context, Healthcare Trust Operating Partnership, LP (the "OP") and its subsidiaries, the "Company") invests in healthcare real estate, such as seniors housing and medical office buildings ("MOB"), located in the United States for investment purposes. As of September 30, 2016, the Company owned 163 properties located in 29 states and comprised of 8.4 million rentable square feet.
The Company, which was incorporated on October 15, 2012, is a Maryland corporation that elected and qualified to be taxed as a real estate investment trust for U.S. federal income tax purposes ("REIT") beginning with its taxable year ended December 31, 2013. Substantially all of the Company's business is conducted through the OP.
In February 2013, the Company commenced its initial public offering (the "IPO") on a "reasonable best efforts" basis of up to $1.7 billion of common stock, $0.01 par value per share, at a price of $25.00 per share, subject to certain volume and other discounts. The Company closed its IPO in November 2014. As of September 30, 2016, the Company had received $2.2 billion from its IPO and from proceeds received under the distribution reinvestment plan ("DRIP").
In 2015, the Company’s board of directors (the "Board") determined that it was in the Company’s best interest to evaluate strategic alternatives, including a listing on a national securities exchange. In April 2016, the Board, led by its independent directors, announced that it had initiated a strategic review process (the "Strategic Review") to identify, examine, and consider a range of strategic alternatives available to the Company with the objective of maximizing shareholder value. The Board formed a special committee (the "Special Committee") to evaluate various options in connection with the Strategic Review. The Special Committee engaged Morgan Stanley & Co. LLC ("Morgan Stanley") and KeyBanc Capital Markets ("KeyBanc") as financial advisors, with Morgan Stanley as lead advisor. The Board also formed a separate special committee to address conflicts of interest. The Board retained Gibson, Dunn & Crutcher LLP ("Gibson") as special legal counsel in connection with the Strategic Review.
On October 6, 2016, the Company announced that the Special Committee had concluded the Strategic Review and recommended that the Company continue to execute its business plan and focus on managing and strengthening its assets. The Special Committee and the committee to address conflicts of interest were terminated by the Board.
On April 7, 2016 (the "NAV Pricing Date"), the Board approved an estimate of per share net asset value ("NAV"). Subsequent valuations will occur periodically, at the discretion of the Board, provided that such estimates will be made at least annually. Pursuant to the DRIP, the Company's stockholders can elect to reinvest distributions by purchasing shares of the Company's common stock. Prior to the NAV Pricing Date, the Company offered shares pursuant to the DRIP at $23.75 per share, which was 95% of the initial offering price of shares of common stock in the IPO. Effective April 7, 2016, the Company began offering shares pursuant to the DRIP at the then-current NAV approved by the Board (see Note 8 — Common Stock).
The Company has no employees. Healthcare Trust Advisors, LLC (the "Advisor") has been retained by the Company to manage the Company's affairs on a day-to-day basis. The Company has retained Healthcare Trust Properties, LLC (the "Property Manager") to serve as the Company's property manager. The Advisor and Property Manager are under common control with AR Global Investments, LLC (the successor business to AR Capital, LLC, "AR Global"), the parent of the Company's sponsor, American Realty Capital VII, LLC (the "Sponsor"), as a result of which they are related parties, and each have received or will receive compensation, fees and expense reimbursements from the Company for services related to managing its business. The Advisor, Healthcare Trust Special Limited Partnership, LLC (the "Special Limited Partner") and Property Manager also have received or will receive compensation, fees and expense reimbursements related to the investment and management of the Company's assets.
Note 2 — Summary of Significant Accounting Policies
The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. All intercompany accounts and transactions have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2016 are not necessarily indicative of the results for the entire year or any subsequent interim period.

8

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2015, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 11, 2016. There have been no significant changes to the Company's significant accounting policies during the nine months ended September 30, 2016 other than the updates described below.
Reclassifications
Certain prior year amounts within rental income, resident services and fee income, contingent purchase price consideration, interest and other income, cash flows from operating activities and cash flows from financing activities have been reclassified to conform with the current year presentation.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries and consolidated joint venture arrangements in which the Company has controlling financial interests. The portions of the consolidated joint venture arrangements not owned by the Company are presented as non-controlling interests as of and during the period consolidated. All inter-company accounts and transactions have been eliminated in consolidation.
The Company evaluates its relationships and investments to determine if it has variable interests. A variable interest is an investment or other interest that will absorb portions of an entity's expected losses or receive portions of the entity's expected residual returns. If the Company determines that it has a variable interest in an entity, it evaluates whether such interest is in a variable interest entity ("VIE"). A VIE is broadly defined as an entity where either (1) the equity investors as a group, if any, lack the power through voting or similar rights to direct the activities of an entity that most significantly impact the entity's economic performance or (2) the equity investment at risk is insufficient to finance that entity's activities without additional subordinated financial support. The Company consolidates any VIEs when it is determined to be the primary beneficiary of the VIE's operations.
A variable interest holder is considered to be the primary beneficiary of a VIE if it has the power to direct the activities of a VIE that most significantly impact the entity's economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. The Company qualitatively assesses whether it is (or is not) the primary beneficiary of a VIE. Consideration of various factors include, but are not limited to, the Company's ability to direct the activities that most significantly impact the entity's economic performance, its form of ownership interest, its representation on the entity's governing body, the size and seniority of its investment, its ability and the rights of other investors to participate in policy making decisions and to replace the manager of and/or liquidate the entity.
The Company continually evaluates the need to consolidate joint ventures based on standards set forth in GAAP. In determining whether the Company has a controlling interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, power to make decisions and contractual and substantive participating rights of the partners/members as well as whether the entity is a VIE for which the Company is the primary beneficiary.
The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.
Recently Issued Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued revised guidance relating to revenue recognition. Under the revised guidance, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The revised guidance was to become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption was not permitted under GAAP. The revised guidance allows entities to apply the full retrospective or modified retrospective transition method upon adoption. In July 2015, the FASB deferred the effective date of the revised guidance by one year to annual reporting periods beginning after December 15, 2017, although entities will be allowed to early adopt the guidance as of the original effective date. The Company has not yet selected a transition method and is currently evaluating the impact of this new guidance.

9

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

In January 2015, the FASB issued updated guidance that eliminates from GAAP the concept of an event or transaction that is unusual in nature and occurs infrequently being treated as an extraordinary item. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Any amendments may be applied either prospectively or retrospectively to all prior periods presented in the financial statements. Early adoption was permitted provided that the guidance was applied from the beginning of the fiscal year of adoption. The Company elected to adopt this new guidance as of September 30, 2015. The adoption of this guidance did not have a material impact on the Company's financial position, results of operations and cash flows.
In February 2015, the FASB amended the accounting for consolidation of certain legal entities. The amendments modify the evaluation of whether certain legal entities are VIEs or voting interest entities, eliminates the presumption that a general partner should consolidate a limited partnership and affect the consolidation analysis of reporting entities that are involved with VIEs (particularly those that have fee arrangements and related party relationships). The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption was permitted, including adoption in an interim period. The Company has elected to adopt this guidance effective January 1, 2016. The Company has evaluated the impact of the adoption of this new guidance on its consolidated financial statements and has determined that the OP is considered a VIE. However, the Company meets the disclosure exemption criteria as the Company is the primary beneficiary of the VIE and the Company’s partnership interest in a business and the assets of the OP can be used for purposes other than settling its obligations, such as paying distributions. As such, this standard did not have a material impact on the Company's consolidated financial statements.
In April 2015, the FASB amended the presentation of debt issuance costs on the balance sheet. The amendment requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of that debt liability. In August 2015, the FASB added that, for line of credit arrangements, the SEC staff would not object to an entity deferring and presenting debt issuance costs as an asset and subsequently amortizing the deferred debt issuance costs ratably over the term of the line, regardless of whether or not there are any outstanding borrowings. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption was permitted for financial statements that have not previously been issued. The Company has elected to adopt this guidance effective January 1, 2016. The adoption of this revised guidance resulted in the reclassification of $2.0 million and $2.2 million of deferred financing costs related to the Company's mortgage notes payable from deferred costs, net to mortgage notes payable, net of deferred financing costs in the Company's consolidated balance sheets as of December 31, 2015.
In September 2015, the FASB issued an update that eliminates the requirement to adjust provisional amounts from a business combination and the related impact on earnings by restating prior period financial statements for measurement period adjustments. The new guidance requires that the cumulative impact of measurement period adjustments on current and prior periods, including the prior period impact on depreciation, amortization and other income statement items and their related tax effects, shall be recognized in the period the adjustment amount is determined. The cumulative adjustment would be reflected within the respective financial statement line items affected. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2015. Early adoption was permitted. The Company elected to adopt this guidance as of September 30, 2015. The adoption of this guidance did not have a material impact to the Company's financial position, results of operations and cash flows.
In January 2016, the FASB issued an update that amends the recognition and measurement of financial instruments. The new guidance revises an entity’s accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it also amends the presentation and disclosure requirements associated with the fair value of financial instruments. The revised guidance is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is not permitted for most of the amendments in the update. The Company is currently evaluating the impact of this new guidance.

10

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

In February 2016, the FASB issued an update that sets out the principles for the recognition, measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases and operating leases. The revised guidance is effective on January 1, 2019. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance.
In March 2016, the FASB issued guidance which requires an entity to determine whether the nature of its promise to provide goods or services to a customer is performed in a principal or agent capacity and to recognize revenue in a gross or net manner based on its principal/agent designation. This guidance is effective for public business entities for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance.
In March 2016, the FASB issued an update that changes the accounting for certain aspects of share-based compensation. Among other things, the revised guidance allows companies to make an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The revised guidance is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company has adopted the provisions of this guidance beginning January 1, 2016 and determined that there is no impact to the Company’s consolidated financial position, results of operations and cash flows. The Company's policy is to account for forfeitures as they occur.
In August 2016, the FASB issued guidance on how certain transactions should be classified and presented in the statement of cash flows as either operating, investing or financing activities. Among other things, the update provides specific guidance on where to classify debt prepayment and extinguishment costs, payments for contingent consideration made after a business combination and distributions received from equity method investments. The revised guidance is effective for reporting periods beginning after December 15, 2017. Early adoption is permitted. We are currently evaluating the impact of this new guidance.
In October 2016, the FASB issued guidance where a reporting entity will need to evaluate if it should consolidate a VIE. The amendments change the evaluation of whether a reporting entity is the primary beneficiary of a VIE by changing how a single decision maker of a VIE treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The revised guidance is effective for reporting periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance.

11

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

Note 3 — Real Estate Investments
The Company owned 163 properties as of September 30, 2016. The Company invests in medical office buildings ("MOB"), seniors housing communities and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base. The following table presents the allocation of the assets acquired and capitalized construction in progress during the nine months ended September 30, 2016 and 2015.
 
 
Nine Months Ended September 30,
(Dollar amounts in thousands)
 
2016
 
2015
Real estate investments, at cost:
 
 
 
 
Land
 
$

 
$
49,921

Buildings, fixtures and improvements
 

 
257,516

Construction in progress
 
21,761

 
17,977

Total tangible assets
 
21,761

 
325,414

Acquired intangibles:
 
 
 
 
In-place leases
 

 
38,885

Market lease and other intangible assets
 

 
1,653

Market lease liabilities
 

 
(8,135
)
Total assets and liabilities acquired, net
 
21,761

 
357,817

Mortgage notes payable assumed to acquire real estate investments
 

 
(38,387
)
Premiums on mortgages assumed
 

 
(2,834
)
Other assets and liabilities, net
 

 
(604
)
Deposits for real estate acquisitions
 

 
(3,000
)
Cash paid for acquired real estate investments
 
$
21,761

 
$
312,992

Number of properties purchased
 

 
31

The following table presents future minimum base rental cash payments due to the Company over the next five years and thereafter as of September 30, 2016.  These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.
(In thousands)
 
Future Minimum
Base Rent Payments
October 1, 2016 — December 31, 2016
 
$
23,503

2017
 
88,552

2018
 
83,867

2019
 
77,503

2020
 
72,181

Thereafter
 
447,168

Total
 
$
792,774

As of September 30, 2016 and 2015, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis.


12

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The following table lists the states where the Company had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of September 30, 2016 and 2015:
 
 
September 30,
State
 
2016
 
2015
Florida
 
17.6%
 
22.0%
Georgia
 
10.9%
 
*
Iowa
 
*
 
11.9%
Pennsylvania
 
11.0%
 
13.3%
_______________
*
State's annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income for all portfolio properties as of the period specified.
Intangible Assets and Liabilities
Acquired intangible assets and liabilities consisted of the following as of the periods presented:
 
 
September 30, 2016
 
December 31, 2015
(In thousands)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
In-place leases
 
$
195,940

 
$
108,294

 
$
87,646

 
$
202,608

 
$
82,390

 
$
120,218

Intangible market lease assets
 
28,221

 
5,205

 
23,016

 
28,262

 
3,393

 
24,869

Other intangible assets
 
10,588

 
506

 
10,082

 
10,589

 
309

 
10,280

Total acquired intangible assets
 
$
234,749

 
$
114,005

 
$
120,744

 
$
241,459

 
$
86,092

 
$
155,367

Intangible market lease liabilities
 
$
25,213

 
$
4,438

 
$
20,775

 
$
25,613

 
$
2,619

 
$
22,994

The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangible assets, amortization and accretion of above- and below-market lease assets and liabilities, net and the accretion of above-market ground leases, for the periods presented:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In thousands)
 
2016
 
2015
 
2016
 
2015
Amortization of in-place leases and other intangible assets(1)
 
$
12,595

 
$
24,833

 
$
31,343

 
$
65,189

Amortization and (accretion) of above- and below-market leases, net(2)
 
(44
)
 
(110
)
 
(171
)
 
(282
)
Accretion of above-market ground leases(3)
 
43

 
50

 
129

 
150

_______________
(1)
Reflected within depreciation and amortization expense
(2)
Reflected within rental income
(3)
Reflected within property operating and maintenance expense

13

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The following table provides the projected amortization expense and adjustments to revenues for the next five years:
(In thousands)
 
October 1, 2016 — December 31, 2016
 
2017
 
2018
 
2019
 
2020
In-place lease assets
 
$
7,204

 
$
15,573

 
$
13,302

 
$
10,732

 
$
8,795

Other intangible assets
 
66

 
265

 
265

 
265

 
265

Total to be added to amortization expense
 
$
7,270

 
$
15,838

 
$
13,567

 
$
10,997

 
$
9,060

 
 
 
 
 
 
 
 
 
 
 
Above-market lease assets
 
$
(541
)
 
$
(1,877
)
 
$
(1,357
)
 
$
(1,068
)
 
$
(741
)
Below-market lease liabilities
 
582

 
2,089

 
1,860

 
1,580

 
1,423

Total to be added to rental income
 
$
41

 
$
212

 
$
503

 
$
512

 
$
682

 
 
 
 
 
 
 
 
 
 
 
Below-market ground lease assets
 
$
53

 
$
212

 
$
212

 
$
212

 
$
212

Above-market ground lease liabilities
 
(10
)
 
(40
)
 
(40
)
 
(40
)
 
(40
)
Total to be added to property operating and maintenance expense
 
$
43

 
$
172

 
$
172

 
$
172

 
$
172

Real Estate Sales
During the nine months ended September 30, 2016, the Company sold Gregory Ridge Living Center ("Gregory Ridge") and Parkway Health Care Center ("Parkway"), both located in Kansas City, Missouri. During the three and nine months ended September 30, 2016, the Company sold Redwood Radiology and Outpatient Center ("Redwood Radiology") located in Santa Rosa, California. The following table summarizes the three properties sold during the nine months ended September 30, 2016. The Company did not sell any properties during the three and nine months ended September 30, 2015.
Property (In thousands)
 
Disposition Date
 
Contract Sale Price
 
Gain (Impairment)
on Sale, Net
Gregory Ridge Living Center - Kansas City, MO
 
June 1, 2016
 
$
4,300

 
$
(126
)
Parkway Health Care Center - Kansas City, MO
 
June 1, 2016
 
4,450

 
(263
)
Redwood Radiology and Outpatient Center - Santa Rosa, CA
 
September 30, 2016
 
17,500

 
1,330

Total
 
 
 
26,250

 
$
941

Less: disposal costs (1)
 
 
 
(185
)
 
 
Proceeds from sale of real estate investments
 
 
 
$
26,065

 
 
_______________
(1) As of September 30, 2016, the Company had $0.2 million of unpaid brokerage commissions.
The disposals of Gregory Ridge, Parkway and Redwood Radiology did not represent a strategic shift that has a major effect on the Company’s operations and financial results. Accordingly, the results of operations of Gregory Ridge, Parkway and Redwood Radiology remain classified within continuing operations for all periods presented until the respective dates of disposal of Gregory Ridge, Parkway and Redwood Radiology.
Note 4 — Investment Securities
As of September 30, 2016, the company had no investment securities.
As of December 31, 2015, the Company had investment securities with an aggregate fair value of $1.1 million. These investments were considered available-for-sale securities and, therefore, increases or decreases in the fair value of these investments are recorded in accumulated other comprehensive income as a component of equity on the consolidated balance sheets unless the securities are considered to be other than temporarily impaired, at which time the losses would be reclassified to expense.

14

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The following table details the unrealized gains and losses on investment securities as of December 31, 2015:
(In thousands)
 
Cost
 
Gross Unrealized Gains
 
Gross Unrealized Losses
 
Fair Value
December 31, 2015
 
 
 
 
 
 
 
 
Equity securities
 
$
1,084

 
$
19

 
$
(25
)
 
$
1,078

During the three and nine months ended September 30, 2016, the Company sold its investments in preferred stock with a cost basis and sale price of $1.1 million, which resulted in a realized gain on sale of investment of $0.1 million.
During the three months ended September 30, 2015, the Company sold certain of its investments in preferred stock, common stock and real estate income funds with a cost basis of $14.9 million for $15.1 million, which resulted in a realized gain on sale of investment of $0.2 million. During the nine months ended September 30, 2015, the Company sold certain of its investments in preferred stock, common stock and real estate income funds and its investment in a senior note with a cost basis of $18.8 million for $19.3 million, which resulted in a realized gain on sale of investment of $0.4 million.
Note 5 — Revolving Credit Facility
On March 21, 2014, the Company entered into a senior secured credit facility in the amount of $50.0 million (the "Credit Facility"). On April 15, 2014 the amount available under the Credit Facility was increased to $200.0 million.
On June 26, 2015, the Company entered into an amendment to the Credit Facility which, among other things, allowed for borrowings of up to $500.0 million. On July 31, 2015, the available borrowings were increased to $565.0 million. The Credit Facility also contains a subfacility for letters of credit of up to $25.0 million. The Credit Facility contains an "accordion" feature to allow the Company, under certain circumstances, to increase the aggregate borrowings under the Credit Facility to a maximum of $750.0 million.
The Company has the option, based upon its leverage, to have the Credit Facility priced at either: (a) LIBOR, plus an applicable margin that ranges from 1.60% to 2.20%; or (b) the Base Rate, plus an applicable margin that ranges from 0.35% to 0.95%. Base Rate is defined in the Credit Facility as the greater of (i) the fluctuating annual rate of interest announced from time to time by the lender as its “prime rate,” (ii) 0.5% above the federal funds effective rate or (iii) the applicable one-month LIBOR plus 1.0%.
The Credit Facility provides for monthly interest payments for each Base Rate loan and periodic payments for each LIBOR loan, based upon the applicable LIBOR loan period, with all principal outstanding being due on the maturity date of March 21, 2019. The Credit Facility may be prepaid at any time, in whole or in part, without premium or penalty (subject to standard breakage costs). In the event of a default, the lender has the right to terminate its obligations under the Credit Facility and to accelerate the payment on any unpaid principal amount of all outstanding loans.
As of September 30, 2016, the balance outstanding under the Credit Facility was $476.5 million, with an effective interest rate of 2.0%. The Company's unused borrowing capacity was $41.5 million, based on assets assigned to the Credit Facility as of September 30, 2016. Availability of borrowings is based on a pool of eligible unencumbered real estate assets. There was $430.0 million in advances outstanding as of December 31, 2015.
The Credit Facility requires the Company to meet certain financial covenants, including the maintenance of certain financial ratios (such as specified debt to equity and debt service coverage ratios) as well as the maintenance of a minimum net worth. As of September 30, 2016, the Company was in compliance with the financial covenants under the Credit Facility.

15

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

Note 6 — Mortgage Notes Payable
The following table reflects the Company's mortgage notes payable as of September 30, 2016 and December 31, 2015:
 
 
 
 
Outstanding Loan Amount as of
 
Effective Interest Rate
 
 
 
 
Portfolio
 
Encumbered Properties
 
September 30, 2016
 
December 31, 2015
 
 
Interest Rate
 
Maturity
 
 
 
 
(In thousands)
 
(In thousands)
 
 
 
 
 
 
Bowie Gateway Medical Center - Bowie, MD
 
 
$

 
$
5,969

 
6.18
%
 
Fixed
 
Sep. 2016
Medical Center of New Windsor - New Windsor, NY
 
1
 
8,633

 
8,720

 
6.39
%
 
Fixed
 
Sep. 2017
Plank Medical Center - Clifton Park, NY
 
1
 
3,427

 
3,461

 
6.39
%
 
Fixed
 
Sep. 2017
Cushing Center - Schenectady, NY
 
 

 
4,184

 
5.71
%
 
Fixed
 
Feb. 2016
Countryside Medical Arts - Safety Harbor, FL
 
1
 
5,927

 
5,992

 
6.07
%
 
Fixed
(1) 
Apr. 2019
St. Andrews Medical Park - Venice, FL
 
3
 
6,551

 
6,623

 
6.07
%
 
Fixed
(1) 
Apr. 2019
Campus at Crooks & Auburn Building C - Rochester Hills, MI
 
 

 
3,555

 
5.91
%
 
Fixed
 
Apr. 2016
Slingerlands Crossing Phase I - Bethlehem, NY
 
1
 
6,613

 
6,680

 
6.39
%
 
Fixed
 
Sep. 2017
Slingerlands Crossing Phase II - Bethlehem, NY
 
1
 
7,699

 
7,777

 
6.39
%
 
Fixed
 
Sep. 2017
Benedictine Cancer Center - Kingston, NY
 
1
 
6,743

 
6,811

 
6.39
%
 
Fixed
 
Sep. 2017
Aurora Healthcare Center Portfolio - WI
 
6
 
30,963

 
31,257

 
6.55
%
 
Fixed
 
Jan. 2018
Palm Valley Medical Plaza - Goodyear, AZ
 
1
 
3,453

 
3,525

 
4.21
%
 
Fixed
 
Jun. 2023
Medical Center V - Peoria, AZ
 
1
 
3,171

 
3,232

 
4.75
%
 
Fixed
 
Sep. 2023
Courtyard Fountains - Gresham, OR
 
1
 
24,930

 
24,999

 
3.82
%
 
Fixed
(2) 
Jan. 2020
Fox Ridge Bryant - Bryant, AR
 
1
 
7,730

 
7,825

 
3.98
%
 
Fixed
 
May 2047
Fox Ridge Chenal - Little Rock, AR
 
1
 
17,606

 
17,800

 
3.98
%
 
Fixed
 
May 2049
Fox Ridge North Little Rock - North Little Rock, AR
 
1
 
10,925

 
11,045

 
3.98
%
 
Fixed
 
May 2047
Gross mortgage notes payable
 
21
 
144,371

 
159,455

 
5.26
%
(3) 
 
 
 
Deferred financing costs, net of accumulated amortization
 
 
 
(1,744
)
 
(2,150
)
 
 
 
 
 
 
Mortgage notes payable, net of deferred financing costs
 
 
 
$
142,627

 
$
157,305

 
 
 
 
 
 
_______________
(1)    Fixed interest rate through May 10, 2017. Interest rate changes to variable rate starting in June 2017.
(2)    Interest only payments through July 1, 2016. Principal and interest payments starting in August 2016.
(3)    Calculated on a weighted average basis for all mortgages outstanding as of September 30, 2016.
As of September 30, 2016, the Company had pledged $261.7 million in real estate as collateral for these mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable on the properties. Except as noted above, the Company makes payments of principal and interest on all of its mortgage notes payable on a monthly basis.
The following table summarizes the scheduled aggregate principal payments on mortgage notes payable for the five years subsequent to September 30, 2016:
(In thousands)
 
Future Principal
Payments
October 1, 2016 — December 31, 2016
 
$
567

2017
 
34,832

2018
 
31,893

2019
 
13,324

2020
 
24,279

Thereafter
 
39,476

Total
 
$
144,371

Some of the Company's mortgage note agreements require the compliance with certain property-level financial covenants including debt service coverage ratios. As of September 30, 2016, the Company was in compliance with the financial covenants under its mortgage note agreements.

16

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

Note 7 — Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:
Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.
Level 3 — Unobservable inputs that reflect the entity's own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.
The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.
The Company has or had investments in common stock, redeemable preferred stock, real estate income funds and a senior note that are traded in active markets and therefore, due to the availability of quoted market prices in active markets, the Company has classified these investments as Level 1 in the fair value hierarchy.
The following table presents information about the Company's assets measured at fair value on a recurring basis as of December 31, 2015, aggregated by the level in the fair value hierarchy within which those instruments fall. The Company did not own any assets measured at fair value on a recurring basis as of September 30, 2016.
(In thousands)
 
Quoted Prices in Active Markets
Level 1
 
Significant Other Observable Inputs
Level 2
 
Significant Unobservable Inputs
Level 3
 
Total
December 31, 2015
 
 
 
 
 
 
 
 
Investment securities
 
$
1,078

 
$

 
$

 
$
1,078

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, straight-line rent receivable, net, prepaid expenses and other assets, deferred costs, net, accounts payable and accrued expenses, deferred rent and distributions payable approximates their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company's remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below:
 
 
 
 
Carrying
Amount(1) at
 
Fair Value at
 
Carrying
Amount(1) at
 
Fair Value at
(In thousands)
 
Level
 
September 30,
2016
 
September 30,
2016
 
December 31,
2015
 
December 31,
2015
Mortgage notes payable
 
3
 
$
145,289

 
$
149,198

 
$
161,858

 
$
162,654

Credit Facility
 
3
 
$
476,500

 
$
476,500

 
$
430,000

 
$
430,000

_______________________________
(1)
Carrying value includes gross mortgage notes payable of $144.4 million and $159.5 million and mortgage premiums and discounts, net of $0.9 million and $2.4 million as of September 30, 2016 and December 31, 2015, respectively.
The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of borrowing arrangements. Advances under the Credit Facility are considered to be reported at fair value, because the Credit Facility's interest rate varies with changes in LIBOR.

17

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

Note 8 — Common Stock
As of September 30, 2016 and December 31, 2015, the Company had 88.6 million and 86.1 million shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the DRIP and had received total proceeds of $2.2 billion and $2.1 billion, respectively, including proceeds from shares issued pursuant to the DRIP.
In April 2013, the Board authorized, and the Company declared, a distribution payable on a monthly basis to stockholders of record on a daily basis at a rate equal to $0.0046575343 per day, which is equivalent to $1.70 per annum, per share of common stock, which began in May 2013. In March 2016, the Board ratified the existing distribution amount equivalent to $1.70 per annum, and, for calendar year 2016, affirmed a change to the daily distribution payable to stockholders of record each day during the applicable period to $0.0046448087 per day per share of common stock to accurately reflect that 2016 is a leap year. Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The Board may reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.
Share Repurchase Program
The Board has adopted a Share Repurchase Program (as amended, the "SRP") which enables stockholders to sell their shares to the Company in limited circumstances. The SRP permits investors to sell their shares back to the Company after they have held them for at least one year, subject to the significant conditions and limitations described below.
Prior to the time that the Company’s shares are listed on a national securities exchange and until the NAV Pricing Date (other than with respect to a repurchase request that was made in connection with a stockholder's death or disability), the repurchase price per share depended on the length of time investors held such shares, as follows: after one year from the purchase date — the lower of $23.13 or 92.5% of the amount they actually paid for each share; after two years from the purchase date — the lower of $23.75 or 95.0% of the amount they actually paid for each share; after three years from the purchase date — the lower of $24.38 or 97.5% of the amount they actually paid for each share; and after four years from the purchase date — the lower of $25.00 or 100.0% of the amount they actually paid for each share (in each case, as adjusted for any stock distributions, combinations, splits and recapitalizations). In cases of requests for death and disability, the repurchase price was be equal to the price actually paid for each share.
In accordance with the First SRP Amendment (described below) and beginning with the NAV Pricing Date, the price per share that the Company will pay to repurchase its shares will be equal to its NAV multiplied by a percentage equal to (i) 92.5%, if the person seeking repurchase has held his or her shares for a period greater than one year and less than two years; (ii) 95.0%, if the person seeking repurchase has held his or her shares for a period greater than two years and less than three years; (iii) 97.5%, if the person seeking repurchase has held his or her shares for a period greater than three years and less than four years; or (iv) 100.0%, if the person seeking repurchase has held his or her shares for a period greater than four years. In cases of requests for death and disability, the repurchase prices will be equal to NAV at the time of repurchase. Subject to limited exceptions, stockholders who redeem their shares of our common stock within the first four months from the date of purchase will be subject to a short-term trading fee of 2% of the aggregate NAV per share of the shares of common stock received.
Repurchases of shares of the Company's common stock, when requested, are at the sole discretion of the Board. Until the First SRP Amendment (described below), the Company limited the number of shares repurchased during any calendar year to 5% of the weighted average number of shares of common stock outstanding on December 31st of the previous calendar year. In addition, the Company was only authorized to repurchase shares in a given quarter up to the amount of proceeds received from its DRIP in that same quarter.
On January 26, 2016, the Board approved and amended the SRP (the "First SRP Amendment") to supersede and replace the existing SRP. Under the First SRP Amendment, repurchases of shares of the Company's common stock, when requested, are at the sole discretion of the Board and generally will be made semiannually (each six-month period ending June 30 or December 31, a “fiscal semester”). Repurchases for any fiscal semester will be limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year (the "Prior Year Outstanding Shares"), with a maximum for any fiscal year of 5.0% of the Prior Year Outstanding Shares. In addition, the Company is only authorized to repurchase shares in a given fiscal semester up to the amount of proceeds received from its DRIP in that same fiscal semester. If the NAV Pricing Date occurs during any fiscal semester, any repurchase requests received during such fiscal semester will be paid at the applicable NAV then in effect.

18

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

On June 28, 2016, the Board further amended the Company’s SRP (the "Second SRP Amendment") to provide for one twelve-month repurchase period for calendar year 2016 (the “2016 Repurchase Period”) instead of two semi-annual periods ending June 30 and December 31. The annual limit on repurchases under the SRP remains unchanged and continues to be limited to a maximum of 5.0% of the Prior Year Outstanding Shares and is subject to the terms and limitations set forth in the SRP. Accordingly, the 2016 Repurchase Period will be limited to a maximum of 5.0% of the Prior Year Outstanding Shares and continue to be subject to the terms and conditions set forth in the SRP, as amended. Following calendar year 2016, the repurchase periods will return to two semi-annual periods and applicable limitations set forth in the SRP. The Second SRP Amendment also provides, for calendar year 2016 only, that any amendments, suspensions or terminations of the SRP will become effective on the day following the Company’s public announcement of such amendments, suspension or termination. The Second SRP Amendment became effective on July 30, 2016 and will only apply to repurchase periods in calendar year 2016.
When a stockholder requests redemption and the redemption is approved, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares purchased under the SRP will have the status of authorized but unissued shares. The following table reflects the number of shares repurchased cumulatively through September 30, 2016:
 
 
Number of Shares Repurchased
 
Average Price per Share
Cumulative repurchases as of December 31, 2015(1)
 
968,370

 
$
23.72

Nine months ended September 30, 2016(2)
 
6,660

 
24.36

Cumulative repurchases as of September 30, 2016 (2)
 
975,030

 
$
23.73

_____________________________
(1)
Excludes rejected repurchases of 201,367 shares for $4.6 million at an average price per share of $23.04, which were unfulfilled as of December 31, 2015 and remain rejected as of September 30, 2016. There were no other rejected share repurchase requests for the period from October 15, 2012 (date of inception) to September 30, 2016.
(2)
Excludes 2.4 million shares that have been requested for repurchase and are not yet fulfilled as of September 30, 2016. These shares, and all additional shares requested prior to December 31, 2016, will be considered for repurchase, to the extent the requests are not withdrawn by December 31, 2016. All requested shares will be subject to the annual limitations set forth in the SRP. The 6,660 shares above represent unaccrued repurchases for the year ended December 31, 2015 that were finalized in January 2016.
Distribution Reinvestment Plan
Pursuant to the DRIP, stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving cash. No dealer manager fees or selling commissions are paid with respect to shares purchased under the DRIP. The shares purchased pursuant to the DRIP have the same rights and are treated in the same manner as the shares issued pursuant to the IPO. The Board may designate that certain cash or other distributions be excluded from reinvestment pursuant to the DRIP. The Company has the right to amend any aspect of the DRIP or terminate the DRIP with ten days' notice to participants. Shares issued under the DRIP are recorded as equity in the accompanying consolidated balance sheet in the period distributions are declared. During the nine months ended September 30, 2016 and 2015, the Company issued 2.4 million and 2.5 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $56.0 million and $58.8 million, respectively.
Note 9 — Related Party Transactions and Arrangements
As of September 30, 2016 and December 31, 2015, the Special Limited Partner owned 8,888 shares of the Company's outstanding common stock. The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company.
Realty Capital Securities, LLC (the "Former Dealer Manager") served as the dealer manager of the IPO. American National Stock Transfer, LLC ("ANST"), a subsidiary of the parent company of the Former Dealer Manager, provided other general professional services through January 2016. RCS Capital Corporation ("RCAP"), the parent company of the Former Dealer Manager and certain of its affiliates that provided the Company with services, filed for Chapter 11 bankruptcy protection in January 2016, prior to which it was also under common control with AR Global, the parent of the Company's Sponsor. In May 2016, RCAP and its affiliated debtors emerged from bankruptcy under the new name Aretec Group, Inc.

19

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

On January 14, 2015, the Company purchased the Specialty Hospital portfolio from American Realty Capital Healthcare Trust, Inc. ("HCT") for a contract purchase price of $39.4 million. At the time of such purchase, the Sponsor and the Advisor and the sponsor and advisor of HCT were under common control.
The limited partnership agreement of the OP provides for a special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to the Company's Advisor, a limited partner of the OP.  In connection with this special allocation, the Company's Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP.
Fees Paid in Connection with the IPO
The Former Dealer Manager was paid fees in connection with the sale of the Company's common stock in the IPO. The Company paid the Former Dealer Manager a selling commission of up to 7.0% of the per share purchase price of offering proceeds before reallowance of commissions earned by participating broker-dealers. In addition, the Company paid the Former Dealer Manager up to 3.0% of the gross proceeds from the sale of shares, before reallowance to participating broker-dealers, as a dealer manager fee. The Former Dealer Manager was permitted to reallow its dealer manager fee to participating broker-dealers. A participating broker-dealer could elect to receive a fee equal to 7.5% of the gross proceeds from the sale of shares by such participating broker-dealer, with 2.5% thereof paid at the time of such sale and 1.0% thereof paid on each anniversary of the closing of such sale up to and including the fifth anniversary of the closing of such sale. If this option had been elected, the dealer manager fee would have been reduced to 2.5% of gross proceeds. During the nine months ended September 30, 2015, the Company received approximately $2,000 from the Former Dealer Manager for an unconsummated share transaction. The Company did not incur any commissions or fees in connection with the sale of the Company's common stock in the IPO from the Former Dealer Manager during the three and nine months ended September 30, 2016 and the three months ended September 30, 2015. The Company did not have any amounts outstanding to the Former Dealer Manager for fees in connection with the sale of the Company's common stock in the IPO as of September 30, 2016 or December 31, 2015.
The Advisor and its affiliates received compensation and reimbursement for services relating to the IPO, including transfer agent services provided by an affiliate of the Former Dealer Manager. All offering costs incurred by the Company or its affiliated entities on behalf of the Company were charged to additional paid-in capital on the accompanying balance sheet during the IPO. The Company did not incur any charges or reimbursements for services relating to the IPO from the Advisor or any of its affiliates during the three and nine months ended September 30, 2016 or 2015. The Company did not have any amounts outstanding to the Advisor or any of its affiliates for charges or reimbursements for services relating to the IPO as of September 30, 2016 or December 31, 2015.
The Company was responsible for paying offering and related costs from the IPO, excluding commissions and dealer manager fees, up to a maximum of 2.0% of gross proceeds received from the IPO, measured at the end of the IPO. Offering costs, excluding selling commissions and dealer manager fees, in excess of the 2.0% cap as of the end of the IPO were to be the Advisor's responsibility. As of the end of the IPO, offering and related costs, excluding selling commissions and dealer manager fees, did not exceed 2.0% of gross proceeds received from the IPO. In aggregate, offering costs including selling commissions and dealer manager fees were the Company's responsibility up to a maximum of 12.0% of the gross proceeds received from the IPO as determined at the end of the IPO. As of the end of the IPO in November 2014, offering costs were less than 12.0% of the gross proceeds received in the IPO.
Fees Paid in Connection With the Operations of the Company
The Advisor is paid an acquisition fee equal to 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. The Advisor is also reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property and 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third party acquisition expenses. The aggregate amount of acquisition fees and financing coordination fees (as described below) may not exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. In no event will the total of all acquisition fees, acquisition expenses and any financing coordination fees payable with respect to the Company's portfolio of investments or reinvestments exceed 4.5% of the contract purchase price of the Company's portfolio to be measured at the close of the acquisition phase or 4.5% of the amount advanced for all loans or other investments.

20

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

If the Advisor provides services in connection with the origination or refinancing of any debt that the Company obtains and uses to acquire properties or to make other permitted investments, or that is assumed, directly or indirectly, in connection with the acquisition of properties, the Company will pay the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations.
Until March 31, 2015, for its asset management services, the Company issued the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the Board) to the Advisor performance-based restricted, forfeitable partnership units of the OP designated as "Class B Units." The Class B Units were intended to be profit interests and vest, and are no longer subject to forfeiture, at such time as: (x) the value of the OP's assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the "economic hurdle"); (y) any one of the following occurs: (1) a listing; (2) an other liquidity event or (3) the termination of the advisory agreement by an affirmative vote of a majority of the Company's independent directors without cause; and (z) the Advisor is still providing advisory services to the Company (the "performance condition"). Unvested Class B Units will be forfeited immediately if: (a) the advisory agreement is terminated for any reason other than a termination without cause; or (b) the advisory agreement is terminated by an affirmative vote of a majority of the Company's independent directors without cause before the economic hurdle has been met.
When approved by the Board, the Class B Units were issued to the Advisor quarterly in arrears pursuant to the terms of the limited partnership agreement of the OP. The number of Class B Units issued in any quarter was equal to: (i) the excess of (A) the product of (y) the cost of assets multiplied by (z) 0.1875% over (B) any amounts payable as an oversight fee (as described below) for such calendar quarter; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter, which is equal initially to $22.50 (the IPO price minus the selling commissions and dealer manager fees). The value of issued Class B Units will be determined and expensed when the Company deems the achievement of the performance condition to be probable. As of September 30, 2016, the Company cannot determine the probability of achieving the performance condition. The Advisor receives distributions on vested and unvested Class B Units equal to the distribution rate received on the Company's common stock. Such distributions on issued Class B Units are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss until the performance condition is considered probable to occur. As of September 30, 2016, the Board had approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement.
On May 12, 2015, the Company, the OP and the Advisor entered into an amendment (the “Amendment”) to the advisory agreement, which, among other things, provided that the Company would cease causing the OP to issue Class B Units in the OP to the Advisor or its assignees related to any period ending after March 31, 2015. Effective April 1, 2015, the Company began paying an asset management fee to the Advisor or its assignees as compensation for services rendered in connection with the management of the Company’s assets. The asset management fee is payable on the first business day of each month in the amount of 0.0625% multiplied by the lesser of (a) cost of assets or (b) fair value of assets for the preceding monthly period. The asset management fee is payable to the Advisor or its assignees in cash, in shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor. For the purposes of the payment of any fees in shares (a) prior to the NAV Pricing Date, each share was valued at $22.50, (b) after the NAV Pricing Date and prior to any listing on a national securities exchange, if it occurs, each share will be valued at the then-current NAV per share and (c) at all other times, each share shall be valued by the Board in good faith at the fair market value.
Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee of 1.5% of gross revenues from the Company's stand-alone single-tenant net leased properties and 2.5% of gross revenues from all other types of properties, respectively. The Company also reimburses the Property Manager for property level expenses. If the Company contracts directly with third parties for such services, the Company will pay them customary market fees and will pay the Property Manager an oversight fee of up to 1.0% of the gross revenues of the property managed. In no event will the Company pay the Property Manager or any affiliate of the Property Manager both a property management fee and an oversight fee with respect to any particular property.

21

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

Effective June 1, 2013, the Company entered into an agreement with the Former Dealer Manager to provide strategic advisory services and investment banking services required in the ordinary course of the Company's business, such as performing financial analysis, evaluating publicly traded comparable companies and assisting in developing a portfolio composition strategy, a capitalization structure to optimize future liquidity options and structuring operations. Strategic advisory fees were amortized over the estimated remaining term of the IPO and, as such, have been fully amortized as of December 31, 2014. The Former Dealer Manager and its affiliates also previously provided transfer agency services, as well as transaction management and other professional services. These fees were included in general and administrative expenses in the accompanying consolidated statement of operations and comprehensive loss.
The following table details amounts incurred, forgiven and payable in connection with the Company's operations-related services described above as of and for the periods presented:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
Payable (Receivable) as of
 
 
2016
 
2015
 
2016
 
2015
 
September 30,
 
December 31,
(In thousands)
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
Incurred
 
Forgiven
 
2016
 
2015
One-time fees and reimbursements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisition fees
 
$

 
$

 
$
1,719

 
$

 
$

 
$

 
$
3,707

 
$

 
$

 
$

Acquisition cost reimbursements
 

 

 
859

 

 

 

 
1,853

 

 

 

Financing coordination fees
 

 

 
512

 

 

 

 
3,400

 

 

 

Ongoing fees and reimbursements:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Asset management fees (1)
 
4,396

 

 
3,656

 

 
13,177

 

 
7,066

 

 

 
(5
)
Property management fees
 
803

 

 
656

 

 
2,349

 

 
656

 
1,220

 

 
(10
)
Professional fees and reimbursements
 
1,090

 

 
1,085

 

 
2,999

 

 
3,156

 

 
499

 
499

Distributions on Class B Units
 
153

 

 
154

 

 
457

 

 
336

 

 

 
52

Total related party operation fees and reimbursements
 
$
6,442

 
$

 
$
8,641

 
$

 
$
18,982

 
$

 
$
20,174

 
$
1,220

 
$
499

 
$
536

_______________
(1)
Prior to April 1, 2015, the Company caused the OP to issue (subject to periodic approval by the Board) to the Advisor restricted performance based Class B Units for asset management services. As of September 30, 2016, the Board had approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. Effective April 1, 2015, in connection with the Amendment, the Company began paying an asset management fee to the Advisor or its assignees in cash, in shares, or a combination of both and no longer issues any Class B Units.
The Company reimburses the Advisor's costs of providing administrative services, subject to the limitation that the Company did not reimburse the Advisor for any amount by which the Company's operating expenses at the end of the four preceding fiscal quarters exceeded the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash expenses and excluding any gain from the sale of assets for that period (the "2%/25% Limitation"), unless the Company's independent directors determined that such excess was justified based on unusual and nonrecurring factors which they deemed sufficient, in which case the excess amount could be reimbursed to the Advisor in subsequent periods. Additionally, the Company reimburses the Advisor for personnel costs; however, the Company may not reimburse the Advisor for personnel costs in connection with services for which the Advisor receives acquisition fees, acquisition expenses or real estate commissions or for persons serving as executive officers of the Company. The 2%/25% Limitation was removed from the advisory agreement in connection with the amendment and restatement of to the advisory agreement in June 2015.
In order to improve operating cash flows and the ability to pay distributions from operating cash flows, the Advisor may elect to forgive and absorb certain fees. Because the Advisor may forgive or absorb certain fees, cash flow from operations that would have been paid to the Advisor may be available to pay distributions to stockholders. The fees that are forgiven are not deferrals and, accordingly, will not be paid to the Advisor in the future. During the nine months ended September 30, 2015, the Advisor elected to forgive $1.2 million in fees. There were no such fees forgiven during the three and nine months ended September 30, 2016 and the three months ended September 30, 2015. In certain instances, to improve the Company's working capital, the Advisor may elect to absorb a portion of the Company's property operating and general and administrative costs, which the Company will not repay. No such fees were absorbed during the three and nine months ended September 30, 2016 or 2015.

22

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The predecessor to AR Global was a party to a services agreement with RCS Advisory Services, LLC, a subsidiary of the parent company of the Former Dealer Manager (“RCS Advisory”), pursuant to which RCS Advisory and its affiliates provided the Company and certain other companies sponsored by AR Global with services (including, without limitation, transaction management, compliance, due diligence, event coordination and marketing services, among others) on a time and expenses incurred basis or at a flat rate based on services performed. The predecessor to AR Global instructed RCS Advisory to stop providing such services in November 2015 and no services have since been provided by RCS Advisory.
The Company was also party to a transfer agency agreement with ANST, a subsidiary of the parent company of the Former Dealer Manager, pursuant to which ANST provided the Company with transfer agency services (including broker and stockholder servicing, transaction processing, year-end IRS reporting and other services), and supervisory services overseeing the transfer agency services performed by DST Systems, Inc., a third-party transfer agent ("DST"). AR Global received written notice from ANST on February 10, 2016 that it would wind down operations by the end of the month and would withdraw as the transfer agent effective February 29, 2016. On February 26, 2016, the Company entered into a definitive agreement with DST to provide the Company directly with transfer agency services (including broker and stockholder servicing, transaction processing, year-end IRS reporting and other services).
Fees and Participations Paid in Connection with a Listing or the Liquidation of the Company's Real Estate Assets
Fees Incurred in Connection with a Listing
In 2015, the Board determined that it was in the Company’s best interest to evaluate strategic alternatives, including a listing on a national securities exchange. Accordingly, in March 2015, the Company formally engaged KeyBanc and RCS Capital ("RCS Capital"), the investment banking and capital markets division of the Former Dealer Manager, and in May 2015, the Company formally engaged BMO Capital Markets Corp. ("BMO"), as financial advisors. Pursuant to the agreements with KeyBanc, BMO and RCS Capital, they each would have received a listing advisory fee equal to $1.5 million if the Company's shares were listed on a national securities exchange. In the event of a sale or acquisition transaction, KeyBanc, BMO and RCS Capital each would have received a proposed transaction fee equal to 0.25% of the value of the transaction. The agreements with KeyBanc, RCS Capital and BMO were terminated in January 2016. No fees were incurred in connection with these agreements during the three and nine months ended September 30, 2016 or 2015.
The Board, led by its independent directors, announced in April 2016 that it had initiated the Strategic Review. On October 6, 2016, the Company announced that the Special Committee concluded the Strategic Review and recommended that the Company continue to execute its business plan and focus on managing and strengthening its assets. See Note 1 — Organization.
Other Liquidation Related Fees and Participations
The Company will pay the Advisor an annual subordinated performance fee calculated on the basis of the Company's total return to stockholders, payable annually in arrears, such that for any year in which the Company's total return on stockholders' capital exceeds 6.0% per annum, the Advisor will be entitled to 15.0% of the excess total return but not to exceed 10.0% of the aggregate total return for such year. This fee will be paid only upon the sale of assets, distributions or other event which results in the return on stockholders' capital exceeding 6.0% per annum. No subordinated performance fees were incurred during the three and nine months ended September 30, 2016 or 2015.
The Company may pay the Advisor a brokerage commission on the sale of property, not to exceed the lesser of 2.0% of the contract sale price of the property and 50.0% of the total brokerage commission paid if a third party broker is also involved; provided, however, that in no event may the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of 6.0% of the contract sales price and a reasonable, customary and competitive real estate commission, in each case, payable to the Advisor if the Advisor or its affiliates, subject to approval by a majority of the independent directors upon a finding that the Advisor provided a substantial amount of services in connection with the sale. During the three months ended September 30, 2016, the Company incurred $0.1 million in brokerage commissions on the sale of one property and during the nine months ended September 30, 2016, the Company incurred $0.3 million in brokerage commissions on the sale of three properties. As of September 30, 2016, the Company had $0.2 million of brokerage commissions payable to the Advisor. No such fees were incurred during the three and nine months ended September 30, 2015.

23

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The Special Limited Partner will be entitled to receive a subordinated participation in the net sales proceeds of the sale of real estate assets from the OP equal to 15.0% of remaining net sale proceeds after return of capital contributions to investors plus payment to investors of a 6.0% cumulative, pre-tax non-compounded annual return on the capital contributed by investors. The Special Limited Partner will not be entitled to the subordinated participation in net sale proceeds unless the Company's investors have received a 6.0% cumulative, pre-tax non-compounded annual return on their capital contributions. No such participation in net sales proceeds became due and payable during the three and nine months ended September 30, 2016 or 2015.
If the common stock of the Company is listed on a national exchange, the Special Limited Partner will be entitled to receive a subordinated incentive listing distribution from the OP equal to 15.0% of the amount by which the adjusted market value of real estate assets plus distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6.0% cumulative, pre-tax non-compounded annual return to investors. The Special Limited Partner will not be entitled to the subordinated incentive listing distribution unless investors have received a 6.0% cumulative, pre-tax non-compounded annual return on their capital contributions. No such distribution was incurred during the three and nine months ended September 30, 2016 or 2015. Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in the net sales proceeds and the subordinated incentive listing distribution.
Upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner will be entitled to receive distributions from the OP equal to 15.0% of the amount by which the sum of the Company's market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an annual 6.0% cumulative, pre-tax, non-compounded annual return to investors. The Special Limited Partner may elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs.
Note 10 — Economic Dependency
Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company and asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and investor relations.
As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that the Advisor and its affiliates are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.
Note 11 — Equity-Based Compensation
Restricted Share Plan
The Company has an employee and director incentive restricted share plan (the "RSP"), which provides for the automatic grant of 1,333 restricted shares of common stock to each of the independent directors, without any further approval by the Board or the stockholders, after initial election to the Board and after each annual stockholder meeting, with such shares vesting annually beginning with the one year anniversary of initial election to the Board and the date of the next annual meeting, respectively. Restricted stock issued to independent directors will vest over a five-year period in increments of 20.0% per annum. The RSP provides the Company with the ability to grant awards of restricted shares to the Company's directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The total number of common shares granted under the RSP may not exceed 5.0% of the Company's outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.4 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).

24

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

Restricted share awards entitle the recipient to receive shares of common stock from the Company under terms that provide for vesting over a specified period of time. For restricted share awards granted prior to July 1, 2015, such awards would typically be forfeited with respect to the unvested shares upon the termination of the recipient's employment or other relationship with the Company. For restricted share awards granted on or after July 1, 2015, such awards provide for accelerated vesting of the portion of the unvested shares scheduled to vest in the year of the recipient's voluntary termination or the failure to be re-elected to the Board. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock shall be subject to the same restrictions as the underlying restricted shares. The following table reflects restricted share award activity for the period presented:
 
 
Number of Common Shares
 
Weighted-Average Issue Price
Unvested, December 31, 2015
 
11,731

 
$
22.50

Granted
 
5,388

 
22.27

Vested
 
(3,199
)
 
22.50

Forfeitures
 
(1,333
)
 
22.50

Unvested, September 30, 2016
 
12,587

 
$
22.50

As of September 30, 2016, the Company had $0.2 million of unrecognized compensation cost related to unvested restricted share awards granted under the Company's RSP. That cost is expected to be recognized over a weighted-average period of 3.4 years.
Compensation expense related to restricted stock was approximately $43,000 and $30,000 during the three months ended September 30, 2016 and 2015, respectively. Compensation expense related to restricted stock was approximately $73,000 and $36,000 during the nine months ended September 30, 2016 and 2015, respectively. Compensation expense related to restricted stock is recorded as general and administrative expense in the accompanying consolidated statement of operations and comprehensive loss.
Other Share-Based Compensation
The Company may issue common stock in lieu of cash to pay fees earned by the Company's directors at the respective director's election. There are no restrictions on the shares issued since these payments in lieu of cash relate to fees earned for services performed. No such shares were issued during the three and nine months ended September 30, 2016 or 2015.
Note 12 — Accumulated Other Comprehensive Income
The following table illustrates the changes in accumulated other comprehensive income as of and for the period presented:
(In thousands)
 
Unrealized Gains (Losses) on Available-for-Sale Securities
Balance, December 31, 2015
 
$
(6
)
Other comprehensive income, before reclassifications
 
62

Amounts reclassified from accumulated other comprehensive income (1)
 
(56
)
Balance, September 30, 2016
 
$

__________________
(1)
During the nine months ended September 30, 2016, the Company sold its investments in preferred stock which resulted in a realized gain of $0.1 million, which is included in gain on sale of investment securities on the consolidated statement of operations and comprehensive loss.
Note 13 — Non-controlling Interests
The Company is the sole general partner and holds substantially all of the units of limited partner interests in the OP ("OP Units"). As of September 30, 2016 and 2015, the Advisor held 90 OP Units, which represents a nominal percentage of the aggregate OP ownership.

25

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

In November 2014, the Company partially funded the purchase of an MOB from an unaffiliated third party by causing the OP to issue 405,908 OP Units, with a value of $10.1 million, or $25.00 per unit, to the unaffiliated third party.
A holder of OP Units has the right to distributions and has the right to convert OP Units for the cash value of a corresponding number of shares of the Company's common stock or, at the option of the OP, a corresponding number of shares of the Company's common stock, in accordance with the limited partnership agreement of the OP, provided, however, that such OP Units must have been outstanding for at least one year. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP's assets. During the three months ended September 30, 2016 and 2015, OP Unit non-controlling interest holders were paid distributions of $0.2 million. During the nine months ended September 30, 2016 and 2015, OP Unit non-controlling interest holders were paid distributions of $0.5 million.
The Company has an investment arrangement with an unaffiliated third party whereby such investor receives an ownership interest in certain of the Company's property-owning subsidiaries and is entitled to receive a proportionate share of the net operating cash flow derived from the subsidiaries' property. Upon disposition of a property subject to non-controlling interest, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company's involvement with the arrangement and the significance of its investment in relation to the investment of the third party, the Company has determined that it controls each entity in this arrangement and therefore the entities related to this arrangement are consolidated within the Company's financial statements. A non-controlling interest is recorded for the investor's ownership interest in the properties.
The following table summarizes the activity related to investment arrangements with the unaffiliated third party. No distributions were made related to these investment arrangements during the three and nine months ended September 30, 2016 and 2015.
 
 
 
 
 
 
 
 
As of September 30, 2016
 
As of December 31, 2015
Property Name
(Dollar amounts in thousands)
 
Investment Date
 
Third Party Net Investment Amount as of September 30, 2016
 
Non-Controlling Ownership Percentage as of September 30, 2016
 
Net Real Estate Assets Subject to Investment Arrangement
 
Mortgage Notes Payable Subject to Investment Arrangement
 
Net Real Estate Assets Subject to Investment Arrangement
 
Mortgage Notes Payable Subject to Investment Arrangement
Plaza Del Rio Medical Office Campus Portfolio - Peoria, AZ
 
May 2015
 
$
478

 
4.1
%
 
$
10,537

 
$

 
$
10,561

 
$

Note 14 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computation for the three and nine months ended September 30, 2016 and 2015:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2016
 
2015
 
2016
 
2015
Net loss attributable to stockholders (in thousands)
 
$
(8,664
)
 
$
(16,108
)
 
$
(13,219
)
 
$
(34,749
)
Basic and diluted weighted-average shares outstanding
 
88,285,390

 
85,705,595

 
87,472,855

 
84,988,240

Basic and diluted net loss per share
 
$
(0.10
)
 
$
(0.19
)
 
$
(0.15
)
 
$
(0.41
)

26

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The Company had the following potentially dilutive securities as of September 30, 2016 and 2015, which were excluded from the calculation of diluted loss per share attributable to stockholders as the effect would have been antidilutive:
 
 
September 30,
 
 
2016
 
2015
Unvested restricted stock
 
12,587

 
9,065

OP Units
 
405,998

 
405,998

Class B units
 
359,250

 
359,250

Total common share equivalents
 
777,835

 
774,313

Note 15 — Segment Reporting
During the three and nine months ended September 30, 2016 and 2015, the Company operated in three reportable business segments for management and internal financial reporting purposes: medical office buildings, triple-net leased healthcare facilities, and seniors housing — operating properties ("SHOP").
The Company evaluates performance and makes resource allocations based on its three business segments. The medical office building segment primarily consists of MOBs leased to healthcare-related tenants under long-term leases, which may require such tenants to pay a pro rata share of property-related expenses. The triple-net leased healthcare facilities segment primarily consists of investments in seniors housing communities, hospitals, inpatient rehabilitation facilities and skilled nursing facilities under long-term leases, under which tenants are generally responsible to directly pay property-related expenses. The SHOP segment consists of direct investments in seniors housing communities, primarily providing assisted living, independent living and memory care services, which are operated through engaging independent third-party managers. There were no intersegment sales or transfers during the periods presented.
The Company evaluates the performance of the combined properties in each segment based on net operating income ("NOI"). NOI is defined as total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss). The Company uses NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. The Company believes that NOI is useful as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).
NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs that define NOI differently. The Company believes that in order to facilitate a clear understanding of the Company's operating results, NOI should be examined in conjunction with net income (loss) as presented in the Company's consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of the Company's performance or to cash flows as a measure of the Company's liquidity or ability to make distributions.

27

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2016
(Unaudited)

The following tables reconcile the segment activity to consolidated net loss for the three and nine months ended September 30, 2016 and 2015:
 
 
Three Months Ended September 30, 2016
 
Nine Months Ended September 30, 2016
(In thousands)
 
Medical Office Buildings
 
Triple-Net Leased Healthcare Facilities
 
Seniors Housing — Operating Properties
 
Consolidated
 
Medical Office Buildings
 
Triple-Net Leased Healthcare Facilities
 
Seniors Housing — Operating Properties
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Rental income
 
$
16,590

 
$
8,387

 
$
3

 
$
24,980

 
$
49,709

 
$
28,271

 
$
4

 
$
77,984

Operating expense reimbursements
 
3,825

 
371

 

 
4,196

 
11,253

 
424

 

 
11,677

Resident services and fee income
 

 

 
46,428

 
46,428

 

 

 
137,084

 
137,084

Total revenues
 
20,415

 
8,758

 
46,431

 
75,604

 
60,962

 
28,695

 
137,088

 
226,745

Property operating and maintenance
 
6,254

 
5,158

 
32,629

 
44,041

 
17,922

 
8,915

 
96,690

 
123,527

NOI
 
$
14,161

 
$
3,600

 
$
13,802

 
31,563

 
$
43,040

 
$
19,780

 
$
40,398

 
103,218

Contingent purchase price consideration
 
 
 
 
 
 
 
(83
)
 
 
 
 
 
 
 
142

Impairment on sale of real estate investments
 
 
 
 
 
 
 

 
 
 
 
 
 
 
(389
)
Operating fees to related parties
 
 
 
 
 
 
 
(5,199
)
 
 
 
 
 
 
 
(15,526
)
Acquisition and transaction related
 
 
 
 
 
 
 
(958
)
 
 
 
 
 
 
 
(3,059
)
General and administrative
 
 
 
 
 
 
 
(2,874
)
 
 
 
 
 
 
 
(9,277
)
Depreciation and amortization
 
 
 
 
 
 
 
(27,347
)
 
 
 
 
 
 
 
(76,245
)
Interest expense
 
 
 
 
 
 
 
(4,923
)
 
 
 
 
 
 
 
(14,783
)
Interest and other income
 
 
 
 
 
 
 
2

 
 
 
 
 
 
 
45

Gain on sale of real estate investment