10-Q 1 hti331201810-q.htm 10-Q HTI 3.31.2018 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 March 31, 2018
 
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
hti2a11.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., 4th 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, a smaller reporting company or an emerging growth company.  See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer x
(Do not check if a smaller reporting company)
Smaller reporting company o
 
 
Emerging growth company x
If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act 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 April 30, 2018, the registrant had 91,374,181 shares of common stock outstanding.


HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


Part I — FINANCIAL INFORMATION



Item 1. Financial Statements.
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

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

 
 
March 31,
 
December 31,
 
 
2018
 
2017
 
 
(Unaudited)
 
 
ASSETS
 
 
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
204,522

 
$
201,427

Buildings, fixtures and improvements
 
1,968,694

 
1,955,940

Construction in progress
 
74,926

 
72,007

Acquired intangible assets
 
258,340

 
256,678

Total real estate investments, at cost
 
2,506,482

 
2,486,052

Less: accumulated depreciation and amortization
 
(330,573
)
 
(309,711
)
Total real estate investments, net
 
2,175,909

 
2,176,341

Cash and cash equivalents
 
61,277

 
94,177

Restricted cash
 
9,753

 
8,411

Assets held for sale
 
37,822

 
37,822

Derivative assets, at fair value
 
6,823

 
2,550

Straight-line rent receivable, net
 
15,995

 
15,327

Prepaid expenses and other assets (including $181 due from related parties as of March 31, 2018)
 
25,505

 
22,099

Deferred costs, net
 
15,263

 
15,134

Total assets
 
$
2,348,347

 
$
2,371,861

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
345,213

 
$
406,630

Credit facilities
 
599,022

 
534,869

Market lease intangible liabilities, net
 
18,356

 
18,829

Accounts payable and accrued expenses (including $2,383 and $1,637 due to related parties as of March 31, 2018 and December 31, 2017, respectively)
 
39,369

 
38,112

Deferred rent
 
8,185

 
6,201

Distributions payable
 
6,585

 
11,161

Total liabilities
 
1,016,730

 
1,015,802

 
 
 
 
 
Stockholders' Equity
 
 
 
 
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of March 31, 2018 and December 31, 2017
 

 

Common stock, $0.01 par value, 300,000,000 shares authorized, 91,251,142 and 91,002,766 shares of common stock issued and outstanding as of March 31, 2018 and December 31, 2017, respectively
 
912

 
910

Additional paid-in capital
 
2,014,844

 
2,009,197

Accumulated other comprehensive income
 
6,437

 
2,473

Accumulated deficit
 
(698,920
)
 
(665,026
)
Total stockholders' equity
 
1,323,273

 
1,347,554

Non-controlling interests
 
8,344

 
8,505

Total equity
 
1,331,617

 
1,356,059

Total liabilities and equity
 
$
2,348,347

 
$
2,371,861


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 share and per share data)
(Unaudited)




 
 
Three Months Ended March 31,
 
 
2018
 
2017
Revenues:
 
 
 
 
Rental income
 
$
25,286

 
$
24,022

Operating expense reimbursements
 
4,971

 
4,104

Resident services and fee income
 
59,181

 
46,489

Total revenues
 
89,438

 
74,615

 
 
 
 
 
Operating expenses:
 
 
 
 
Property operating and maintenance
 
53,106

 
42,611

Impairment charges
 
733

 
35

Operating fees to related parties
 
5,727

 
5,301

Acquisition and transaction related
 
173

 
2,845

General and administrative
 
3,652

 
4,157

Depreciation and amortization
 
20,769

 
20,483

Total expenses
 
84,160

 
75,432

Operating gain (loss)
 
5,278

 
(817
)
Other income (expense):
 
 
 
 
Interest expense
 
(11,157
)
 
(5,482
)
Interest and other income
 
3

 
1

Gain (loss) on non-designated derivatives
 
178

 
(64
)
Total other expenses
 
(10,976
)
 
(5,545
)
Loss before income taxes
 
(5,698
)
 
(6,362
)
Income tax (expense) benefit
 
(309
)
 
195

Net loss
 
(6,007
)
 
(6,167
)
Net income attributable to non-controlling interests
 
16

 
28

Net loss attributable to stockholders
 
(5,991
)
 
(6,139
)
Other comprehensive income (loss):
 
 
 
 
Unrealized gain on designated derivative
 
3,964

 

Comprehensive loss attributable to stockholders
 
$
(2,027
)
 
$
(6,139
)
 
 
 
 
 
Basic and diluted weighted-average shares outstanding
 
90,783,065

 
89,639,676

Basic and diluted net loss per share
 
$
(0.07
)
 
$
(0.07
)
Distributions declared per share
 
$
0.31

 
$
0.42


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


4

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2018
(In thousands, except 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, 2017
91,002,766

 
$
910

 
$
2,009,197

 
$
2,473

 
$
(665,026
)
 
$
1,347,554

 
$
8,505

 
$
1,356,059

Common stock issued through distribution reinvestment plan
622,343

 
6

 
13,349

 

 

 
13,355

 

 
13,355

Common stock repurchases
(373,967
)
 
(4
)
 
(8,021
)
 

 

 
(8,025
)
 

 
(8,025
)
Share-based compensation

 

 
319

 

 

 
319

 

 
319

Distributions declared

 

 

 

 
(27,903
)
 
(27,903
)
 

 
(27,903
)
Contributions from non-controlling interest holders

 

 

 

 

 

 

 

Distributions to non-controlling interest holders

 

 

 

 

 

 
(145
)
 
(145
)
Other comprehensive income

 

 

 
3,964

 

 
3,964

 

 
3,964

Net loss

 

 

 

 
(5,991
)
 
(5,991
)
 
(16
)
 
(6,007
)
Balance, March 31, 2018
91,251,142

 
$
912

 
$
2,014,844

 
$
6,437

 
$
(698,920
)
 
$
1,323,273

 
$
8,344

 
$
1,331,617


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)

 
 
Three Months Ended March 31,
 
 
2018
 
2017
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(6,007
)
 
$
(6,167
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
20,769

 
20,483

Amortization of deferred financing costs
 
2,227

 
1,277

Amortization of mortgage premiums and discounts, net
 
(69
)
 
(440
)
Amortization of market lease and other intangibles, net
 
86

 
118

Bad debt expense
 
2,586

 
3,510

Share-based compensation
 
319

 
14

(Gain) loss on non-designated derivatives
 
(178
)
 
64

Impairment charges
 
733

 
35

Changes in assets and liabilities:
 
 
 
 
Straight-line rent receivable
 
(2,136
)
 
(1,419
)
Prepaid expenses and other assets
 
(4,627
)
 
(1,634
)
Due from affiliate
 
(29
)
 

Accounts payable, accrued expenses and other liabilities
 
1,260

 
1,893

Deferred rent
 
1,984

 
1,325

Net cash provided by operating activities
 
16,918

 
19,059

Cash flows from investing activities:
 
 
 
 
Investments in real estate
 
(20,311
)
 
(2,844
)
Deposits paid for unconsummated acquisitions
 

 
(600
)
Capital expenditures
 
(1,174
)
 
(1,141
)
Net cash used in investing activities
 
(21,485
)
 
(4,585
)
Cash flows from financing activities:
 
 
 
 
Proceeds from credit facilities
 
64,153

 
99,439

Payments on mortgage notes payable
 
(62,112
)
 
(590
)
Payments for derivative instruments
 
(131
)
 
(67
)
Payments of deferred financing costs
 
(1,606
)
 
(2,475
)
Common stock repurchases
 
(8,025
)
 
(27,518
)
Distributions paid
 
(19,125
)
 
(20,215
)
Distributions to non-controlling interest holders
 
(145
)
 
(169
)
Net cash (used in) provided by financing activities
 
(26,991
)
 
48,405

Net change in cash, cash equivalents and restricted cash
 
(31,558
)
 
62,879

Cash, cash equivalents and restricted cash, beginning of period
 
102,588

 
33,187

Cash, cash equivalents and restricted cash, end of period
 
$
71,030

 
$
96,066



6

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

 
 
Three Months Ended March 31,
 
 
2018
 
2017
Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for interest
 
$
9,598

 
$
4,977

Cash paid for income taxes
 
16

 

 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
Common stock issued through distribution reinvestment plan
 
13,355

 
17,321


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


7

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(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, focusing on seniors housing and medical office buildings ("MOB") located in the United States. As of March 31, 2018, the Company owned 190 properties located in 30 states and comprised of 9.1 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 ("REIT") for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. Substantially all of the Company's business is conducted through the OP.
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. The results of operations for the quarter ended March 31, 2018 are not necessarily indicative of the results for the entire year or any subsequent interim period.
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, 2017, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 20, 2018. There have been no significant changes to the Company's significant accounting policies during the quarter ended March 31, 2018 other than the updates described below.
Principles of Consolidation and Basis of Presentation
The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity ("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.
Reclassifications
Certain prior year amounts have been reclassified to conform with the current year presentation.
Revenue Recognition
The Company's rental income is primarily related to rent received from tenants in MOBs and triple-net leased healthcare facilities. Rent from tenants in the Company's MOB and triple-net leased healthcare facilities operating segments (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, GAAP requires the Company to record a receivable, and include in revenues on a straight-line basis, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation.

8

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Cost recoveries from tenants are included in operating expense reimbursement in the period the related costs are incurred, as applicable.
Resident services and fee income primarily relates to rent from residents in the Company's seniors housing — operating properties ("SHOP") held using a structure permitted by the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA") and to fees for ancillary services performed for SHOP residents. Rental income from residents in the Company's SHOP operating segment is recognized as earned. Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the rent are short term in nature, primarily month-to-month. Fees for ancillary services are recorded in the period in which the services are performed.
The Company defers the revenue related to lease payments received from tenants and residents in advance of their due dates.
The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company records an increase in the allowance for uncollectible accounts on the consolidated balance sheets or records a direct write-off of the receivable in the consolidated statements of operations.
Recently Issued Accounting Pronouncements
Adopted as of January 1, 2018
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and has since issued several additional amendments thereto (collectively referred to herein as "ASC 606"). ASC 606 establishes a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Under ASC 606, 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. ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. A reporting entity may apply the amendments in ASC 606 using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or a full retrospective approach. The Company adopted this guidance effective January 1, 2018 under the modified retrospective approach and it did not have an impact on the Company's consolidated financial statements. See above for further information on the Company's Revenue Recognition Accounting Policies under ASC606.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The revised guidance amends the recognition and measurement of financial instruments. The new guidance significantly 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 Company adopted this guidance effective January 1, 2018, using the modified retrospective transition method, and there was no impact to the Company's consolidated financial statements.
In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides 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 Company adopted the new guidance on January 1, 2018 and it did not have an impact on its statement of cash flows.
In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Assets Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which provides guidance related to partial sales of non-financial assets, eliminates rules specifically addressing the sales of real estate, clarifies the definition of in substance non-financial assets, removes the exception to the financial asset derecognition model and clarifies the accounting for contributions of non-financial assets to joint ventures. The Company adopted this guidance effective January 1, 2018 using the modified transition method and it did not have an impact on its financial statements. The Company expects that any future sales of real estate in which the Company retains a non-controlling interest in the property would result in the full gain amount being recognized at the time of the partial sale. Historically, the Company has not retained any interest in properties it has sold.
In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance that clarifies which changes to the terms or conditions of a share-based payment award

9

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

require an entity to apply modification accounting. The update states that modification accounting should be used unless the fair value of the award, the vesting terms of the award, and the classification of the award as either equity or liability, all do not change as a result of the modification. The Company adopted this guidance effective January 1, 2018 using the modified retrospective transition method and it did not have an impact on its consolidated financial statements. The Company expects that any future modifications to the Company's issued share-based awards will be accounted for using modification accounting, unless the modification meets all of the exception criteria noted above. As a result, the modification would be treated as an exchange of the original award for a new award, with any incremental fair value being treated as additional compensation cost.
Pending Adoption as of March 31, 2018
In February 2016, the FASB issued ASC 842, which originally stated that companies would be required to bifurcate certain lease revenues between lease and non-lease components, however, the FASB issued an exposure draft in January 2018 (the "2018 Exposure Draft") which, if adopted as written, would allow lessors a practical expedient by class of underlying assets to account for lease and non-lease components as a single lease component if certain criteria are met. Additionally, only incremental direct leasing costs may be capitalized under this new guidance, which is consistent with the Company’s existing policies. ASU 842 originally required a modified retrospective method of adoption, however, the 2018 Exposure Draft indicates that companies may be permitted to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The pronouncement allows some optional practical expedients.
From a lessor perspective the Company expects that the new standard will impact the presentation of lease and non-lease components of revenue such as rent, and operating expense reimbursements including common area maintenance, taxes, and insurance from leases for which the Company is a lessor. The Company does not expect this guidance to impact its existing lessor revenue recognition pattern.
The Company is a lessee for 19 of its properties for which it has ground leases as of March 31, 2018. For these leases, the Company will be required to record a right-of-use asset and lease liability equal to the present value of the remaining lease payments upon adoption of this update. The new standard requires lessees to apply a dual lease classification 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 Company is continuing to evaluate any differences in the timing, measurement, or presentation of lessor revenues as well as the impact of the new lessee accounting model on the Company’s consolidated financial position, results of operations and disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities measure credit losses for financial assets carried at amortized cost. The update eliminates the requirement that a credit loss must be probable before it can be recognized and instead requires an entity to recognize the current estimate of all expected credit losses. Additionally, the update requires credit losses on available-for-sale debt securities to be carried as an allowance rather than as a direct write-down of the asset. The amendments become effective for reporting periods beginning after December 15, 2019. Early adoption is permitted for reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of this new guidance.
In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests with a Scope Exception guidance that changes the method to determine the classification of certain financial instruments with a down round feature as liabilities or equity instruments and clarify existing disclosure requirements for equity-classified instruments. A down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument no longer would be accounted for as a derivative liability, rather, an entity that presents earnings per share is required to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features. The revised guidance is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Adoption should be applied retrospectively to outstanding financial instruments

10

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

with a down round feature with a cumulative-effect adjustment to the statement of financial position. The Company is currently evaluating the impact of this new guidance.
In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. This adoption method will require the Company to recognize the cumulative effect of initially applying the ASU as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that the Company adopts the update. The Company is currently assessing the potential impacts of this new standard.
Note 3 — Real Estate Investments
The Company owned 190 properties as of March 31, 2018. The Company invests in MOBs, seniors housing communities and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base.
During the quarter ended March 31, 2018, the Company, through wholly-owned subsidiaries of the OP, completed its acquisitions of four single tenant MOBs, one multi-tenant MOB, and acquired a parcel of land attached to an existing investment property for an aggregate contract purchase price of $17.4 million. Additionally, the Company incurred construction in progress costs during the period of $2.9 million. The following table presents the allocation of real estate assets acquired and liabilities assumed during the quarter ended March 31, 2018 as well as capitalized construction in progress during the three months ended March 31, 2018 and 2017:
 
 
Three Months Ended March 31,
(In thousands)
 
2018
 
2017
Real estate investments, at cost:
 
 
 
 
Land
 
$
3,169

 
$

Buildings, fixtures and improvements
 
12,615

 

Construction in progress
 
2,919

 
2,844

Total tangible assets
 
18,703

 
2,844

Acquired intangibles:
 
 
 
 
In-place leases (1)
 
1,633

 

Market lease and other intangible assets (1)
 
30

 

Market lease liabilities (1)
 
(55
)
 

Total intangible assets and liabilities
 
1,608

 

Cash paid for acquired real estate investments
 
$
20,311

 
$
2,844

Number of properties purchased
 
5

 

_______________
(1) 
Weighted-average remaining amortization periods for in-place leases, an above-market lease and a below-market lease liability acquired during the quarter ended March 31, 2018 were 9.4 years.

11

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

The following table presents future minimum base rental cash payments due to the Company over the next five years and thereafter as of March 31, 2018. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.
(In thousands)
 
Future Minimum
Base Rent Payments
April 1, 2018 - December 31, 2018
 
$
67,893

2019
 
87,524

2020
 
82,331

2021
 
76,588

2022
 
69,838

Thereafter
 
312,440

Total
 
$
696,614

As of March 31, 2018 and 2017, 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. 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 March 31, 2018 and 2017:
 
 
March 31,
State
 
2018
 
2017
Florida
 
16.1%
 
19.4%
Georgia
 
*
 
10.2%
Iowa
 
*
 
10.5%
Michigan
 
12.4%
 
*
Pennsylvania
 
*
 
12.0%
_______________
*
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 date specified.
Intangible Assets and Liabilities
Acquired intangible assets and liabilities consisted of the following as of the periods presented:
 
 
March 31, 2018
 
December 31, 2017
(In thousands)
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
 
Gross Carrying Amount
 
Accumulated Amortization
 
Net Carrying Amount
Intangible assets:
 
 
 
 
 
 
 
 
 
 
 
 
In-place leases
 
$
217,085

 
$
135,581

 
$
81,504

 
$
215,453

 
$
130,749

 
$
84,704

Market lease assets
 
30,666

 
8,419

 
22,247

 
30,636

 
7,853

 
22,783

Other intangible assets
 
10,589

 
904

 
9,685

 
10,589

 
838

 
9,751

Total acquired intangible assets
 
$
258,340

 
$
144,904

 
$
113,436

 
$
256,678

 
$
139,440

 
$
117,238

Intangible liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Market lease liabilities
 
$
26,011

 
$
7,655

 
$
18,356

 
$
25,956

 
$
7,127

 
$
18,829


12

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

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 amortization and accretion of above- and below-market ground leases, for the periods presented:
 
 
Three Months Ended March 31,
(In thousands)
 
2018
 
2017
Amortization of in-place leases and other intangible assets (1)
 
$
4,898

 
$
5,536

Amortization and (accretion) of above- and below-market leases, net (2)
 
$
1

 
$
(153
)
Amortization and (accretion) of above- and below-market ground leases, net (3)
 
$
37

 
$
43

_______________
(1)
Reflected within depreciation and amortization expense
(2)  
Reflected within rental income
(3)
Reflected within property operating and maintenance expense
The following table provides the projected amortization expense and adjustments to revenues for the next five years:
(In thousands)
 
April 1, 2018 - December 31, 2018
 
2019
 
2020
 
2021
 
2022
In-place lease assets
 
$
18,164

 
$
14,242

 
$
12,083

 
$
9,746

 
$
7,934

Other intangible assets
 
459

 
568

 
414

 
414

 
414

Total to be added to amortization expense
 
$
18,623

 
$
14,810

 
$
12,497

 
$
10,160

 
$
8,348

 
 
 
 
 
 
 
 
 
 
 
Above-market lease assets
 
$
(1,379
)
 
$
(1,603
)
 
$
(1,265
)
 
$
(912
)
 
$
(561
)
Below-market lease liabilities
 
1,419

 
1,652

 
1,495

 
1,345

 
1,315

Total to be added to rental income
 
$
40

 
$
49

 
$
230

 
$
433

 
$
754

 
 
 
 
 
 
 
 
 
 
 
Below-market ground lease assets
 
$
159

 
$
212

 
$
212

 
$
212

 
$
212

Above-market ground lease liabilities
 
(49
)
 
(65
)
 
(65
)
 
(65
)
 
(63
)
Total to be added to property operating and maintenance expense
 
$
110

 
$
147

 
$
147

 
$
147

 
$
149

Assets Held for Sale
When assets are identified by management as held for sale, the Company stops recognizing depreciation and amortization expense on the identified assets and estimates the sales price, net of costs to sell, of those assets. If the carrying amount of the assets classified as held for sale exceeds the estimated net sales price, the Company records an impairment charge equal to the amount by which the carrying amount of the assets exceeds the Company's estimate of the net sales price of the assets.

13

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

The following table details the major classes of assets associated with the properties that have been classified as held for sale as of March 31, 2018 and December 31, 2017:
(In thousands)
 
Amount
Real estate held for sale, at cost:
 
 
   Land
 
$
3,131

   Buildings, fixtures and improvements
 
38,596

Total real estate held for sale, at cost
 
41,727

Less accumulated depreciation and amortization
 
(3,870
)
Real estate assets held for sale, net
 
37,857

   Impairment charges related to properties reclassified as held for sale
 
(35
)
Assets held for sale
 
$
37,822

Impairment of Held for Use Real Estate Investments
As of March 31, 2018, the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators. As a result, the Company evaluated the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended holding period. The Company primarily used an undiscounted cash flow approach to estimate the future cash flows expected to be generated. The Company made certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessment of terminal values. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future.
For some of these held for use properties, the Company used a broker opinion of value to estimate future cash flows expected to be generated. The Company made certain assumptions in this approach as well, mainly that the sale of these properties would close at this value and within a specified time in the future. There can be no guarantee that the sales of these properties would close under these terms or at all.
As a result of its consideration of impairment, the Company determined that the carrying value of one held for use property exceeded its estimated undiscounted cash flows and recognized an aggregate impairment charge of $0.7 million, which is included on the consolidated statement of operations and comprehensive loss for the three ended March 31, 2018. The estimated undiscounted cash flows of the remaining properties evaluated were greater than their carrying value.

14

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Note 4 — Mortgage Notes Payable
The following table reflects the Company's mortgage notes payable as of March 31, 2018 and December 31, 2017:
 
 
 
 
Outstanding Loan Amount as of
 
Effective Interest Rate as of
 
 
 
Portfolio
 
Encumbered Properties (1)
 
March 31, 2018
 
December 31, 2017
 
March 31, 2018
 
Interest Rate
 
Maturity
 
 
 
 
(In thousands)
 
(In thousands)
 
 
 
 
 
 
Countryside Medical Arts - Safety Harbor, FL
 
1
 
$
5,752

 
$
5,773

 
4.98
%
 
Variable
 
Apr. 2019
St. Andrews Medical Park - Venice, FL
 
3
 
6,357

 
6,381

 
4.98
%
 
Variable
 
Apr. 2019
Palm Valley Medical Plaza - Goodyear, AZ
 
1
 
3,301

 
3,327

 
4.15
%
 
Fixed
 
Jun. 2023
Medical Center V - Peoria, AZ
 
1
 
3,044

 
3,066

 
4.75
%
 
Fixed
 
Sep. 2023
Courtyard Fountains - Gresham, OR
 
1
 
24,254

 
24,372

 
3.87
%
 
Fixed
 
Jan. 2020
Fox Ridge Bryant - Bryant, AR
 
1
 
7,531

 
7,565

 
3.98
%
 
Fixed
 
May 2047
Fox Ridge Chenal - Little Rock, AR
 
1
 
17,200

 
17,270

 
3.98
%
 
Fixed
 
May 2049
Fox Ridge North Little Rock - North Little Rock, AR
 
1
 
10,672

 
10,716

 
3.98
%
 
Fixed
 
May 2049
Philip Professional Center - Lawrenceville, GA
 
2
 
4,871

 
4,895

 
4.00
%
 
Fixed
 
Oct. 2019
MOB Loan
 
32
 
250,000

 
250,000

 
4.44
%
 
Fixed
(3) 
June 2022
Bridge Loan
 
16
 
20,271

 
82,000

 
4.13
%
 
Variable
 
Dec. 2018
Gross mortgage notes payable
 
60
 
353,253

 
415,365

 
4.35
%
(2) 
 
 
 
Deferred financing costs, net of accumulated amortization
 
 
 
(6,861
)
 
(7,625
)
 
 
 
 
 
 
Mortgage premiums and discounts, net
 
 
 
(1,179
)
 
(1,110
)
 
 
 
 
 
 
Mortgage notes payable, net
 
 
 
$
345,213

 
$
406,630

 
 
 
 
 
 
_______________
(1) 
Does not include real estate assets mortgaged to secure advances under the Fannie Mae Master Credit Facilities (as defined below) or eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility. The equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease these real estate assets have been pledged for the benefit of the lenders thereunder. See Note 5 — Credit Facilities for further details.
(2) 
Calculated on a weighted average basis for all mortgages outstanding as of March 31, 2018.
(3) 
Variable rate loan which is fixed as a result of entering into interest rate swap agreements. Note 7 — Derivatives and Hedging Activities.
As of March 31, 2018, the Company had pledged $805.4 million in total real estate investments, at cost, as collateral for its $353.3 million of mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties. The Company makes payments of principal and interest, or interest only, depending upon the specific requirements of each mortgage note, on a monthly basis.
Some of the Company's mortgage note agreements (including the MOB Loan) require compliance with certain property-level financial covenants, including debt service coverage ratios. As of March 31, 2018, the Company was in compliance with these financial covenants.
MOB Loan
On June 30, 2017, Capital One, National Association ("Capital One"), as administrative agent and lender, and certain other lenders, made a loan in the aggregate amount of $250.0 million (the “MOB Loan”) to certain subsidiaries of the OP. As of March 31, 2018, there was $250.0 million outstanding under the MOB Loan.
Bridge Loan
On December 28, 2017, 23 wholly owned subsidiaries (the “Borrowers”) of the OP entered into a loan agreement (the “Bridge Loan Agreement”) with Capital One, as administrative agent and lender.
The Bridge Loan Agreement provides for a $82.0 million loan (the “Bridge Loan”) with a floating interest rate equal to one-month LIBOR plus 2.5% per annum and a maturity date of December 28, 2019. Subject to meeting certain conditions, including a minimum debt yield and debt service coverage ratio, the Borrowers have the right to extend the maturity date for one year.

15

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

The Bridge Loan may be prepaid at any time in whole or in part, subject to certain conditions and limitations. Upon repayment of all or any part of the principal of the Bridge Loan, whether as a prepayment or as a repayment at maturity, the Borrowers are obligated to pay to an exit fee of: (i) 2.0% of the principal amount with respect to the aggregate of approximately $63.0 million principal amount allocated under the Bridge Loan to the seven mortgaged properties that have been identified for refinancing through Fannie Mae or Freddie Mac, and (ii) 1.0% of the principal amount with respect to the aggregate of approximately $19.0 million principal amount allocated under the Bridge Loan to the other sixteen mortgaged properties. No exit fee will be due or payable: (i) with respect to any portion of the Bridge Loan refinanced through Fannie Mae’s Multifamily MBS program with Capital One or one of its affiliates acting as agent, originator or seller, (ii) with respect to any portion of the Bridge Loan that is not refinanced through Fannie Mae’s Multifamily MBS program due to the program no longer being available under applicable law or because the applicable mortgaged property being refinanced does not qualify for financing through the program, or (iii) with respect to any prepayment in connection with a casualty or a condemnation.
On March 2, 2018, the Company used $64.2 million of advances under a Fannie Mae Master Credit Facility with Capital One to prepay a portion of the Bridge Loan (see Note 5 — Credit Facilities for more information). Concurrent with this prepayment the seven mortgaged properties that were identified for refinancing at the time the Bridge Loan was entered, were added to the collateral pool securing the Fannie Mae Master Credit Facility with Capital One.
Future Principal Payments
The following table summarizes the scheduled aggregate principal payments on mortgage notes payable for the five years subsequent to March 31, 2018 and thereafter:
(In thousands)
 
Future Principal
Payments
April 1, 2018 - December 31, 2018
 
$
21,422

2019
 
18,078

2020
 
24,279

2021
 
892

2022
 
250,928

Thereafter
 
37,654

Total
 
$
353,253


16

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Note 5 — Credit Facilities
The Company had the following credit facilities outstanding as of March 31, 2018 and December 31, 2017:
 
 
 
 
Outstanding Facility Amount as of
 
Effective Interest Rate
 
 
Credit Facility
 
Encumbered Properties (1)
 
March 31,
2018
 
December 31, 2017
 
March 31,
2018
 
December 31, 2017
 
Maturity
 
 
 
 
(In thousands)
 
(In thousands)
 
 
 
 
 
 
Revolving Credit Facility
 
54
(2) 
$
239,700

 
$
239,700

 
3.66
%
 
3.33
%
 
Mar. 2019
Fannie Mae Master Credit Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
Capital One Facility
 
12
(3) 
216,614

 
152,461

 
4.12
%
 
3.88
%
 
Nov. 2026
KeyBank Facility
 
10
(4) 
142,708

 
142,708

 
4.19
%
 
3.89
%
 
Nov. 2026
Total Fannie Mae Master Credit Facilities
 
 
 
359,322

 
295,169

 
 
 
 
 
 
Total Credit Facilities
 
76
 
$
599,022

 
$
534,869

 
3.95
%
(5) 
3.63
%
(5) 
 
_______________
(1) 
Encumbered as of March 31, 2018.
(2) 
The equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility have been pledged for the benefit of the lenders thereunder.
(3) 
Secured by first-priority mortgages on 12 of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan as of March 31, 2018.
(4) 
Secured by first-priority mortgages on 10 of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of March 31, 2018.
(5) 
Calculated on a weighted average basis for all credit facilities outstanding as of March 31, 2018 and December 31, 2017.
Revolving Credit Facility
On March 21, 2014, the Company entered into a senior secured revolving credit facility (as amended from time to time, the "Revolving Credit Facility"). The Revolving Credit Facility is secured by a pledged pool of the equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base thereunder.
The Revolving Credit Facility allows for committed borrowings of up to $565.0 million. The Revolving Credit Facility also contains a sub-facility for letters of credit of up to $25.0 million and an "accordion" feature to allow the Company, under certain circumstances and at the discretion of the participating lenders, to increase the aggregate borrowings under the Revolving Credit Facility to a maximum of $750.0 million.
The Company has the option, to have the Revolving Credit Facility priced at either: (a) LIBOR, plus an applicable margin that ranges, depending on the Company's leverage, from 1.60% to 2.20%; or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company's leverage, from 0.35% to 0.95%. The Base Rate is defined in the Revolving 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%.
As of March 31, 2018, $239.7 million was outstanding under the Revolving Credit Facility and the unused borrowing capacity under the Revolving Credit Facility was $33.7 million. Availability of borrowings is based on a pool of eligible otherwise unencumbered real estate assets comprising the borrowing base thereunder.
The Revolving Credit Facility requires the Company to meet certain financial covenants. As of March 31, 2018, the Company was in compliance with the financial covenants under the Revolving Credit Facility.
Fannie Mae Master Credit Facilities
On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement (the “KeyBank Credit Agreement”) relating to a secured credit facility (the "Key Bank Facility") with KeyBank National Association (“KeyBank”) and a master credit facility agreement (the “Capital One Credit Agreement” and, together with the KeyBank Credit Agreement, the “Fannie Mae Master Credit Agreements”) for a secured credit facility (the "Capital One Facility"; the Capital One Facility and the Key Bank Facility are referred to herein individually as a "Fannie Mae Master Credit Facility" and together as the "Fannie Mae Master Credit Facilities") with Capital One Multifamily Finance, LLC (an affiliate of Capital One). Advances made under the Fannie Mae Master Credit Agreements are assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.

17

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Effective October 31, 2016, in conjunction with the execution of the Fannie Mae Master Credit Facilities, the OP entered into two interest rate cap agreements (the "IR Caps") with an unrelated third party, which caps interest paid on amounts outstanding under the Fannie Mae Master Credit Facilities at a maximum of 3.5%. See Note 7 — Derivatives and Hedging Activities for further disclosure over the Company's derivatives.
The Company may request future advances under the Fannie Mae Master Credit Facilities by borrowing against the value of the initial mortgaged properties, as described below, or by adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. During the year ended December 31, 2017, the Company increased its advances under the Capital One Facility and the KeyBank Facility to $152.5 million and $142.7 million, respectively. On March 2, 2018, the Company, increased its advances under the Capital One Facility by $64.2 million. The advance was secured by the addition of seven mortgaged properties subject to the Capital One Facility. All of the $61.7 million of the net proceeds, after closing costs, of the advance was used by the Company to prepay a portion of the Bridge Loan.
As of March 31, 2018, approximately $216.6 million was outstanding under the Fannie Mae Master Credit Facility. The Capital One Facility is secured by first-priority mortgages on twelve of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan. The KeyBank Facility is secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa.
Note 6 — 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.
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of March 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company's derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company's potential nonperformance risk and the performance risk of the counterparties.
The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheet as of March 31, 2018. As of March 31, 2018, the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators. As a result, the Company evaluated the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended

18

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

holding period. The Company primarily used an undiscounted cash flow approach to estimate the future cash flows expected to be generated. As a result of this evaluation and its consideration of impairment, the Company determined that the carrying value of one held for use property exceeded its estimated undiscounted cash flows and recognized an impairment charge of $0.7 million, which is included on the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2018. The Company made certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessment of terminal values, all of which are unobservable inputs. As a result, the impaired property that the Company evaluated using this approach is classified in Level 3 of the fair value hierarchy.
The following table presents information about the Company's assets and liabilities measured at fair value as of March 31, 2018 and December 31, 2017, aggregated by the level in the fair value hierarchy within which those instruments fall.
(In thousands)
 
Basis of
Measurement
 
Quoted Prices in Active Markets
Level 1
 
Significant
Other Observable Inputs
Level 2
 
Significant Unobservable Inputs
Level 3
 
Total
March 31, 2018
 
 
 
 
 
 
 
 
 
 
Derivatives, net
 
Recurring
 
$

 
$
6,823

 
$

 
$
6,823

Impaired assets held for use
 
Non-recurring
 

 

 
5,189

 
5,189

Impaired assets held for sale
 
Non-recurring
 

 
1,323

 

 
1,323

Total
 
 
 
$

 
$
8,146

 
$
5,189

 
$
13,335

 
 
 
 
 
 
 
 
 
 
 
December 31, 2017
 
 
 
 
 
 
 
 
 
 
Derivatives, net
 
Recurring
 
$

 
$
2,550

 
$

 
$
2,550

Impaired assets held for sale
 
Non-recurring
 

 
1,323

 

 
1,323

 
 
 
 
$

 
$
3,873

 
$

 
$
3,873

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the quarter ended March 31, 2018.
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values 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 approximate 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:
 
 
 
 
March 31, 2018
 
December 31, 2017
(In thousands)
 
Level
 
Carrying
Amount (1)
 
Fair Value 
 
Carrying
Amount (1)
 
Fair Value 
Gross mortgage notes payable and mortgage premium and discounts, net
 
3
 
$
352,074

 
$
348,619

 
$
414,255

 
$
411,749

Revolving Credit Facility
 
3
 
$
239,700

 
$
239,700

 
$
239,700

 
$
239,700

Fannie Mae Master Credit Facilities
 
3
 
$
359,322

 
$
360,976

 
$
295,169

 
$
296,151

(1) Carrying value includes mortgage notes payable of $353.3 million and $415.4 million and mortgage premiums and (discounts), net of $(1.2) million and $(1.1) million as of March 31, 2018 and December 31, 2017, 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 Revolving Credit Facility and Fannie Mae Master Credit Facilities are considered to be reported at fair value, because their interest rates vary with changes in LIBOR and there has not been a significant change in credit risk of the Company or credit markets since origination.

19

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Note 7 — Derivatives and Hedging Activities
Risk Management Objective of Using Derivatives
The Company may use derivative financial instruments, including interest rate swaps, caps, collars, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings.
The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company's operating and financial structure as well as to hedge specific anticipated transactions. Additionally, in using interest rate derivatives, the Company aims to add stability to interest expense and to manage its exposure to interest rate movements. The Company does not intend to utilize derivatives for speculative purposes or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company, and its affiliates, may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.
The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2018 and December 31, 2017:
(In thousands)
 
Balance Sheet Location
 
March 31, 2018
 
December 31, 2017
Derivatives designated as hedging instruments:
 
 
 
 
 
 
    Interest rate swaps
 
Derivative assets, at fair value
 
$
6,437

 
$
2,473

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
    Interest rate caps
 
Derivative assets, at fair value
 
$
386

 
$
77

Cash Flow Hedges of Interest Rate Risk
The Company currently has two interest rate swaps that are designated as cash flow hedges. The interest rate swaps are used as part of the Company's interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the first quarter of 2018, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.
The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the first quarter of 2018, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.
Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, from April 1, 2018 through March 31, 2019, the Company estimates that $0.6 million will be reclassified from other comprehensive income as a decrease to interest expense.
As of March 31, 2018 and December 31, 2017, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk.
 
 
March 31, 2018
 
December 31, 2017
Interest Rate Derivative
 
Number of Instruments
 
Notional Amount
 
Number of Instruments
 
Notional Amount
 
 
 
 
(In thousands)
 
 
 
(In thousands)
Interest rate swap
 
2

 
$
250,000

 
2

 
$
250,000

The table below details the location in the financial statements of the loss recognized on interest rate derivatives designated as cash flow hedges for the three months ended March 31, 2018. The Company did not have any derivatives designated as cash flow hedges as of March 31, 2017.

20

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

 
 
Three Months Ended March 31,
(In thousands)
 
2018
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives (effective portion)
 
$
3,790

Amount of loss reclassified from accumulated other comprehensive income into income as interest expense
 
$
(174
)
Non-Designated Derivatives
These derivatives are used to manage the Company's exposure to interest rate movements, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net income (loss) and was a gain of $0.2 million.
The Company had the following outstanding interest rate derivatives that were not designated as hedges in qualified hedging relationships as of March 31, 2018 and December 31, 2017:
 
 
March 31, 2018
 
December 31, 2017
Interest Rate Derivative
 
Number of Instruments
 
Notional Amount
 
Number of Instruments
 
Notional Amount
 
 
 
 
(In thousands)
 
 
 
(In thousands)
Interest rate caps
 
7

 
$
359,322

 
6

 
$
295,169

Offsetting Derivatives
The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of March 31, 2018 and December 31, 2017. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Balance Sheet.
 
 
 
 
 
 
 
 
 
Gross Amounts Not Offset in the Consolidated Balance Sheet
 
 
(In thousands)
Gross Amounts of Recognized Assets
 
Gross Amounts of Recognized (Liabilities)
 
Gross Amounts Offset in the Consolidated Balance Sheet
 
Net Amounts of Assets presented in the Consolidated Balance Sheet
 
Financial Instruments
 
Cash Collateral Received
 
Net Amount
March 31, 2018
$
6,823

 
$

 
$

 
$
6,823

 
$

 
$

 
$
6,823

December 31, 2017
$
2,550

 
$

 
$

 
$
2,550

 
$

 
$

 
$
2,550

Credit-risk-related Contingent Features
The Company has agreements in place with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.
As of March 31, 2018, there were no derivatives with a fair value in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements. As of March 31, 2018, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value.
Note 8 — Common Stock
As of March 31, 2018 and December 31, 2017, the Company had 91.3 million and 91.0 million shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the Company's distribution reinvestment plan ("DRIP"), net of shares repurchases. As of March 31, 2018 and December 31, 2017, the Company had received total net proceeds from its initial public offering (the "IPO") and DRIP, net of shares repurchases, of $2.2 billion.

21

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

In April 2013, the Company's board of directors (the "Board") authorized, and the Company began paying distributions on a monthly basis at a rate equivalent to $1.70 per annum, per share of common stock, which began in May 2013. In March 2017, the Board authorized a decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of April 1, 2017, to a rate equivalent to $1.45 per annum per share of common stock. On February 20, 2018, the Board authorized a further decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of March 1, 2018, to a rate equivalent to $0.85 per annum per share of common stock.
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 further reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.
On March 29, 2018, the independent directors of the Board approved an updated estimate of per-share net asset value ("Estimated Per-Share NAV") as of December 31, 2017, which was published on April 4, 2018. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Company's Board, provided that such estimates will be made at least once annually.
Share Repurchase Program
Under the Company's SRP, as amended from time to time stockholders are able 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.
Beginning on April 7, 2016 (the "Original NAV Pricing Date"), the price per share that the Company will pay to repurchase its shares would have been prior to amendment and restatement of the SRP effective in July 2017 as described below, equal to its Estimated Per-Share NAV multiplied by a percentage equal to:
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;
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;
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
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 price is equal to Estimated Per-Share NAV at the time of repurchase.
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 an updated Estimated Per-Share NAV is published during any fiscal semester, any repurchase requests received during such fiscal semester will be paid at the applicable Estimated Per-Share NAV then in effect.
On June 14, 2017, the Board approved and adopted an amended and restated SRP that superseded and replaced the existing SRP, effective as of July 14, 2017. Under the amended and restated SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of our common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions would be considered for repurchase. Other terms and provisions of the amended and restated SRP remained consistent with the existing SRP.

22

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

When a stockholder requests redemption and redemption is approved by the Company's board of directors, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP have the status of authorized but unissued shares. The following table reflects the number of shares repurchased cumulatively through March 31, 2018:
 
 
Number of Shares Repurchased
 
Average Price per Share
Cumulative repurchases as of December 31, 2017 (1)
 
2,529,798

 
$
22.43

Three months ended March 31, 2018 (2)
 
373,967

 
$
21.45

Cumulative repurchases as of March 31, 2018
 
2,903,765

 
$
22.30

_______________
(1) Includes 1,554,768 shares repurchased during the year ended December 31, 2017 for approximately $33.6 million at a weighted average price per share of $21.61. In July 2017, following the effectiveness of the amendment and restatement of the SRP, the Company's board of directors approved 100% of the repurchase requests made following the death or qualifying disability of stockholders during the period from January 1, 2017 to September 30, 2017, which was equal to 267,723 shares repurchased for approximately $5.7 million at an average price per share of $21.47. No repurchases have been or will be made with respect to requests received during 2017 that are not valid requests in accordance with the amended and restated SRP.
(2) Includes 373,967 shares repurchased during January 2018 with respect to requests received following the death or qualifying disability of stockholders during the six months ended December 31, 2017 for approximately $8.0 million at a weighted average price per share of $21.45.

Tender Offer
On March 13, 2018, the Company announced a tender offer (the "Tender Offer") to purchase up to 2.0 million shares of the Company’s common stock for cash at a purchase price equal to $13.15 per share with the proration period and withdrawal rights expiring on April 12, 2018. The Company made the Tender Offer in response to an unsolicited offer to stockholders commenced on February 27, 2018. On April 4, 2018 and April 16, 2018 the Tender Offer was amended to reduce the number of shares the Company was offering to purchase to 230,000 shares and extend the expiration date to May 1, 2018. The Tender Offer expired in accordance with its terms on May 1, 2018. In accordance with the terms of the Tender Offer, we accepted for purchase 229,999 shares for a total cost of approximately $3.0 million. See Note 17 — Subsequent Events for further discussion on the Tender Offer.
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 quarter ended March 31, 2018, the Company issued 0.6 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $13.4 million.
The Company offers shares pursuant to the DRIP at the then-current Estimated Per-Share NAV approved by the Company's board of directors.
Note 9 — Related Party Transactions and Arrangements
As of March 31, 2018 and December 31, 2017, 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. As of March 31, 2018 and December 31, 2017, the Advisor held 90 partnership units in the OP designated as "OP Units" ("OP Units").

23

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

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 Sponsor. In May 2016, RCAP and its affiliated debtors emerged from bankruptcy under the new name Aretec Group, Inc. On March 8, 2017, the creditor trust established in connection with the RCAP bankruptcy filed suit against AR Global, the Advisor, advisors of other entities sponsored by AR Global, and AR Global’s principals (including Mr. Weil, a member of the Board). The suit alleges, among other things, certain breaches of duties to RCAP. The Company is not named in the suit, nor are there any allegations related to the services the Advisor provides to the Company. On May 26, 2017, the defendants moved to dismiss.  On November 30, 2017, the Court issued an opinion partially granting the defendants’ motion. The Advisor has informed the Company that it believes that the suit is without merit and intends to defend against it vigorously.
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 Incurred in Connection with the Operations of the Company
On February 17, 2017, the members of a special committee of the Board unanimously approved certain amendments to the Amended and Restated Advisory Agreement, as amended (the "Original A&R Advisory Agreement"), by and among the Company, the OP and the Advisor (the "Second A&R Advisory Agreement"). The Second A&R Advisory Agreement, which superseded the Original A&R Advisory Agreement, took effect on February 17, 2017. The initial term of the Second A&R Advisory Agreement is ten years beginning on February 17, 2017, and is automatically renewable for another ten-year term upon each ten-year anniversary unless the Second A&R Advisory Agreement is terminated (i) with notice of an election not to renew at least 365 days prior to the applicable tenth anniversary, (ii) in accordance with a change of control or a transition to self-management (see the section titled "Termination Fees" included within this footnote), (iii) by 67% of the independent directors of the Board for cause, without penalty, with 45 days' notice or (iv) with 60 days prior written notice by the Advisor for (a) a failure to obtain a satisfactory agreement for any successor to the Company to assume and agree to perform obligations under the Second A&R Advisory Agreement or (b) any material breach of the Second A&R Advisory Agreement of any nature whatsoever by the Company.
Acquisition Fees
Under the Original A&R Advisory Agreement and until February 17, 2017, the Advisor was 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 was also reimbursed for services provided for which it incurred investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses was not permitted to exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimbursed the Advisor for third party acquisition expenses. The aggregate amount of acquisition fees and financing coordination fees (as described below) could not exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. As of March 31, 2018, aggregate acquisition fees and financing fees did not exceed the 1.5% threshold. In no event was 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 permitted to 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. As of March 31, 2018, the total of all cumulative acquisition fees, acquisition expenses and financing coordination fees did not exceed the 4.5% threshold.
The Second A&R Advisory Agreement does not provide for an acquisition fee, however the Advisor may continue to be 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 or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third party acquisition expenses.

24

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Financing Coordination Fees
Under the Original A&R Advisory Agreement and until February 17, 2017, if the Advisor provided services in connection with the origination or refinancing of any debt that the Company obtained and used to acquire properties or to make other permitted investments, or that was assumed, directly or indirectly, in connection with the acquisition of properties, the Company paid the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations.
The Second A&R Advisory Agreement does not provide for a financing coordination fee.
Asset Management Fees and Variable Management/Incentive Fees
Under an advisory agreement that was superseded by the Original A&R Advisory Agreement and until March 31, 2015 and the limited partnership agreement of the OP, 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 partnership units of the OP designated as "Class B Units" ("Class B Units"). The Class B Units were intended to be profit interests and vest, and no longer are 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.
Subject to approval 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 was initially equal 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 March 31, 2018, the Company cannot determine the probability of achieving the performance condition. The Advisor receives cash distributions on each issued Class B Units equal to the distribution rate received on the Company's common stock. Such distributions on 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 March 31, 2018, 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 to the Advisor with respect 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 was 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 was 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 Original NAV Pricing Date, each share was valued at $22.50, (b) after the Original 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 Estimated Per-Share NAV and (c) at all other times, each share shall be valued by the Board in good faith at the fair market value.
Effective February 17, 2017, the Second A&R Advisory Agreement requires the Company to pay the Advisor a base management fee, which is payable on the first business day of each month. The fixed portion of the base management fee is equal to $1.625 million per month, while the variable portion of the base management fee is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity (including convertible equity and certain convertible debt but excluding proceeds from the DRIP) raised subsequent to February 17, 2017 per month. The base management fee is payable to the Advisor or its assignees in cash, OP Units or shares, or a combination thereof, the form of payment to be determined at the discretion of the Advisor and the value of any OP Unit or share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

25

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

In addition, the Second A&R Advisory Agreement requires the Company to pay the Advisor a variable management/incentive fee quarterly in arrears equal to (1) the product of fully diluted shares of common stock outstanding multiplied by (2) (x) 15.0% of the applicable prior quarter's Core Earnings (as defined below) per share in excess of $0.375 per share plus (y) 10.0% of the applicable prior quarter's Core Earnings per share in excess of $0.47 per share. Core Earnings is defined as, for the applicable period, net income or loss, computed in accordance with GAAP, excluding non-cash equity compensation expense, the variable management/incentive fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains or losses or other non-cash items recorded in net income or loss for the applicable period, regardless of whether such items are included in other comprehensive income or loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairments of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent and any associated bad debt reserves, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses (in each case after discussions between the Advisor and the independent directors and approved by a majority of the independent directors). The variable management/incentive fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.
Property Management Fees
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 incurred by the Property Manager. 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.
On February 17, 2017, the Company entered into the Amended and Restated Property Management and Leasing Agreement (the “A&R Property Management Agreement”) with the OP and the Property Manager. The A&R Property Management Agreement was entered into to reflect amendments to the original agreement between the parties and further amends the original agreement by extending the term of the agreement from one to two years, until February 17, 2019. The A&R Property Management Agreement will automatically renew for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement at least ninety days prior to the end of the term. The Property Manager may assign the A&R Property Management Agreement to any party with expertise in commercial real estate which has, together with its affiliates, over $100.0 million in assets under management.
Professional Fees and Other Reimbursements
The Company reimburses the Advisor's costs of providing administrative services. Until June 2015, reimbursement of these expenses was 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. This limitation ceased to exist after June 2015, when the Original A&R Advisory Agreement became effective. The Company reimburses the Advisor for personnel costs, excluding any compensation paid to individuals who also serve as the Company’s executive officers, or the executive officers of the Advisor, the Property Manager or their respective affiliates. This reimbursement includes reasonable overhead expenses for employees of the Advisor or its affiliates directly involved in the performance of services on behalf of the Company, including the reimbursement of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor. During the quarters ended March 31, 2018 and 2017 the Company incurred $1.9 million and $1.3 million, respectively, of reimbursement expenses from the Advisor for providing administrative services.

26

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

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. There were no such fees forgiven during the quarters ended March 31, 2018 or 2017. 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 quarters ended March 31, 2018 or 2017.
The Advisor elected to, without interest accrual, defer cash payment of $1.7 million in certain fees and reimbursements due to the Advisor as of March 31, 2018 and December 31, 2017. As of December 31, 2017, a portion of these fees and reimbursements were already paid and the Company had recorded a $0.7 million receivable due from the Advisor. As of March 31, 2018, there was no remaining receivable due from the Advisor. The $1.7 million in deferred fees and reimbursements were repaid during April 2018.
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 March 31,
 
Payable (Receivable) as of
 
 
 
2018
 
2017
 
March 31,
 
December 31,
 
(In thousands)
 
Incurred (1)
 
Incurred (1)
 
2018
 
2017
 
One-time fees and reimbursements:
 
 
 
 
 
 
 
 
 
Acquisition cost reimbursements
 
$
60

 
$

 
$
60

 
$
36

 
Due to(from) HT III related to Asset Purchase (2)
 

 

 
(181
)
 
196

 
Ongoing fees and reimbursements:
 
 
 
 
 
 
 
 
 
Asset management fees
 
4,875

 
4,564

 

 

 
Property management fees
 
852

 
737

 
579

 
66

 
Professional fees and other reimbursements
 
2,046

 
1,442

 
1,704

(4) 
1,339

(4) 
Distributions on Class B Units (3)
 
110

 
151

 
40

 

 
Total related party operation fees and reimbursements
 
$
7,943

 
$
6,894

 
$
2,202

 
$
1,637

 
_______________
(1) 
There were no fees or reimbursements forgiven during the three months ended March 31, 2018 or 2017.
(2)
On December 22, 2017, the Company purchased substantially all the assets of HT III. Certain proration estimates were included within the Closing. The purchase agreement calls for a final purchase price adjustment. The Company had a $181 thousand net receivable and $196 thousand net payable related to the HT III Asset Purchase included on its Consolidated Balance Sheet as of March 31, 2018 and December 31, 2017, respectively. Please see below for additional information related to the asset purchase.
(3)
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 December 31, 2017, 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.
(4) 
Balance includes costs which were incurred and accrued due to ANST and a subsidiary of RCAP which were related parties of the Company. See above for further details on the status of the ANST and RCAP relationship.
Fees and Participations Incurred in Connection with a Listing or the Liquidation of the Company's Real Estate Assets
Fees Incurred in Connection with a Listing
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 market value of all issued and outstanding shares of common stock 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 quarters ended March 31, 2018 or 2017. Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in net sales proceeds and the subordinated incentive listing distribution.

27

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Annual Subordinated Performance Fees and Brokerage Commissions
Under the Original A&R Advisory Agreement and until February 17, 2017, the Advisor was entitled to 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 exceeded 6.0% per annum, the Advisor was 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 would have been payable only upon the sale of assets, distributions or another event which resulted in the return on stockholders' capital exceeding 6.0% per annum. No subordinated performance fees were incurred during the quarters ended March 31, 2018 or 2017.
Under the Original A&R Advisory Agreement and until February 17, 2017, the Advisor was entitled to a brokerage commission on the sale of property, not to exceed the lesser of (a) 2.0% of the contract sale price of the property and (b) 50.0% of the total brokerage commission paid if a third party broker was also involved; provided, however, that in no event could the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of (a) 6.0% of the contract sales price and (b) a reasonable, customary and competitive real estate commission. The brokerage commission payable to the Advisor was 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. No such fees were incurred during the quarters ended March 31, 2018 or 2017.
The Second A&R Advisory Agreement does not provide for the annual subordinated performance fee and brokerage commissions payable to the Advisor, (all as defined in the Original A&R Advisory Agreement) effective February 17, 2017 and no such fees or commissions were incurred prior thereto.
Subordinated Participation in Real Estate Sales
The Special Limited Partner is 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 is not entitled to the subordinated participation in net sale proceeds unless the Company's investors have received their capital contributions, plus 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 quarters ended March 31, 2018 or 2017. Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in net sales proceeds and the subordinated incentive listing distribution described above.
Termination Fees
Under the operating partnership agreement of the OP, upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner is 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 is able to 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.
Under the Second A&R Advisory Agreement, upon the termination or non-renewal of the agreement, the Advisor will be entitled to receive from the Company all amounts due to the Advisor, including any change in control fee and transition fee (both described below), as well as the then-present fair market value of the Advisor's interest in the Company. All fees will be due within 30 days after the effective date of the termination of the Second A&R Advisory Agreement.
Upon a termination by either party in connection with a change of control (as defined in the Second A&R Advisory Agreement), the Company would pay the Advisor a change of control fee equal to the product of four (4) and the "Subject Fees."
Upon a termination by the Company in connection with transition to self-management, the Company would pay the Advisor a transition fee equal to (i) $15.0 million plus (ii) the product of four multiplied by the Subject Fees, provided that the transition fee shall not exceed an amount equal (i) 4.5 multiplied by (ii) the Subject Fees.
The Subject Fees are equal to (i) the product of four (4) multiplied by the actual base management fee plus (ii) the product of four (4) multiplied by the actual variable management/incentive fee, in each of clauses (i) and (ii), payable for the fiscal quarter immediately prior to the fiscal quarter in which the change of control or the transition to self-management is consummated, as applicable, plus (iii) without duplication, the annual increase in the base management fee resulting from the cumulative net proceeds of any equity raised in respect to the fiscal quarter immediately prior to the fiscal quarter in which the change of control or the transition to self-management is consummated, as applicable.

28

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

The right to termination of the Second A&R Advisory Agreement in connection with a change of control or transition to self-management is subject to a lockout period that requires the notice of any termination in connection with a change of control or transition to self-management to be delivered after February 14, 2019.
American Realty Capital Healthcare Trust III, Inc. Asset Purchase
On December 22, 2017, the Company, Healthcare Trust Operating Partnership, L.P., the Company's operating partnership, and its subsidiary, ARHC TRS Holdco II, LLC, purchased all of the membership interests in indirect subsidiaries of American Realty Capital Healthcare Trust III, Inc. (“HT III”) that own the 19 properties comprising substantially all of HT III’s assets (the “Asset Purchase”), pursuant to a purchase agreement (the “Purchase Agreement”), dated as of June 16, 2017. HT III is sponsored and advised by an affiliate of the Company’s advisor. As of March 31, 2018 and December 31, 2017 the Company had a $181,000 net receivable and $196,000 net payable, respectively, to HT III included on its Consolidated Balance Sheet.
At the closing of the Asset Purchase, the Company paid HT III $108.4 million, representing the purchase price under the Purchase Agreement of $120.0 million, less (i) $0.7 million reflecting prorations and closing adjustments in accordance with the Purchase Agreement, (ii) $4.9 million reflecting the outstanding principal amount of the loan secured by HT III’s Philip Center property assumed by the Company at the closing in accordance with the Purchase Agreement, and (iii) $6.0 million deposited by the Company into an escrow account in accordance with the Purchase Agreement. This escrow amount, less any amounts paid or reserved for pending or unsatisfied indemnification claims that the Company may make pursuant to the Purchase Agreement, will be released to HT III in installments over a period of 14 months following the closing.
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 — Share-Based Compensation
Restricted Share Plan
The Company has adopted an employee and director incentive restricted share plan (as amended from time to time, the "RSP"), which provides the Company with the ability to grant awards of restricted shares of common stock ("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 shares of common stock that may be subject to awards 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).
Prior to August 2017, the RSP provided for an automatic grant of 1,333 restricted shares to each of the independent directors, without any further approval by the Board or the stockholders, on the date of his or her initial election to the Board and thereafter on the date of each annual stockholder meeting. The restricted shares granted as annual automatic awards prior to August 2017 were subject to vesting over a five-year period following the date of grant.
In August 2017, the Board amended the RSP to provide that the number of restricted shares comprising the automatic annual award to each of the independent directors would be equal to the quotient of $30,000 divided by the then-current Estimated Per-Share NAV and subsequently amended and restated the RSP to eliminate the automatic annual awards and to make other revisions related to the implementation of a new independent director equity compensation program. As part of this new independent director equity compensation program, the Board approved a one-time grant of restricted share awards to the independent directors as follows: (i) 300,000 restricted shares to the chairman, with one-seventh of the shares vesting annually in equal increments over a seven-year period with initial vesting on August 4, 2018; and (ii) 25,000 restricted shares to each of the three other independent directors, with one-fifth of the shares vesting annually in equal increments over a five-year period with initial vesting on August 4, 2018. In connection with these one-time grants, the restricted shares granted as automatic annual awards in connection with the Company’s 2017 annual meeting of stockholders on July 21, 2017 were forfeited. 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 Shares of Common Stock
 
Weighted Average Issue Price
Unvested, December 31, 2017
 
382,510

 
$
21.47

Granted
 

 

Vested
 
(267
)
 
$
22.50

Forfeitures
 

 

Unvested, March 31, 2018
 
382,243

 
$
21.50

As of March 31, 2018, the Company had $8.2 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 5.9 years.
Compensation expense related to restricted shares was approximately $319,000 and $14,000 during the three months ended March 31, 2018 and 2017, respectively. Compensation expense related to restricted shares is recorded as general and administrative expense in the accompanying consolidated statements 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 shares issued in lieu of cash compensation since these payments in lieu of cash relate to fees earned for services performed. No such shares were issued during the three months ended March 31, 2018 or 2017.
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 Gain on Designated Derivative
Balance, December 31, 2017
 
$
2,473

Other comprehensive income, before reclassifications
 
3,790

Amount of loss reclassified from accumulated other comprehensive income
 
174

Balance, March 31, 2018
 
$
6,437

Note 13 — Non-controlling Interests
Non-Controlling Interests in the Operating Partnership
The Company is the sole general partner and holds substantially all of the OP Units. As of March 31, 2018 and December 31, 2017, the Advisor held 90 OP Units, which represents a nominal percentage of the aggregate OP ownership.
In November 2014, the Company partially funded the purchase of a 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. After holding the OP Units for a period of one year, a holder of OP Units has the right to redeem OP Units for, at the option of the OP, the cash value of a corresponding number of shares of the Company's common stock or a corresponding number of shares of the Company's common stock. 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 quarters ended March 31, 2018 and 2017, OP Unit non-controlling interest holders were paid distributions of $0.1 million and $0.2 million, respectively.

29

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Non-Controlling Interests in Property Owning Subsidiaries
The Company also has investment arrangements with other unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company's property-owning subsidiaries and are 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 these arrangements 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 these arrangements and therefore the entities related to these arrangements are consolidated within the Company's financial statements. A non-controlling interest is recorded for the investor's ownership interest in the properties. During the quarters ended March 31, 2018 and 2017, no distributions were paid to non-controlling interest holders in property owning subsidiaries.
The following table summarizes the activity related to investment arrangements with the unaffiliated third parties:
 
 
 
 
Third Party Net Investment Amount
 
Non-Controlling Ownership Percentage
 
Net Real Estate Assets Subject to Investment Arrangement (1)
Property Name
(Dollar amounts in thousands)
 
Investment Date
 
As of March 31, 2018
 
As of March 31, 2018
 
As of March 31, 2018
 
As of December 31, 2017
Plaza Del Rio Medical Office Campus Portfolio
 
May 2015
 
$
413

 
4.1
%
 
$
11,001

 
$
10,784

UnityPoint Clinic Portfolio (2)
 
December 2017
 
$
477

 
5.0
%
 
$
9,540

 
$
9,639

______________
(1) There are no mortgage notes payable subject to these investment arrangements.
(2) Assumed as part of the HT III Asset Purchase. See Note 9 - Related Party Transactions and Arrangements for further information on the
Asset Purchase.
Note 14 — Net Loss Per Share
The following is a summary of the basic and diluted net loss per share computation for the quarters ended March 31, 2018 and 2017:
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Net loss attributable to stockholders (in thousands)
 
$
(5,991
)
 
$
(6,139
)
Basic and diluted weighted-average shares outstanding
 
90,783,065

 
89,639,676

Basic and diluted net loss per share
 
$
(0.07
)
 
$
(0.07
)

30

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

Diluted net loss per share assumes the conversion of all common stock equivalents into an equivalent number of common shares, unless the effect is antidilutive. The Company considers unvested restricted shares, OP Units and Class B Units to be common share equivalents. The Company had the following common share equivalents on a weighted-average basis that were excluded from the calculation of diluted net loss per share attributable to stockholders as their effect would have been antidilutive for the period presented:
 
 
Three Months Ended March 31,
 
 
2018
 
2017
Unvested restricted shares (1)
 
382,409

 
9,785

OP Units (2)
 
405,998

 
405,998

Class B Units (3)
 
359,250

 
359,250

Total weighted average antidilutive common stock equivalents
 
1,147,657

 
775,033

_______________
(1) 
Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were 382,243 and 9,654 unvested restricted shares outstanding as of March 31, 2018 and 2017, respectively.
(2) 
Weighted average number of antidilutive OP Units outstanding for the periods presented. There were 405,998 and 405,998 OP Units outstanding as of March 31, 2018 and 2017, respectively.
(3) 
Weighted average number of antidilutive Class B Units outstanding for the periods presented. There were 359,250 and 359,250 Class B Units outstanding as of March 31, 2018 and 2017, respectively.
Note 15 — Segment Reporting
During the quarters ended March 31, 2018 and 2017, the Company operated in three reportable business segments for management and internal financial reporting purposes: MOBs, 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.
On June 8, 2017, the Company's taxable REIT subsidiary, through 12 separately executed membership interest or stock transfer agreements, acquired 12 operating entities that leased 12 healthcare facilities included in the Company's triple-net leased healthcare facilities segment. Concurrently with the acquisition of the 12 operating entities, the Company transitioned the management of the healthcare facilities to a third-party management company that manages other healthcare facilities in the Company's SHOP operating segment. The segment reporting results of these 12 operating entities is included in the Company's triple-net leased healthcare facilities segment through June 8, 2017. Subsequent to June 8, 2017, these operating entities are operated under the RIDEA structure and are included in the Company's SHOP segment.
On January 1, 2018, the Company transitioned six properties in its triple-net leased healthcare facilities segment to operating properties under a structure permitted by the RIDEA structure. The properties consist of two assisted living facilities located in Burlington and Cudahy, Wisconsin, two assisted living facilities located in Dixon and Rockford, Illinois, an assisted living facility located in Richmond, Kentucky and a skilled nursing facility located in Lutz, Florida. The prior tenants of the six properties transferred the operations of the properties to newly-formed subsidiaries of the Company and third-party managers engaged by those Company subsidiaries pursuant to market operations transfer agreements. The Company’s subsidiaries simultaneously entered into new management agreements with the third-party managers, who will operate and manage the facilities on behalf of the Company subsidiaries.

31

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2018
(Unaudited)

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.
The following tables reconcile the segment activity to consolidated net loss for the quarters ended March 31, 2018 and 2017:
 
 
Three Months Ended March 31, 2018
(In thousands)
 
Medical Office Buildings
 
Triple-Net Leased Healthcare Facilities
 
Seniors Housing — Operating Properties
 
Consolidated
Revenues:
 
 
 
 
 
 
 
 
Rental income
 
$
19,355

 
$
5,928

 
$
3

 
$
25,286

Operating expense reimbursements
 
4,634

 
337

 

 
4,971

Resident services and fee income
 

 

 
59,181

 
59,181

Total revenues
 
23,989

 
6,265

 
59,184

 
89,438

Property operating and maintenance
 
7,216

 
2,426

 
43,464

 
53,106

NOI
 
$
16,773

 
$
3,839

 
$
15,720

 
36,332

Impairment charges
 
 
 
 
 
 
 
(733
)
Operating fees to related parties
 
 
 
 
 
 
 
(5,727
)
Acquisition and transaction related
 
 
 
 
 
 
 
(173
)
General and administrative
 
 
 
 
 
 
 
(3,652
)
Depreciation and amortization
 
 
 
 
 
 
 
(20,769
)
Interest expense
 
 
 
 
 
 
 
(11,157
)
Interest and other income
 
 
 
 
 
 
 
3

Gain (loss) on non-designated derivatives
 
 
 
 
 
 
 
178

Income tax expense
 
 
 
 
 
 
 
(309
)
Net income attributable to non-controlling interests
 
 
 
 
 
 
 
16

Net loss attributable to stockholders