10-Q 1 hti331201910-q.htm 10-Q HTI 3.31.2019 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, 2019
 
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
hti2a15.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., 3rd 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 has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes 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 the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
Non-accelerated filer x
 
Smaller reporting company o
 
 
Emerging growth company o
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 o
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
Securities registered pursuant to section 12(b) of the Act: None.
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
N/A
 
N/A
 
N/A
As of May 6, 2019, the registrant had 91,898,422 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,
2019
 
December 31, 2018
ASSETS
 
(Unaudited)
 
 
Real estate investments, at cost:
 
 
 
 
Land
 
$
212,111

 
$
209,284

Buildings, fixtures and improvements
 
2,033,651

 
2,006,745

Construction in progress
 
82,859

 
80,598

Acquired intangible assets
 
259,146

 
256,452

Total real estate investments, at cost
 
2,587,767

 
2,553,079

Less: accumulated depreciation and amortization
 
(402,627
)
 
(381,909
)
Total real estate investments, net
 
2,185,140

 
2,171,170

Cash and cash equivalents
 
63,508

 
77,264

Restricted cash
 
15,270

 
14,094

Assets held for sale
 
13,123

 
52,397

Derivative assets, at fair value
 
2,171

 
4,633

Straight-line rent receivable, net
 
18,227

 
17,351

Prepaid expenses and other assets (including $154 due from related parties as of December 31, 2018)
 
34,853

 
28,785

Deferred costs, net
 
13,197

 
11,752

Total assets
 
$
2,345,489

 
$
2,377,446

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
Mortgage notes payable, net
 
$
454,899

 
$
462,839

Revolving credit facility
 
83,618

 
243,300

Term loan, net
 
144,551

 
—

Fannie Mae master credit facilities
 
359,322

 
359,322

Market lease intangible liabilities, net
 
15,114

 
17,104

Accounts payable and accrued expenses (including $622 and $764 due to related parties as of March 31, 2019 and December 31, 2018, respectively)
 
51,423

 
40,298

Deferred rent
 
8,655

 
7,011

Distributions payable
 
6,674

 
6,638

Total liabilities
 
1,124,256

 
1,136,512

 
 
 
 
 
Stockholders' Equity
 
 
 
 
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of March 31, 2019 and December 31, 2018
 
—

 
—

Common stock, $0.01 par value, 300,000,000 shares authorized, 92,308,777 and 91,963,532 shares of common stock issued and outstanding as of March 31, 2019 and December 31, 2018, respectively
 
922

 
919

Additional paid-in capital
 
2,039,269

 
2,031,967

Accumulated other comprehensive income
 
2,163

 
4,582

Accumulated deficit
 
(828,852
)
 
(804,331
)
Total stockholders' equity
 
1,213,502

 
1,233,137

Non-controlling interests
 
7,731

 
7,797

Total equity
 
1,221,233

 
1,240,934

Total liabilities and equity
 
$
2,345,489

 
$
2,377,446

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,
 
 
2019
 
2018
Revenue from tenants
 
$
88,718

 
$
89,438

 
 
 
 
 
Operating expenses:
 
 
 
 
Property operating and maintenance
 
52,799

 
53,106

Impairment charges
 
—

 
733

Operating fees to related parties
 
5,768

 
5,727

Acquisition and transaction related
 
18

 
173

General and administrative
 
6,298

 
3,652

Depreciation and amortization
 
20,685

 
20,769

Total expenses
 
85,568

 
84,160

Operating income before gain on sale of real estate investments
 
3,150

 
5,278

Gain on sale of real estate investments
 
6,078

 
—

Operating income
 
9,228

 
5,278

Other (expense) income:
 
 
 
 
Interest expense
 
(13,943
)
 
(11,157
)
Interest and other income
 
4

 
3

(Loss) gain on non-designated derivatives
 
(43
)
 
178

Total other expenses
 
(13,982
)
 
(10,976
)
Loss before income taxes
 
(4,754
)
 
(5,698
)
Income tax expense
 
(338
)
 
(309
)
Net loss
 
(5,092
)
 
(6,007
)
Net (income) loss attributable to non-controlling interests
 
(19
)
 
16

Net loss attributable to stockholders
 
(5,111
)
 
(5,991
)
Other comprehensive loss:
 
 
 
 
Unrealized (loss) gain on designated derivatives
 
(2,419
)
 
3,964

Comprehensive loss attributable to stockholders
 
$
(7,530
)
 
$
(2,027
)
 
 
 
 
 
Basic and diluted weighted-average shares outstanding
 
92,894,608

 
90,783,065

Basic and diluted net loss per share
 
$
(0.06
)
 
$
(0.07
)

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


4
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Three Months Ended March 31, 2019 and 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, 2018
91,963,532

 
$
919

 
$
2,031,967

 
$
4,582

 
$
(804,331
)
 
$
1,233,137

 
$
7,797

 
1,240,934

Impact of adoption of ASC 842
—

 
—

 
—

 
—

 
(87
)
 
(87
)
 
—

 
(87
)
Common stock issued through distribution reinvestment plan
345,245

 
3

 
6,980

 
—

 
—

 
6,983

 
—

 
6,983

Share-based compensation
—

 
—

 
322

 
—

 
—

 
322

 
—

 
322

Distributions declared, $0.21 per share
—

 
—

 
—

 
—

 
(19,323
)
 
(19,323
)
 
—

 
(19,323
)
Distributions to non-controlling interest holders
—

 
—

 
—

 
—

 
—

 
—

 
(85
)
 
(85
)
Other comprehensive loss
—

 
—

 
—

 
(2,419
)
 
—

 
(2,419
)
 
—

 
(2,419
)
Net loss (income)
—

 
—

 
—

 
—

 
(5,111
)
 
(5,111
)
 
19

 
(5,092
)
Balance, March 31, 2019
92,308,777

 
$
922

 
$
2,039,269

 
$
2,163

 
$
(828,852
)
 
$
1,213,502

 
$
7,731

 
$
1,221,233


 
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, $0.31 per share
—

 
—

 
—

 
—

 
(27,903
)
 
(27,903
)
 
—

 
(27,903
)
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 these unaudited consolidated financial statement.


5
HEALTHCARE TRUST, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Three Months Ended March 31,
 
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(5,092
)
 
$
(6,007
)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
20,685

 
20,769

Amortization of deferred financing costs
 
2,451

 
2,227

Amortization of mortgage premiums and discounts, net
 
(66
)
 
(69
)
(Accretion) amortization of market lease and other intangibles, net
 
(50
)
 
86

Bad debt expense
 
2,719

 
2,586

Share-based compensation
 
322

 
319

Gain on sale of real estate investments, net
 
(6,078
)
 
—

Loss (gain) on non-designated derivatives
 
43

 
(178
)
Impairment charges
 
—

 
733

Changes in assets and liabilities:
 
 
 
 
Straight-line rent receivable
 
(876
)
 
(2,136
)
Prepaid expenses and other assets
 
(1,007
)
 
(4,627
)
Due from related party
 
—

 
(29
)
Accounts payable, accrued expenses and other liabilities
 
1,815

 
1,260

Deferred rent
 
1,644

 
1,984

Net cash provided by operating activities
 
16,510

 
16,918

Cash flows from investing activities:
 
 
 
 
Investments in real estate
 
(33,088
)
 
(20,311
)
Capital expenditures
 
(1,787
)
 
(1,174
)
Proceeds from sale of real estate
 
45,352

 
—

Net cash provided by (used in) investing activities
 
10,477

 
(21,485
)
Cash flows from financing activities:
 
 
 
 
Payments on credit facilities
 
(243,300
)
 
—

Proceeds from credit facilities
 
83,618

 
64,153

Proceeds from term loan
 
150,000

 
—

Payments on mortgage notes payable
 
(8,413
)
 
(62,112
)
Payments for derivative instruments
 
—

 
(131
)
Payments of deferred financing costs
 
(9,083
)
 
(1,606
)
Common stock issuances repurchases
 
—

 
(8,025
)
Distributions paid
 
(12,304
)
 
(19,125
)
Distributions to non-controlling interest holders
 
(85
)
 
(145
)
Net cash used in financing activities
 
(39,567
)
 
(26,991
)
Net change in cash, cash equivalents and restricted cash
 
(12,580
)
 
(31,558
)
Cash, cash equivalents and restricted cash, beginning of period
 
91,358

 
102,588

Cash, cash equivalents and restricted cash, end of period
 
$
78,778

 
$
71,030



6
HEALTHCARE TRUST, INC. AND SUBSIDIARIES
  
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

 
 
Three Months Ended March 31,
 
 
2019
 
2018
Cash, cash equivalents, end of period
 
$
63,508

 
$
61,277

Restricted cash, end of period
 
15,270

 
9,753

Cash, cash equivalents and restricted cash, end of period
 
$
78,778

 
$
71,030

 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid for interest, net of amounts capitalized
 
$
10,365

 
$
9,598

Cash paid for income taxes
 
175

 
16

 
 
 
 
 
Non-cash investing and financing activities:
 
 
 
 
Common stock issued through distribution reinvestment plan
 
6,983

 
13,355


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, 2019
(Unaudited)


Note 1 — Organization
Healthcare Trust, Inc. (including, as required by context, Healthcare Trust Operating Partnership, L.P. (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, 2019, the Company owned 189 properties (all references to number of properties and square footage are unaudited) located in 31 states and comprised of 9.0 million rentable square feet.
The Company, which was incorporated on October 15, 2012, is a Maryland corporation that elected 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"), and these related parties receive compensation, fees and expense reimbursements from the Company for services related to managing its business and investments. Healthcare Trust Special Limited Partnership, LLC (the "Special Limited Partner"), which is also under common control with AR Global, also has an interest in the Company through ownership of interests in the OP.
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 this Quarterly Report on 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 statement of results for the interim periods. The results of operations for the three months ended March 31, 2019 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, 2018, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 14, 2019. Except for those required by new accounting pronouncements discussed below, there have been no significant changes to the Company's significant accounting policies during the three months ended March 31, 2019 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. The Company has aggregated revenue from its lease components and non-lease components (tenant operating expense reimbursements) into one line. See — Recently Issued Accounting Pronouncements — ASU No. 2016-02 — Leases.
Purchase Accounting
The Company evaluates the inputs, processes and outputs of each asset acquired to determine if the transaction is a business combination or an asset acquisition. If an acquisition qualifies as a business combination, the related transaction costs are recorded as an expense in the consolidated statements of operations. If an acquisition qualifies as an asset acquisition, the related transaction costs are generally capitalized as part of the overall purchase price.
In both a business combination and an asset acquisition, the Company allocates the purchase price of acquired properties to tangible and identifiable intangible assets or liabilities based on their respective fair values. Tangible assets may include land, land

8
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

improvements, buildings, fixtures and tenant improvements. Intangible assets or liabilities may include the value of in-place leases, above- and below- market leases and other identifiable assets or liabilities based on lease or property specific characteristics. In addition, any assumed mortgages receivable or payable and any assumed or issued non-controlling interests (in a business combination) are recorded at their estimated fair values. In allocating the fair value to assumed mortgages, amounts are recorded to debt premiums or discounts based on the present value of the estimated cash flows, which is calculated to account for either above or below-market interest rates. In a business combination, the difference between the purchase price and the fair value of identifiable net assets acquired is either recorded as goodwill or as a bargain purchase gain. In an asset acquisition, the difference between the acquisition price (including capitalized transaction costs) and the fair value of identifiable net assets acquired is allocated to the non-current assets. All acquisitions during the three- month periods ended December 31, 2019 and 2018 were asset acquisitions.
Tangible assets include land, land improvements, buildings, fixtures and tenant improvements on an as-if vacant basis. The Company utilizes various estimates, processes and information to determine the as-if vacant property value. Estimates of value are made using customary methods, including data from appraisals, comparable sales, discounted cash flow analysis and other methods. Amounts allocated to land, land improvements, buildings and fixtures are based on cost segregation studies performed by independent third parties or on the Company’s analysis of comparable properties in the Company’s portfolio. Identifiable intangible assets include amounts allocated to acquire leases for above- and below-market lease rates and the value of in-place leases as applicable.
Factors considered in the analysis of the in-place lease intangibles include an estimate of carrying costs during the expected lease-up period for each property, taking into account current market conditions and costs to execute similar leases. In estimating carrying costs, the Company includes real estate taxes, insurance and other operating expenses and estimates of lost rentals at contract rates during the expected lease-up period, which typically ranges from six to 24 months. The Company also estimates costs to execute similar leases including leasing commissions, legal and other related expenses.
Above-market and below-market lease values for acquired properties are initially recorded based on the present value (using a discount rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to each in-place lease and (ii) management’s estimate of fair market lease rates for each corresponding in-place lease, measured over a period equal to the remaining initial term of the lease for above-market leases and the remaining initial term plus the term of any below-market fixed rate renewal options for below-market leases. The capitalized above-market lease values are amortized as a reduction of base rental revenue over the remaining terms of the respective leases, and the capitalized below-market lease values are amortized as an increase to base rental revenue over the remaining initial terms plus the terms of any below-market fixed rate renewal options of the respective leases. If a tenant with a below-market rent renewal does not renew, any remaining unamortized amount will be taken into income at that time.
In making estimates of fair values for purposes of allocating purchase price, the Company utilizes a number of sources, including independent appraisals that may be obtained in connection with the acquisition or financing of the respective property and other market data. The Company also considers information obtained about each property as a result of the Company’s pre-acquisition due diligence in estimating the fair value of the tangible and intangible assets acquired and intangible liabilities assumed.
Impairment of Long-Lived Assets
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. This review is based on an estimate of the future undiscounted cash flows, excluding interest charges, expected to result from the property’s use and eventual disposition. These estimates consider factors such as expected future operating income, market and other applicable trends and residual value, as well as the effects of leasing demand, competition and other factors. If an impairment exists, due to the inability to recover the carrying value of a property, the Company would recognize an impairment loss in the consolidated statement of operations and comprehensive income to the extent that the carrying value exceeds the estimated fair value of the property for properties to be held and used. For properties held for sale, the impairment loss recorded would equal the adjustment to fair value less estimated cost to dispose of the asset. These assessments have a direct impact on net income because recording an impairment loss results in an immediate negative adjustment to net earnings.
Revenue Recognition
The Company's revenues, which are derived primarily from lease contracts, which include rent received from tenants in MOBs and triple-net leased healthcare facilities. As of March 31, 2019, these leases had an average remaining lease term of 8.8 years. 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 for, 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

9
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

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. The Company's revenues also include resident services and fee income primarily related to rent derived from lease contracts with 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, which are generally variable in nature. Rental income from residents in the Company's SHOP 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. Pursuant to certain of the Company's lease agreements, tenants are required to reimburse the Company for certain property operating expenses related to non-SHOP assets (recorded in revenue from tenants), in addition to paying base rent, whereas under certain other lease agreements, the tenants are directly responsible for all operating costs of the respective properties.
Under ASC 842, the Company has elected to report combined lease and non-lease components in a single line “Revenue from tenants”. For comparative purposes, the Company has also elected to reflect prior revenue and reimbursements reported under ASC 842 also on a single line. For expenses paid directly by the tenant, under both ASC 842 and 840, the Company has reflected them on a net basis.
The following tables present future base rent payments on a cash basis due to the Company over the periods indicated. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to sales thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.
As of March 31, 2019:
(In thousands)
 
Future 
Base Rent Payments
2019 (remainder)
 
$
71,117

2020
 
92,194

2021
 
86,490

2022
 
77,958

2023
 
67,233

Thereafter
 
288,376

Total
 
$
683,368

As of December 31, 2018:
(In thousands)
 
Future  Base Rent Payments
2019
 
$
96,178

2020
 
91,848

2021
 
85,563

2022
 
77,205

2023
 
65,504

Thereafter
 
284,929

Total
 
$
701,227

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. Under the new leasing standard (see Recently Issued Accounting Pronouncements below), the Company is required to assess, based on credit risk only, if it is probable that it will collect virtually all of the lease payments at the lease commencement date and it must continue to reassess collectability periodically thereafter based on new facts and circumstances affecting the credit risk of the tenant. Partial reserves, or the ability to assume partial recovery are no longer permitted. If the Company determines that it is probable it will collect virtually all of the lease payments (rent and common area maintenance), the lease will continue to be accounted for on an accrual

10
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

basis (i.e. straight-line). However, if the Company determines it’s not probable that it will collect virtually all of the lease payments, the lease will be accounted for on a cash basis and a full reserve would be recorded on previously accrued amounts in cases where it was subsequently concluded that collection was not probable. Cost recoveries from tenants are included in revenue from tenants in the accompanying consolidated statements of operations and comprehensive loss in the period the related costs are incurred, as applicable.
Under ASC 842, uncollectable amounts are reflected as reductions in revenue. Under ASC 840, the Company recorded such amounts as bad debt expense as part of property operating expenses. During the three month periods ended March 31, 2019 and 2018 such amounts were $2.7 million and $2.6 million, respectively.
Recently Issued Accounting Pronouncements
Adopted as of January 1, 2019
ASU No. 2016-02 - Leases
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02") which provides new guidance related to the accounting for leases, as well as the related disclosures. For lessors of real estate, leases are accounted for using an approach substantially the same as previous accounting guidance for operating leases and direct financing leases. For lessees, the new standard requires the application of a dual lease classification approach, classifying leases as either operating or finance leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. Lease expense for operating leases is recognized on a straight-line basis over the term of the lease, while lease expense for finance leases is recognized based on an effective interest method over the term of the lease. Also, lessees must recognize a right-of-use asset (“ROU”) and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Further, certain transactions where at inception of the lease the buyer-lessor accounted for the transaction as a purchase of real estate and a new lease, may now be required to have symmetrical accounting to the seller-lessee if the transaction was not a qualified sale-leaseback and accounted for as a financing transaction.
Upon adoption, lessors were allowed a practical expedient, which the Company has elected, by class of underlying assets to account for lease and non-lease components (such as tenant reimbursements of property operating expenses) as a single lease component as an operating lease because (a) the non-lease components have the same timing and pattern of transfer as the associated lease component; and (b) the lease component, if accounted for separately, would be classified as an operating lease. Additionally, only incremental direct leasing costs may be capitalized under this new guidance, which is consistent with the Company’s existing policies. Also, upon adoption, companies were allowed a practical expedient package, which the Company has elected, that allowed the Company: (a) to not reassess whether any expired or existing contracts entered into prior to January 1, 2019 are or contain leases; (b) to not reassess the lease classification for any expired or existing leases entered into prior to January 1, 2019 (including assessing sale-leaseback transactions); and (c) to not reassess initial direct costs for any expired or existing leases entered into prior to January 1, 2019. As a result, all of the Company’s existing leases will continue to be classified as operating leases under the new standard. Further, any existing leases for which the property is the leased to a tenant in a transaction that at inception was a sale-leaseback transaction will continue to be treated (absent a modification) as operating lease.The Company did not have any leases that would be considered financing leases as of January 1, 2019.
The Company assessed the impact of adoption from both a lessor and lessee perspective, which is discussed in more detail below, and adopted the new guidance prospectively on January 1, 2019, using a prospective transition approach under which the Company elected to apply the guidance effective January 1, 2019 and not adjust prior comparative reporting periods (except for the Company’s presentation of lease revenue discussed below).
Lessor Accounting
As discussed above, the Company was not required to re-assess the classification of its leases, which are considered operating leases under ASU 2016-02. The following is a summary of the most significant impacts to the Company of the new accounting guidance, as lessor:
•
Because the Company elected the practical expedient noted above to not separate non-lease component revenue from the associated lease component, the Company has aggregated revenue from its lease components and non-lease components (tenant operating expense reimbursements) into one line. The prior period has been conformed to this new presentation.
•
Changes in the Company’s assessment of receivables that result in bad debt expense is now required to be recorded as an adjustment to revenue, rather than a charge to bad debt expense. This new classification applies for the first quarter of 2019 and reclassification of prior period amounts is not permitted. At transition on January 1, 2019, after assessing its reserve balances at December 31, 2018 under the new guidance, the Company wrote off accounts receivable of $0.1

11
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

million and straight-line rents receivable of $0.1 million as an adjustment to the opening balance of accumulated deficit, and accordingly rent for these tenants is currently recorded on a cash basis.
•
Indirect leasing costs in connection with new or extended tenant leases, if any, are being expensed. Under prior accounting guidance, the recognition would have been deferred.
Lessee Accounting
The Company is a lessee under ground leases for 17 properties as of January 1, 2019 and because the Company has elected the practical expedients described above, it determined that 11 of these leases would continue to be classified as operating leases under the new standard. The following is a summary of the most significant impacts to the Company of the new accounting guidance, as lessee:
•
Upon adoption of the new standard, the Company recorded ROU assets and lease liabilities equal to $10.2 million for the present value of the lease payments related to its ground leases. These amounts are included in prepaid expenses and other assets and accounts payable and accrued expenses on the consolidated balance sheet.
•
The Company also reclassified $0.5 million related to amounts previously reported as a straight-line rent liability, $4.8 million, net related to amounts previously reported as above and below market ground lease intangibles to the ROU assets. For additional information and disclosures related to these operating leases, see Note 16 — Commitments and Contingencies.

Other Accounting Pronouncements
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 stockholders in basic earnings per share. 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. Adoption should be applied retrospectively to outstanding financial instruments with a down round feature with a cumulative-effect adjustment to the statement of financial position. The Company adopted the new guidance on January 1, 2019 and it did not have an impact on its consolidated financial statements.
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 Company adopted ASU 2017-12 on January 1, 2019, as required under the guidance, using a modified retrospective transition method and the adoption did not have a material impact on its consolidated financial statements.
In June 2018, the FASB issued ASU 2018-07, Compensation- Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting as an amendment and update expanding the scope of Topic 718. The amendment specifies that Topic 718 now applies to all share-based payment transactions, even non-employee awards, in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. Under the new guidance, awards to nonemployees are measured on the grant date, rather than on the earlier of the performance commitment date or the date at which the nonemployee’s performance is complete. Also, the awards would be measured by estimating the fair value of the equity instruments to be issued, rather than the fair value of the goods or services received or the fair value of the equity instruments issued, whichever can be measured more reliably. In addition, entities may use the expected term to measure nonemployee awards or elect to use the contractual term as the expected term, on an award-by-award basis. The new guidance is effective for the Company in annual periods beginning after December 15, 2018, and interim periods within those annual periods. As of December 31, 2018 the Company did not have any nonemployee awards outstanding that would be impacted by the new guidance, however the Company will apply this new guidance prospectively to grants of nonemployee awards, if any. The Company has adopted ASU 2018-07 on January 1, 2019.

12
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Pending Adoption as of March 31, 2019
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. On July 25, 2018, the FASB proposed an amendment to ASU 2016-13 to clarify that operating lease receivables recorded by lessors (including unbilled straight-line rent) are explicitly excluded from the scope of ASU 2016-13. The new guidance is effective for reporting periods beginning after December 15, 2019, with early adoption permitted for reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of this new guidance.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement. The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements by removing, modifying, and adding certain fair value disclosure requirements to facilitate clear communication of the information required by generally accepted accounting principles. The amendments are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted upon issuance of this ASU. The Company is currently evaluating the potential impact of this new guidance.
Note 3 — Real Estate Investments
The Company owned 189 properties as of March 31, 2019. 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 three months ended March 31, 2019, the Company, through wholly-owned subsidiaries of the OP, completed its acquisitions of three multi-tenant MOBs for an aggregate contract purchase price of $30.2 million. Additionally, the Company incurred construction in progress costs during the period of $2.3 million, inclusive of capitalized interest totaling $1.0 million. The following table presents the allocation of real estate assets acquired and liabilities assumed as well as capitalized construction in progress during the three months ended March 31, 2019 and 2018:
 
 
Three Months Ended March 31,
(In thousands)
 
2019
 
2018
Real estate investments, at cost:
 
 
 
 
Land
 
$
2,827

 
$
3,169

Buildings, fixtures and improvements
 
26,022

 
12,615

Construction in progress
 
2,261

 
2,919

Total tangible assets
 
31,110

 
18,703

Acquired intangibles:
 
 
 
 
In-place leases (1)
 
2,768

 
1,633

Market lease and other intangible assets (1)
 
31

 
30

Market lease liabilities (1)
 
(821
)
 
(55
)
Total intangible assets and liabilities
 
1,978

 
1,608

Other assets acquired and liabilities assumed in the Asset Acquisition, net (1)
 
—

 
—

Cash paid for real estate investments, including acquisitions
 
$
33,088

 
$
20,311

Number of properties purchased
 
3

 
5

_______________
(1) 
Weighted-average remaining amortization periods for in-place leases, an above-market lease and a below-market lease liability acquired  were 5.6 years and 8.9 years as of March 31, 2019 and 2018, respectively.



13
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

As of March 31, 2019 and 2018, 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, 2019 and 2018:
 
 
March 31,
State
 
2019
 
2018
Florida
 
23.1%
 
16.1%
Michigan
 
10.9%
 
12.4%
Pennsylvania
 
10.1%
 
*

Intangible Assets and Liabilities
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)
 
2019
 
2018
Amortization of in-place leases and other intangible assets (1)
 
$
4,062

 
$
4,898

(Accretion) and Amortization of above- and below-market leases, net (2)
 
$
(110
)
 
$
1

Amortization of above- and below-market ground leases, net (3)
 
$
21

 
$
37

_______________
(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)
 
Remainder 2019
 
2020
 
2021
 
2022
 
2023
In-place lease assets
 
$
14,799

 
$
12,918

 
$
10,453

 
$
8,447

 
$
6,573

Other intangible assets
 
415

 
414

 
414

 
414

 
414

Total to be added to amortization expense
 
$
15,214

 
$
13,332

 
$
10,867

 
$
8,861

 
$
6,987

 
 
 
 
 
 
 
 
 
 
 
Above-market lease assets
 
$
(785
)
 
$
(1,225
)
 
$
(924
)
 
$
(576
)
 
$
(238
)
Below-market lease liabilities
 
911

 
1,542

 
1,324

 
1,262

 
1,149

Total to be added to revenue from tenants
 
$
126

 
$
317

 
$
400

 
$
686

 
$
911


14
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

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.
On February 6, 2019, the Company sold five of the MOB properties within the State of New York (the "New York Six MOBs") for a contract sales price of $45.0 million, resulting in a gain on sale of real estate investments of $6.1 million which is included on the Consolidated Statement of Operations for the three months ended March 31, 2019. The Company had reconsidered the intended holding period for all six of the New York Six MOBs due to various market conditions and the potential to reinvest in properties generating a higher yield. On July 26, 2018, the Company had entered into a purchase and sale agreement for the sale of the New York Six MOBs, for an aggregate contract sale price of approximately $68.0 million. On September 25, 2018, the Company amended the purchase and sale agreement to decrease the aggregate contract sale price to $58.8 million.
One of the New York Six MOBs remains held for sale as of March 31, 2019 representing $13.1 million which is presented in assets held for sale on the Consolidated Balance Sheet.
The following table details the major classes of assets associated with the properties that are classified as held for sale as of March 31, 2019 and December 31, 2018:
(In thousands)
 
March 31, 2019
 
December 31, 2018
   Land
 
$
261

 
$
5,285

   Buildings, fixtures and improvements
 
12,862

 
47,112

Assets held for sale
 
$
13,123

 
$
52,397

Impairment of Held for Use Real Estate Investments
When circumstances indicate the carrying value of a property may not be recoverable, the Company reviews the property for impairment. For the Company, the most triggering events are (i) concerns regarding the tenant (i.e., credit or expirations) in the Company's single tenant properties or significant vacancy in the Company's multi-tenant properties and (ii) changes to the Company's expected holding period as a result of business decisions or non-recourse debt maturities. As of March 31, 2019, the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators, and where appropriate, 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 assessments of terminal values. Where more than one possible scenario exists, the Company uses a probability weighted approach. 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 three of these held for use properties, the Company used purchase and sale agreements 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 values did not exceed their estimated undiscounted cash flows. No impairments were recorded for the three months ended March 31, 2019.
As of March 31, 2018, as a result of its consideration of impairment, the Company also 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.

15
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

The LaSalle Tenant
The Company is currently exploring options to replace tenants at four properties in Texas (collectively, the "LaSalle Tenant"). In January 2018, the Company entered into an agreement with the LaSalle Tenant in which the Company agreed to forbear from exercising legal remedies, including staying a lawsuit against the tenant, as long as the tenant pays the amounts due for rent and property taxes on an updated payment schedule pursuant to a forbearance agreement. The LaSalle Tenant is currently in default of the forbearance agreement and owes the Company $5.5 million of rent, property taxes, late fees, and interest receivable thereunder.
On February 15, 2019, the Company filed an amended petition in Texas state court seeking the appointment of a receiver to manage the operations at the four properties and for recovery of damages for the various breaches by the LaSalle Tenant. In April 2019, the Company and the LaSalle Tenant participated in a mediation of the claims. Subsequent to the mediation, The LaSalle Group Inc., a guarantor of certain of the LaSalle Tenant’s lease obligations (the "LaSalle Guarantor"), filed for voluntarily relief under chapter 11 of the United States Bankruptcy Code. The Company is currently evaluating its options in light of the bankruptcy filing by the LaSalle Guarantor.
The Company has the entire receivable balance and related income from the LaSalle Tenant fully reserved as of March 31, 2019. The Company incurred $1.0 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Tenant during the three months ended March 31, 2019 which is included in revenue from tenants during the three months ended March 31, 2019 on the consolidated statement of operations. No bad debt expense was recorded during the three months ended March 31, 2018.
The NuVista Tenants
The Company had tenants and former tenants at two of its properties in Florida (collectively, the "NuVista Tenants") that have been in default under their leases since July 2017 and collectively owe the Company $10.1 million of rent, property taxes, late fees, and interest receivable under their leases as of March 31, 2019. There can be no guarantee on the collectibility of these receivables, and as such, the Company has the entire receivable balance and related income from the NuVista Tenants fully reserved as of March 31, 2019. The Company also incurred bad debt expense related to the NuVista Tenants during the three months ended March 31, 2019 of $1.1 million which is included in revenue from tenants on the consolidated statement of operations, and $2.6 million during the three months ended March 31, 2018, which is included in property operating and maintenance expense during the three months ended March 31, 2018 on the consolidated statement of operations. The NuVista Tenants are related to Palm Health Partners, LLC ("Palm"), the developer of the Company's development property in Jupiter, Florida which is also currently in default to the Company (see Note 16 — Commitments and Contingencies for more information on the status of the relationship with Palm).
At one of the properties which is occupied by the NuVista Tenants, located in Wellington, Florida, the Company and the tenant entered into an operations transfer agreement (the “OTA”) pursuant to which the Company and the tenant agreed to cooperate in transitioning operations at the property to a third party operator selected by the Company. On February 19, 2019, in response to litigation commenced by the Company against the NuVista Tenant to enforce the OTA, the United States District Court for the Southern District of Florida entered into an agreed order (the “Order”) pursuant to which it found that the NuVista Tenant was in default under the lease for the property and that the OTA was valid, binding and in full force and effect, as modified by the Order. Subsequent to the entry into the Order, the Company, its designated manager and NuVista Tenant transitioned operations at the property to the Company’s designated manager. The Company’s designated manager received its license to operate the facility on April 1, 2019 and is in operational control of the property. The Company intends to seek a final order from the court terminating the existing lease with the NuVista Tenant, at which time the Company anticipates it will sign a lease with a taxable REIT subsidiary (“TRS”) and engage its designated manager, a third party, to operate the property. This structure is permitted by RIDEA, under which a REIT may lease "qualified health care" properties on an arm's length basis to a TRS if the property is operated on behalf of such subsidiary by an eligible independent contractor.
The other property, located in Lutz, Florida, transitioned to the SHOP operating segment as of January 1, 2018. In connection with this transition, the Company replaced the NuVista Tenant as a tenant with a TRS, and has engaged a third party to operate the property.

16
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Note 4 — Mortgage Notes Payable, Net
The following table reflects the Company's mortgage notes payable as of March 31, 2019 and December 31, 2018:
 
 
 
 
Outstanding Loan Amount as of
 
Effective Interest Rate(1) as of
 
 
 
 
 
Portfolio
 
Encumbered Properties (2)
 
March 31,
2019
 
December 31, 2018
 
March 31,
2019
 
December 31, 2018
 
Interest Rate
 
Maturity
 
 
 
 
 
(In thousands)
 
(In thousands)
 
 
 
 
 
 
 
 
 
Countryside Medical Arts - Safety Harbor, FL
 
1
 
$
5,667

 
$
5,690

 
6.28
%
 
6.20
%
 
Variable
(6) 
Apr. 2019
(5) 
St. Andrews Medical Park - Venice, FL
 
3
 
6,264

 
6,289

 
6.28
%
 
6.20
%
 
Variable
(6) 
Apr. 2019
(5) 
Palm Valley Medical Plaza - Goodyear, AZ
 
1
 
3,195

 
3,222

 
4.15
%
 
4.15
%
 
Fixed
 
Jun. 2023
 
Medical Center V - Peoria, AZ
 
1
 
2,954

 
2,977

 
4.75
%
 
4.75
%
 
Fixed
 
Sep. 2023
 
Courtyard Fountains - Gresham, OR
 
1
 
23,784

 
23,905

 
3.87
%
 
3.87
%
 
Fixed
 
Jan. 2020
 
Fox Ridge Bryant - Bryant, AR
 
1
 
7,391

 
7,427

 
3.98
%
 
3.98
%
 
Fixed
 
May 2047
 
Fox Ridge Chenal - Little Rock, AR
 
1
 
16,916

 
16,988

 
3.98
%
 
3.98
%
 
Fixed
 
May 2049
 
Fox Ridge North Little Rock - North Little Rock, AR
 
1
 
10,496

 
10,541

 
3.98
%
 
3.98
%
 
Fixed
 
May 2049
 
Philip Professional Center - Lawrenceville, GA
 
2
 
4,766

 
4,793

 
4.00
%
 
4.00
%
 
Fixed
 
Oct. 2019
(5) 
Capital One MOB Loan
 
31
 
241,986

 
250,000

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

 
20,271

 
5.08
%
 
4.87
%
 
Variable
(6) 
Dec. 2019
 
Multi-Property CMBS Loan
 
21
 
118,700

 
118,700

 
4.60
%
 
4.60
%
 
Fixed
 
May 2028
 
Gross mortgage notes payable
 
80
 
462,390

 
470,803

 
4.49
%
 
4.48
%
 
 
 
 
 
Deferred financing costs, net of accumulated amortization (4)
 
 
 
(6,052
)
 
(6,591
)
 
 
 
 
 
 
 
 
 
Mortgage premiums and discounts, net
 
 
 
(1,439
)
 
(1,373
)
 
 
 
 
 
 
 
 
 
Mortgage notes payable, net
 
 
 
$
454,899

 
$
462,839

 
 
 
 
 
 
 
 
 
_____________
(1) Calculated on a weighted average basis for all mortgages outstanding as of March 31, 2019 and December 31, 2018.
(2) 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 New Credit Facility (as defined in Note 5 — Credit Facilities). The equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease the real estate assets comprising the borrowing base have been pledged for the benefit of the lenders thereunder (see Note 5 — Credit Facilities for additional details).
(3) 
Variable rate loan which is fixed as a result of entering into "pay-fixed" interest rate swap agreements (see Note 7 — Derivatives and Hedging Activities for additional details).
(4) 
Deferred financing costs represent commitment fees, legal fees and other costs associated with obtaining financing. These costs are amortized to interest expense over the terms of the respective financing agreements using the effective interest method. Unamortized deferred financing costs are generally expensed when the associated debt is refinanced or repaid before maturity. Costs incurred in seeking financial transactions that do not close are expensed in the period in which it is determined it is probable the financing will not close.
(5) 
Repaid and added to the borrowing base under the New Credit Facility (as defined herein) in April 2019 (see Note 17 — Subsequent Events for additional details).
(6) Based on 30-day LIBOR.
As of March 31, 2019, the Company had pledged $1.0 billion in total real estate investments, at cost, as collateral for its $462.4 million of gross 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 require compliance with certain property-level financial covenants, including debt service coverage ratios. As of March 31, 2019, the Company was in compliance with these financial covenants.




17
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)


Future Principal Payments
The following table summarizes the scheduled aggregate principal payments on mortgage notes payable for the five years subsequent to March 31, 2019 and thereafter:
(In thousands)
 
Future Principal
Payments
2019 (remainder)
 
$
37,949

2020
 
24,279

2021
 
892

2022
 
242,916

2023
 
6,056

Thereafter
 
150,298

Total
 
$
462,390

The Company plans to refinance or exercise extension options for the remaining mortgages due in 2019 prior to their maturity.

18
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Note 5 — Credit Facilities
The Company had the following credit facilities outstanding as of March 31, 2019 and December 31, 2018:
 
 
 
 
Outstanding Facility
Amount as of
 
Effective Interest Rate
 
 
 
 
Credit Facility
 
Encumbered Properties (1)
 
March 31,
2019
 
December 31, 2018
 
March 31,
2019
 
December 31, 2018
 
Interest Rate
 
Maturity
 
 
 
 
(In thousands)
 
(In thousands)
 
 
 
 
 
 
 
 
Prior Credit Facility
 
—
 
$
—

 
$
243,300

 
—
%
 
4.62
%
 
—
 
—
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
New Credit Facility:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revolving Credit Facility
 
 
 
$
83,618

 
$
—

 
4.61
%
 
—%
 
Variable
 
Mar. 2024
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Term Loan
 
 
 
$
150,000

 
$
—

 
4.56
%
 
—%
 
Variable
 
Mar. 2024
Deferred financing costs
 
 
 
(5,449
)
 
—

 
 
 
 
 
 
 
 
Term Loan, net
 
 
 
$
144,551

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total New Credit Facility
 
65
(2) 
$
228,169

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Fannie Mae Master Credit Facilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Capital One Facility
 
12
(3) 
$
216,614

 
$
216,614

 
4.99
%
 
4.83
%
 
Variable
(6) 
Nov. 2026
KeyBank Facility
 
10
(4) 
142,708

 
142,708

 
5.02
%
 
4.88
%
 
Variable
(6) 
Nov. 2026
Total Fannie Mae Master Credit Facilities
 
22
 
$
359,322

 
$
359,322

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Credit Facilities
 
87
 
$
587,491

 
$
602,622

 
4.84
%
(5) 
4.76
%
(5) 
 
 
 
_______________
(1) 
Encumbered properties are as of March 31, 2019.
(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 New 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, 2019 with a carrying value of $348.1 million.
(4) 
Secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of March 31, 2019 with a carrying value of $249.8 million.
(5) 
Calculated on a weighted average basis for all credit facilities outstanding as of March 31, 2019 and December 31, 2018.
(6) 
Variable rate loan which is capped as a result of entering into interest rate cap agreements (see Note 7 — Derivatives and Hedging Activities for additional details).
Credit Facility
On March 21, 2014, the Company entered into a senior secured revolving credit facility (as amended from time to time, the “Prior Credit Facility”). On March 13, 2019, the Company entered into a new senior secured credit facility (the ‘‘New Credit Facility’’) by amending and restating the Prior Credit Facility prior to its maturity on March 21, 2019. The total commitments under the New Credit Facility are $630.0 million and include an uncommitted “accordion feature” whereby, upon the Company's request, but at the sole discretion of the participating lenders, the commitments under the New Credit Facility may be increased by up to an additional $370.0 million up to a total of $1.0 billion.
The New Credit Facility consists of two components, the revolving credit facility (the "Revolving Credit Facility") and the loan (the "Term Loan"). The Revolving Credit Facility is interest-only and matures on March 13, 2023, subject to a one 1-year extension at the Company's option. The Term Loan is interest-only and matures on March 13, 2024. The Revolving Credit Facility has total commitments of up to $480.0 million, and the Term Loan has total commitments of up to $150.0 million (both excluding the accordion feature).
The amount available for borrowings under the New Credit Facility is based on the lesser of (1) 55% of the value (or in certain cases cost) of the pool of eligible unencumbered real estate assets comprising the borrowing base, and (2) a maximum amount

19
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

permitted to maintain a minimum debt service coverage ratio with respect to the borrowing base, in each case, as of the determination date.
Like the Prior Credit Facility, the New 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. After the closing of the New Credit Facility, the 65 properties that had comprised the borrowing base under the Prior Credit Facility comprised the borrowing base under the New Credit Facility.
The Company has the option to have amounts outstanding under the New Revolving Credit Facility bear interest at a rate per annum equal to 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 (as defined in the New Credit Facility), 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 New Credit Facility as the greatest of (a) the fluctuating annual rate of interest announced from time to time by the agent as its “prime rate”, (b) 0.5% above the Federal Funds Effective Rate or (c) the then applicable LIBOR for a one-month interest period plus 1.0% per annum.
The Company has the option to have amounts outstanding under the Term Loan bear interest at a rate per annum equal to either: (a) LIBOR, plus an applicable margin that ranges, depending on the Company's leverage, from 1.55% to 2.15%; or (b) the Base Rate (as defined in the paragraph above), plus an applicable margin that ranges, depending on our leverage, from 0.30% to 0.90%. On April 15, 2019, the Company entered into interest rate swaps on the Term Loan, resulting in a weighted average fixed rate of 2.3% plus applicable margin under the New Credit Facility (see Note 17 — Subsequent Events for additional details).
As of March 31, 2019, the Revolving Credit Facility and the Term Loan had an effective interest rate per annum equal to 4.61% and 4.56%, respectively.
The New Credit Facility contains customary representations, warranties, as well as affirmative and negative covenants. As of March 31, 2019, the Company was in compliance with the financial covenants under the New Credit Facility, and, as of the date of the closing thereunder, the Company was in compliance with the financial covenants under the Prior Credit Facility.
As of March 31, 2019, $150.0 million was outstanding under the Term Loan, while $83.6 million was outstanding under the Revolving Credit Facility and the unused borrowing capacity under the Revolving Credit Facility was $31.6 million. Availability of borrowings is based on a pool of eligible otherwise unencumbered real estate assets comprising the borrowing base thereunder. 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.
Pursuant to the New Credit Facility, until no later than January 1, 2020, the Company is not permitted to increase distributions the Company may pay to its stockholders. Once the Company is permitted to increase the distribution rate, provisions in the New Credit Facility will restrict the Company from paying distributions in any fiscal quarter that, when added to the aggregate amount of all other distributions paid in the same fiscal quarter and the preceding three fiscal quarters (calculated on an annualized basis during the first three fiscal quarters for which the provisions are in effect), exceed 95% of Modified FFO (as defined in the New Credit Facility and which is similar but not identical to MFFO as discussed in this Quarterly Report on Form 10-Q) during the applicable period. Until the Company becomes subject to these distribution restrictions, the Company will also become subject to a covenant requiring the Company to maintain a combination of cash, cash equivalents and availability for future borrowings under the New Credit Facility totaling at least $50.0 million, and the amount available for borrowings under our New Credit Facility based on the same borrowing base properties will be lower.
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 relating to a secured credit facility with KeyBank (the "KeyBank Facility") and a master credit facility agreement with Capital One for a secured credit facility with Capital One Multifamily Finance LLC, an affiliate of Capital One (the "Capital One Facility"; the Capital One Facility and the KeyBank Facility are referred to herein individually as a "Fannie Mae Master Credit Facility" and together as the "Fannie Mae Master Credit Facilities"). Advances made under these agreements are assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.
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 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 additional disclosure regarding the Company's derivatives).

20
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

The Company may request future advances under the Fannie Mae Master Credit Facilities by borrowing against the value of the initial mortgaged properties, 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 (see Note 4 — Mortgage Notes Payable, Net).
Note 6 — Fair Value of Financial Instruments
GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring assets and liabilities 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.
Derivative Instruments
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, 2019, 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.
Real Estate Investments - Held for Use
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, 2019. As of March 31, 2019, 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. 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. The Company primarily used a purchase and sale agreement to estimate the undiscounted cash flows expected to be generated for this one held for use property, which is an observable input. As a result, the impaired property that the Company evaluated using this approach is classified in Level 2 of the fair value hierarchy.

21
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Real Estate Investments - Held for Sale
The Company has impaired real estate investments held for sale, which are carried at fair value on a non-recurring basis on the consolidated balance sheets as of March 31, 2019 and December 31, 2018. Impaired real estate investments held for sale were valued using the sale price from the applicable purchase and sale agreement less costs to sell, which is an observable input. As a result, the Company’s impaired real estate investments held for sale are classified in Level 2 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, 2019 and December 31, 2018, 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, 2019
 
 
 
 
 
 
 
 
 
 
Derivative assets, at fair value
 
Recurring
 
$
—

 
$
2,171

 
$
—

 
$
2,171

Total
 
 
 
$
—

 
$
2,171

 
$
—

 
$
2,171

 
 
 
 
 
 
 
 
 
 
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
Derivative assets, at fair value
 
Recurring
 
$
—

 
$
4,633

 
$
—

 
$
4,633

Impaired real estate investments held for use
 
Non-recurring
 
—

 
—

 
3,341

 
3,341

Impaired real estate investments held for sale
 
Non-recurring
 
—

 
—

 
4,611

 
4,611

Total
 
 
 
$
—

 
$
4,633

 
$
7,952

 
$
12,585

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 three months ended March 31, 2019.
Financial Instruments Not Measured at Fair Value
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, 2019
 
December 31, 2018
(In thousands)
 
Level
 
Carrying
Amount (1)
 
Fair Value 
 
Carrying
Amount (1)
 
Fair Value 
Gross mortgage notes payable and mortgage premium and discounts, net
 
3
 
$
460,951

 
$
467,205

 
$
469,430

 
$
472,585

Revolving Credit Facility
 
3
 
$
83,618

 
$
82,450

 
$
243,300

 
$
243,300

Fannie Mae Master Credit Facilities
 
3
 
$
359,322

 
$
360,046

 
$
359,322

 
$
360,675

(1) Carrying value includes mortgage notes payable of $462.4 million and $470.8 million and mortgage premiums and (discounts), net of $1.4 million and $1.4 million as of March 31, 2019 and December 31, 2018, 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.

22
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(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 its 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, 2019 and December 31, 2018:
(In thousands)
 
Balance Sheet Location
 
March 31,
2019
 
December 31, 2018
Derivatives designated as hedging instruments:
 
 
 
 
 
 
    Interest rate "pay-fixed" swaps
 
Derivative assets, at fair value
 
$
2,163

 
$
4,582

Derivatives not designated as hedging instruments:
 
 
 
 
 
 
    Interest rate caps
 
Derivative assets, at fair value
 
$
7

 
$
51

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 2019 and 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 2019 and 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, if any, would be 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, 2019 through March 31, 2020, the Company estimates that $1.3 million will be reclassified from other comprehensive loss as a decrease to interest expense.
As of March 31, 2019 and December 31, 2018, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk:
 
 
March 31, 2019
 
December 31, 2018
Interest Rate Derivatives
 
Number of Instruments
 
Notional Amount
 
Number of Instruments
 
Notional Amount
 
 
 
 
(In thousands)
 
 
 
(In thousands)
Interest rate "pay-fixed" swaps
 
2

 
$
250,000

 
2

 
$
250,000


23
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

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 periods presented:
 
 
Three Months Ended March 31,
(In thousands)
 
2019
 
2018
Amount of (loss) gain recognized in accumulated other comprehensive income on interest rate derivatives (effective portion)
 
$
(2,028
)
 
$
3,790

Amount of gain (loss) reclassified from accumulated other comprehensive income into income as interest expense
 
$
391

 
$
(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 were gains of $43,000 and $0.2 million for the three months ended March 31, 2019 and 2018, respectively.
The Company had the following outstanding interest rate derivatives that were not designated as hedges in qualified hedging relationships as of March 31, 2019 and December 31, 2018:
 
 
March 31, 2019
 
December 31, 2018
Interest Rate Derivatives
 
Number of Instruments
 
Notional Amount
 
Number of Instruments
 
Notional Amount
 
 
 
 
(In thousands)
 
 
 
(In thousands)
Interest rate caps
 
7

 
$
359,322

 
7

 
$
359,322

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, 2019 and December 31, 2018. 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, 2019
 
$
2,171

 
$
—

 
$
—

 
$
2,171

 
$
—

 
$
—

 
$
2,171

December 31, 2018
 
$
4,633

 
$
—

 
$
—

 
$
4,633

 
$
—

 
$
—

 
$
4,633

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, 2019, there were no derivatives in a net liability position. As a result, there is no termination value associated with the settlement of the Company’s obligations under the agreement, and the Company has not posted any collateral related to the agreement.

24
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Note 8 — Common Stock
As of March 31, 2019 and December 31, 2018, the Company had 92.3 million and 92.0 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 share repurchases.
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 April 1, 2019, the independent directors of the Board, who comprise a majority of the Board, unanimously approved an updated estimate of per-share net asset value ("Estimated Per-Share NAV") as of December 31, 2018, which was published on April 3, 2019. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually.
Share Repurchase Program
Under the Company's share repurchase program (the "SRP"), as amended from time to time, qualifying 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 significant conditions and limitations. Repurchases of shares of the Company's common stock, when requested, are at the sole discretion of the Board.
Under the SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of the Company's common stock or received their shares from the Company (directly or indirectly) through one or more non-cash transactions are considered for repurchase. Additionally, pursuant to the SRP, the repurchase price per share equals 100% of the Estimated Per-Share NAV in effect on the last day of the fiscal semester, or the six-month period ending June 30 or December 31.
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. 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. During May 2018, in accordance with the terms of the Tender Offer, the Company accepted for purchase 229,999 shares for a total cost of approximately $3.0 million.
The Company suspended the SRP during the pendency of the Tender Offer. On June 29, 2018, the Company announced the Board unanimously determined to reactivate the SRP, effective June 30, 2018. In connection with reactivating the SRP, the Board approved all repurchase requests received during the period from January 1, 2018 through the suspension of the SRP on March 13, 2018 (see table below for additional details).
On January 29, 2019, the Company announced that the Board approved an amendment to the SRP changing the date on which any repurchases are to be made in respect of requests made during the period commencing March 13, 2018 up to and including December 31, 2018 to no later than March 31, 2019, rather than on or before the 31st day following December 31, 2018. This SRP amendment became effective on January 30, 2019. Additionally, on March 27, 2019, the Company announced that the Board approved an amendment to the SRP further extending the date on which any repurchases are to be made in respect of requests made during the period commencing March 13, 2018 up to and including December 31, 2018 to no later than April 30, 2019. This SRP amendment became effective on March 28, 2019. The Company completed the repurchases in April 2019 (see Note 17 — Subsequent Events).
When a stockholder requests redemption and redemption is approved by the Board, 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.

25
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

The table below reflects the number of shares repurchased cumulatively through March 31, 2019. There was no activity for the three months ended March 31, 2019.
 
 
Number of Shares Repurchased
 
Average Price per Share
Cumulative repurchases as of March 31, 2019(1) (2)
 
3,288,256

 
$
21.56

_______________
(1) 
Repurchases made in 2018 include: (i) 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, and (ii) 155,904 shares that were repurchased for $3.2 million at an average price per share of $20.25 on July 31, 2018, representing 100% of the repurchase requests made following the death or qualifying disability of stockholders during the period from January 1, 2018 through the suspension of the SRP on March 13, 2018. No repurchase requests received during the SRP suspension were accepted. No repurchases were made during the three months ended March 31, 2019.
(2)
Excludes 656,434 shares of common stock repurchased during April 2019 with respect to requests received during the period commencing March 13, 2018 up to and including December 31, 2018 for $13.3 million at an average price per share of $20.25, including all shares submitted for death or disability (see Note 17 — Subsequent Events).
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 all of the other shares of outstanding common stock. 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 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 three months ended March 31, 2019, the Company issued 0.3 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $7.0 million.
Note 9 — Related Party Transactions and Arrangements
As of March 31, 2019 and December 31, 2018, 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, 2019 and December 31, 2018, the Advisor held 90 partnership units in the OP designated as "OP Units" ("OP Units").
The limited partnership agreement of the OP allows for the special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to the Advisor, a limited partner of the OP.  In connection with this special allocation, the 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 and a restatement of the then-effective 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, amended and restated the previously effective advisory agreement (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, (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 Expense Reimbursements
The Second A&R Advisory Agreement does not provide for an acquisition fee, however the Advisor may 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.

26
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Asset Management Fees and Variable Management/Incentive Fees
Under the limited partnership agreement of the OP and the advisory agreement that was superseded by the Original A&R Advisory Agreement and until March 31, 2015, for its asset management services, the Company issued the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the Board) to the Advisor 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) another 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, 2019, the Company cannot determine the probability of achieving the Performance Condition. The Advisor receives cash distributions on each issued Class B Unit equal to the distribution rate received on the Company's common stock. These 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. The Board has previously approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. The Board determined in February 2018 that Economic Hurdle had been satisfied, however none of the events have occurred, including the Listing, which would have satisfied the other vesting requirement of the Class B Units. Therefore, no expense has ever been recognized in connection with the Class B Units.
On May 12, 2015, the Company, the OP and the Advisor entered into an amendment to the then-current 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 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.

27
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(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, or until February 17, 2019. The A&R Property Management Agreement automatically renews for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement at least 90 days prior to the end of the term. Neither party provided notice of intent to terminate. Thus, the current term of the A&R Property Management Agreement now expires February 17, 2020. 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.
On April 10, 2018, in connection with the Multi-Property CMBS Loan, the Company and the OP entered into a further amendment to the A&R Property Management Agreement confirming, consistent with the intent of the parties, that the borrowers under the Multi-Property CMBS Loan and other subsidiaries of the OP that own or lease the Company’s properties are the direct obligors under the arrangements pursuant to which the Company’s properties are managed by either the Property Manager or a third party overseen by the Property Manager pursuant to the A&R Property Management Agreement.
Professional Fees and Other Reimbursements
The Company reimburses the Advisor's costs of providing administrative services. The Company reimburses the Advisor for personnel costs, except for costs to the extent that the employees perform services for which the Advisor receives a separate fee. 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 three months ended March 31, 2019 and 2018, the Company incurred $2.7 million and $1.9 million, respectively, of reimbursement expenses from the Advisor for providing administrative services.

28
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

Summary of fees, expenses and related payables
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
 
 
 
2019
 
2018
 
March 31,
 
December 31,
 
(In thousands)
 
Incurred (1)
 
Incurred (1)
 
2019
 
2018
 
Non-recurring fees and reimbursements:
 
 
 
 
 
 
 
 
 
Acquisition cost reimbursements
 
$
18

 
$
60

 
$
—

 
$
32

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

 
—

 
—

 
(154
)
 
Ongoing fees and reimbursements:
 
 
 
 
 
 
 
 
 
Asset management fees
 
4,875

 
4,875

 
—

 
—

 
Property management fees
 
893

 
852

 
114

 
58

 
Professional fees and other reimbursements
 
2,875

 
2,046

 
508

(4) 
674

(4) 
Distributions on Class B Units (3)
 
75

 
110

 
—

 
—

 
Total related party operation fees and reimbursements
 
$
8,736

 
$
7,943

 
$
622

 
$
610

 
_______________
(1) 
There were no fees or reimbursements forgiven during the three months ended March 31, 2019 or 2018.
(2)
On December 22, 2017, the Company purchased substantially all the assets of American Realty Capital Healthcare Trust III, Inc. Certain proration estimates were included within the closing. The purchase agreement calls for a final purchase price adjustment. The Company had a $154,000 net receivable related to the Asset Purchase (as defined below) included on its consolidated balance sheet as of December 31, 2018. 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 March 31, 2019, the Board had approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. Effective April 1, 2015, 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 American National Stock Transfer, LLC, a subsidiary of RCS Capital Corporation ("RCAP") which were related parties of the Company.
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% 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 three months ended March 31, 2019 or 2018. 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.
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 three months ended March 31, 2019 or 2018. 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.

29
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

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 multiplied by the actual base management fee plus (ii) the product of four 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.
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, the OP and its subsidiary, ARHC TRS Holdco II, LLC, completed the Asset Purchase, purchasing all of the membership interests in indirect subsidiaries of HT III that own the 19 properties which comprised substantially all of HT III’s assets, pursuant to the Purchase Agreement, dated as of June 16, 2017. HT III was sponsored and advised by an affiliate of the Advisor. As of December 31, 2018 the Company had a $0.2 million net receivable to HT III included on its consolidated balance sheet.
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.

30
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

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 the amount of restricted shares outstanding as of March 31, 2019. There was no activity for the three months ended March 31, 2019.
 
 
Number of Shares of Common Stock
 
Weighted Average Issue Price
Unvested, March 31, 2019
 
322,242

 
$
21.41

As of March 31, 2019, the Company had $7.0 million of unrecognized compensation cost related to unvested restricted share awards granted under the RSP. That cost is expected to be recognized over a weighted-average period of 5.0 years. Compensation expense related to restricted shares was approximately $322,000 and $319,000 for the three months ended March 31, 2019 and 2018, 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, 2019 or 2018.

31
HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2019
(Unaudited)

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, 2018
 
$
4,582

Other comprehensive income, before reclassifications
 
(2,028
)
Amount of loss reclassified from accumulated other comprehensive income
 
(391
)
Balance, March 31, 2019
 
$
2,163

 
 
 
Interest expense for the three months ended March 31, 2019
 
$
(13,943
)
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, 2019 and December 31, 2018, the Advisor held 90 OP Units, which represents a nominal percentage of the aggregate ownership in the OP.
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 three months ended March 31, 2019 and 2018, OP Unit non-controlling interest holders were paid distributions of $0.1 million.
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.
The following table summariz