The Company invests in MOBs, seniors housing properties and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base. During the year ended December 31, 2019, the Company, through wholly-owned subsidiaries of the OP, completed its acquisitions of five multi-tenant MOBs, three single tenant MOBs and one SHOP for an aggregate contract purchase price of $86.3 million. In addition, the Company incurred an additional $5.7 million in capitalized costs, including capitalized interest, to its development project in Jupiter, Florida which described in more detail under “Development Project” in this Note. All acquisitions in 2019 and 2018 were considered asset acquisitions for accounting purposes. During 2017, prior to the adoption of ASU no. 2017-01, Business Combinations (Topic 805) (see Note 2 — Summary of Significant Accounting Policies - “Recent Accounting Pronouncements”), all acquisitions, including the HT III transaction described below, were accounted for as business combinations.



	Year Ended December 31,
(In thousands)	2019			2018			2017
Real estate investments, at cost:
Land	$	6,356		$	14,417		$	18,501
Buildings, fixtures and improvements	68,903			98,236			135,344
Development costs	5,721			8,591			11,952
Total tangible assets	80,980			121,244			165,797
Acquired intangibles:
In-place leases and other intangible assets ⁽¹⁾	11,777			6,823			21,546
Market lease and other intangible assets ⁽¹⁾	724			275			2,472
Market lease liabilities ⁽¹⁾	(1,483		)	(286		)	(888		)
Total intangible assets and liabilities	11,018			6,812			23,130
Mortgage notes payable, net	—			—			(4,897		)
Other liabilities assumed in the Asset Acquisition, net ⁽²⁾	—			—			(1,056		)
Cash paid for real estate investments, including acquisitions	$	91,998		$	128,056		$	182,974
Number of properties purchased	9			14			23

⁽²⁾ Includes liabilities of $0.8 million in accounts payable and accrued expenses, $0.5 million in non-controlling interests and $0.1 million in deferred rent and includes assets of $0.2 million in cash and $0.2 million in restricted cash related to the Company’s acquisition from American Realty Capital Healthcare Trust III, Inc. (“HT III”) of 19 properties comprising substantially all of HT III’s assets (the “Asset Purchase”), pursuant to a purchase agreement (the “Purchase Agreement”), dated as of June 16, 2017. HT III was sponsored and advised by an affiliate of the Advisor. See Note 9 — Related Party Transactions and Arrangements for additional information.

In August 2015, the Company entered into an asset purchase agreement and development agreement to acquire land and construction in progress, and subsequently fund the remaining construction, of a development property in Jupiter, Florida for $82.0 million. As of December 31, 2019, the Company had funded $97.8 million, including $10.0 million for the land and $87.8 million for construction in progress

The Company had been working for some time to obtain a certificate of occupancy for the facility (“CO”), which was ultimately obtained in December 2019. Historically, all construction costs, including capitalized interest, insurance and real estate taxes were capitalized and classified in construction is progress on the Company’s consolidated balance sheet. In December 2019, when the development reached substantial completion and the Company reclassified the entire amount in construction in progress.

Obtaining the CO was a necessary condition to leasing the property to any tenant other than a tenant associated with the developer of the property, which had been, and remains in, default under its agreements with the Company. The Company entered into a lease for 10% of the rentable square feet at the property, but the tenant is not required to pay the Company cash rent until May 2021. There can be no assurance as to the timing or terms of any additional leases or as to if and when the property may generate positive cash flow allowing the Company to earn a return on its investment in this property.

During the fourth quarter of 2019, in connection with the substantial completion of the development property, the Company began to evaluate it for a potential sale. As a result of this potential change in plans, the Company concluded this held for use asset was impaired and recognized an impairment charge to its respective operating real estate components (see Assets Held For Use and Related Impairments in this note for additional information).

As of December 31, 2019, 2018 and 2017, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income on a straight-line basis for the portfolio. 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 December 31, 2019, 2018 and 2017:



	December 31, 2019						December 31, 2018
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets:
In-place leases	$	229,300	$	156,428	$	72,872	$	214,953	$	144,669	$	70,284
Market lease assets ⁽¹⁾	13,616		9,501		4,115		30,910		9,970		20,940
Other intangible assets	26,700		1,144		25,556		10,589		1,103		9,486
Total acquired intangible assets	$	269,616	$	167,073	$	102,543	$	256,452	$	155,742	$	100,710
Intangible liabilities:
Market lease liabilities ⁽¹⁾	$	21,777	$	9,725	$	12,052	$	26,241	$	9,137	$	17,104



(In thousands)	2020			2021			2022			2023			2024
In-place lease assets	$	13,115		$	10,650		$	8,644		$	6,770		$	6,009
Other intangible assets	414			414			414			414			389
Total to be added to amortization expense	$	13,529		$	11,064		$	9,058		$	7,184		$	6,398

Above-market lease assets	$	(1,295	)	$	(933	)	$	(645	)	$	(307	)	$	(260	)
Below-market lease liabilities	1,488			1,269			1,208			1,095			955
Total to be added to revenue from tenants	$	193		$	336		$	563		$	788		$	695

On June 8, 2017, the Company’s TRS acquired 12 operating entities that leased 12 healthcare facilities previously included in the Company’s triple-net leased healthcare facilities segment. Concurrently with the acquisition of the 12 operating entities, the Company transitioned the management of the healthcare facilities to a third-party management company that manages other healthcare facilities in the Company’s SHOP segment. As a part of the transition, the Company’s subsidiary property companies

executed leases with the acquired operating entities and the acquired operating entities executed management agreements with the management company under a structure permitted by the REIT rules. As part of the transition of operations, the Company now controls the operating entities that hold the operating licenses for the healthcare facilities. The Company determined the transition of operations to be an asset acquisition and accounted for such transfer accordingly.

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 year ended December 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 originally 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 and subsequently, on September 25, 2018, the Company further amended the purchase and sale agreement to decrease the aggregate contract sale price to $58.8 million. The one remaining New York Six MOB was sold for a contract sales price of $13.6 million on August 22, 2019, resulting in a gain on sale of real estate investments of $2.9 million recorded in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019.

During the first quarter of 2019, the Company reconsidered the intended holding period for one of its SHOP properties located in Brookings, OR (“Ocean Park”) due to various market conditions and the potential to reinvest in properties generating a higher yield. On March 21, 2019, the Company entered into a purchase and sale agreement for the sale of Ocean Park, for an aggregate contract sale price of approximately $3.6 million. On April 1, 2019, the Company amended the purchase and sale agreement to decrease the aggregate contract sale price to $3.5 million. In connection with this amendment, the Company recognized an impairment charge of approximately $19,000 on Ocean Park during the second quarter of 2019, which is included on the consolidated statement of operations and comprehensive loss. On August 1, 2019, the Company closed its disposition of Ocean Park resulting in a loss on sale of real estate investments of $0.2 million recorded in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019.

On November 6, 2018, the Company entered into the final amendment to its January 2017 agreement (as amended to date, the “Amended Missouri SNF PSA”) to sell eight skilled nursing facility properties in Missouri (the “Missouri SNF Properties”) that were previously classified as held-for-sale, for an aggregate contract purchase price of $27.5 million. In connection with the Amended Missouri SNF PSA, the Company recognized an impairment charge of approximately $11.9 million on the Missouri SNF Properties in the third quarter of 2018 which is included on the consolidated statement of operations and comprehensive loss. The sale of these properties pursuant to the Amended Missouri SNF PSA, which occurred in the fourth quarter of 2018, resulted in a loss of $0.1 million for the year ended December 31, 2018, which is reflected within (loss) gain on sale of real estate investment in the consolidated statements of operations and comprehensive loss.



(In thousands)	Disposition Date	Contract Sale Price		Gain (Loss) on Sale, of Real Estate Investments
2019 Dispositions:
New York Six MOBs (1 property)	August 22, 2019	$	13,600	$	2,883
Ocean Park⁽¹⁾	August 1, 2019	3,600		(152		)
New York Six MOBs (5 properties)	February 6, 2019	45,000		6,059
Totals		$	62,200	$	8,790

2018 Dispositions:
Missouri SNF Properties⁽¹⁾	December 5, 2018	$	27,500	$	(70	)

2017 Dispositions:
Dental Arts Building - Peoria, AZ	May 16, 2017	$	825	$	438

When assets are identified by management as held for sale, the Company reflects them separately on its balance sheet and 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. For held-for-sale properties, the Company predominately used the contract sale price as fair market value.

The Company recognized an impairment charge of $22.6 million for the year ended December 31, 2019 related to assets held for sale, representing the amount by which the carrying amount of the Michigan SHOPs exceeds the Company’s estimate of the net sales price of the Michigan SHOPs. During the year ended December 31, 2018 the Company recorded $18.3 million related to assets held for sale for the eight Missouri SNF Properties which were sold in 2018 and one of the New York Six MOBs which was sold in 2019. There were no impairments related to assets held for sale during the year ended December 31, 2017.

The Company determined that the Michigan SHOPs should be classified as held for sale as of December 31, 2019. There can be no guarantee that the sale of these properties will close under the proposed terms, or at all. As of December 31, 2019, seven Michigan SHOPs were part of the borrowing base of the Credit Facility, four were mortgaged under the Fannie Mae Master Credit Facilities and three were unencumbered. There can be no assurance that the sale of the Michigan SHOPs will be completed under the terms of the PSA, or at all.

When circumstances indicate the carrying value of a property classified as held for use may not be recoverable, the Company reviews the property for impairment. For the Company, the most common 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. If a triggering event is identified, the Company considers the projected cash flows due to various performance indicators, and where appropriate, the Company evaluates the impact on its ability to recover the carrying value of the properties based on the expected cash flows on an undiscounted basis over its intended holding period. The Company makes 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 in estimating cash flows. 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. If the undiscounted cash flows over the expected hold period are less than the carrying value, the Company reflects an impairment charge to write the asset down to its fair value.

During the years ended December 31, 2019, 2018 and 2017, 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 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.

During 2019, the Company began to evaluate the properties in Lutz, Florida, Wellington, Florida and our recently completed development property in Jupiter, Florida for potential sales. As a result of these potential changes in plans, the Company concluded these held for use assets were impaired and recognized impairment charges in the aggregate of $33.3 million to reduce their carrying value to estimated fair value. The Company obtained third-party appraisals of all three properties (Lutz, Wellington, and Jupiter) which estimated fair value primarily applying an income approach using stabilized cash flows and capitalization rates of 9.0%, 9.0% and 7.0%, respectively.

During the year ended December 31, 2018, as a result of its consideration of impairment, the Company determined that the carrying value of one held for use property exceeded its estimated fair value and recognized an aggregate impairment charge of $2.4 million, and during the year ended December 31, 2017, the Company determined that the carrying value of six held for use properties exceeded their estimated fair value and recognized an aggregate impairment charge of $19.0 million.

On November 1, 2017, the Company, through wholly owned subsidiaries of the OP, entered into separate triple-net leases for seven skilled nursing facilities located in the state of Illinois. The operators under the new leases are affiliates of Aperion Care, Inc., an operator of over thirty skilled nursing, rehabilitation and long-term care facilities located in the states of Illinois, Indiana, and Missouri. Six of the seven skilled nursing facilities had previously been under the possession and control of a receiver pursuant to a consensual order appointing receiver issued by the United States District Court for the Northern District of Illinois, Eastern Division on November 1, 2016. On November 1, 2017, the Court ordered the termination of the receiver’s possession and control of the skilled nursing facilities and the transition of operations to the operators under the new leases. Each of the seven new leases have an initial term of ten years and are guaranteed by Aperion Care, Inc. and certain affiliated individuals and trusts.

In connection with the execution of the leases, the OP agreed to indemnify and hold harmless the tenants under the new leases with respect to all claims, demands, obligations, losses, liabilities, damages, recoveries, and deficiencies that such tenants may suffer as a result of the prior tenants’ failure to discharge certain tax liabilities or to pay certain assessments, recoupments, claims, fines or penalties accrued or payable with respect to the facilities that accrued between December 31, 2014 and October 31, 2017. The OP’s indemnity obligation is capped at $2.5 million and expires on the earlier of the date of termination of a lease or April 1, 2020.

The Company is currently in the process of replacing the LaSalle Tenant and transitioning four triple-net leased properties in Texas (collectively, the “LaSalle Tenant”) from the triple-net leased healthcare facilities segment to the SHOP segment, where they would be leased to one of the Company’s TRSs and operated and managed on the Company’s behalf by a third-party operator. 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 LaSalle Tenant, as long as the LaSalle Tenant paid the amounts due for rent and property taxes on an updated payment schedule pursuant to a forbearance agreement. As of December 31, 2019, the LaSalle Tenant remains in default of the forbearance agreement and owes the Company $8.2 million of rent, property taxes, late fees, and interest receivable thereunder.

The Company has the entire receivable balance, including any monetary damages, and related income from the LaSalle Tenant fully reserved as of December 31, 2019. The Company incurred $3.5 million and $5.0 million of bad debt expense, including straight-line rent write-offs, related to the LaSalle Tenant during the years ended December 31, 2019 and 2018, respectively, which is included in revenue from tenants in 2019 and in property operating and maintenance expense in 2018 on the consolidated statement of operations.

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 these properties and for recovery of damages for the various breaches by the LaSalle Tenant. Subsequently, 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 severed its claims against the LaSalle Guarantor from the action against the LaSalle Tenant. On August 27, 2019, the court awarded the Company monetary damages on its claims against the LaSalle Tenant in an amount equal to $7.7 million plus interest.

On October 30, 2019, the court entered into an order appointing a receiver. This receiver is empowered to replace the LaSalle Tenant with a new tenant and operator at the properties, and, on February15, 2020, the receiver took operational control of the properties. The Company is currently working with the receiver and the Company’s designated third-party operator in a manner that will allow the Company to transition the properties to its SHOP operating segment during 2020. By doing so, the Company will gain more control over the operations of the applicable properties, and the Company believes this will allow the Company to improve performance and the cash flows generated by the properties. There can be no assurance, however, that the Company will be able to complete this transition on a timely basis, or at all, and that completing this transition will result in the Company achieving its operational objectives.

The Company had tenants at two of its properties in Florida (collectively, the “NuVista Tenant”) that were in default under its leases beginning from July 2017 and collectively owe the Company $10.1 million of rent, property taxes, late fees, and interest receivable under its leases as of December 31, 2019. The Company had previously fully reserved for this receivable. During the fourth quarter of 2019, the Company wrote off the entire receivable and the associated reserve, which had no net impact on our

At one of the properties which was occupied by the NuVista Tenant, 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 third-party operator and the NuVista Tenant transitioned operations at the property to the Company’s designated third-party operator. The Company’s designated third-party operator received its license to operate the facility on April 1, 2019 and is in operational control of the property. On May 20, 2019, the court entered into a final order from the court terminating the existing lease with the NuVista Tenant. Following entry into the order, the Company signed a lease with a taxable REIT subsidiary (“TRS”) and engaged its designated third-party operator, to operate the property. This structure is permitted by the REIT rules, 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. During the year end December 31, 2019 the company received $1.6 million under the OTA for periods prior to the lease termination, which amounts had previously been fully reserved. This payment under the OTA is included in revenue from tenants in the consolidated statement of operations and comprehensive loss.

The properties in Lutz, Florida, and Wellington, Florida transitioned to the SHOP segment as of January 1, 2018 and April 1, 2019, respectively. In connection with these transitions, the Company replaced the NuVista Tenant as a tenant with TRSs, and engaged a third-party operator to operate the properties. This structure is permitted by the REIT rules, under which a REIT may lease qualified healthcare properties on an arm’s length basis to a TRS if the property is operated on behalf of such subsidiary by an entity who qualifies as an eligible independent contractor. During the third quarter of 2018, the new third-party operator at the property in Wellington, Florida obtained a Medicare license. Prior to the operator obtaining this Medicare license, we were unable to bill Medicare for services performed and accumulated receivables. We were able to bill and collect the majority of these receivables during the year ended December 31, 2018; however, $0.7 million of these receivables are not collectible. We have reserved for the uncollectible receivables, resulting in bad debt expense during the year ended December 31, 2018, which is included in property operating and maintenance expense on the consolidated statement of operations.

During 2019, the Company began to evaluate the properties in Lutz, Florida, Wellington, Florida and the recently completed development property in Jupiter, Florida for potential sales. As a result of these potential changes in plans, the Company concluded these held for use assets were impaired and recognized impairment charges in the aggregate of $33.3 million to reduce their carrying value to estimated fair value. See “Assets Held for Use and Related Impairments” in this note for additional information.