10-Q 1 gahr4-10xq2018xq2.htm 10-Q 2018 Q2 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 June 30, 2018
or
¨
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: 000-55775

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
(Exact name of registrant as specified in its charter)
Maryland
 
47-2887436
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
18191 Von Karman Avenue, Suite 300,
Irvine, California
 
92612
(Address of principal executive offices)
 
(Zip Code)

(949) 270-9200
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
___________________________________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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. x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    x  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
o
Accelerated filer
o
 
Non-accelerated filer
x
Smaller reporting company
o
 
 
 
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨  Yes   x  No
As of August 3, 2018, there were 53,715,262 shares of Class T common stock and 3,369,417 shares of Class I common stock of Griffin-American Healthcare REIT IV, Inc. outstanding.
 
 
 
 
 



GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
(A Maryland Corporation)
TABLE OF CONTENTS

 
Page
 
 
 
 
 


2


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of June 30, 2018 and December 31, 2017
(Unaudited)

 
June 30, 2018
 
December 31, 2017
ASSETS
Real estate investments, net
$
479,050,000

 
$
419,665,000

Cash and cash equivalents
26,788,000

 
7,087,000

Accounts and other receivables, net
5,921,000

 
2,838,000

Restricted cash
162,000

 
16,000

Real estate deposits
9,065,000

 
500,000

Identified intangible assets, net
45,702,000

 
44,821,000

Other assets, net
6,728,000

 
5,226,000

Total assets
$
573,416,000

 
$
480,153,000

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND STOCKHOLDERS’ EQUITY
Liabilities:
 
 
 
Mortgage loans payable, net(1)
$
17,085,000

 
$
11,567,000

Line of credit and term loan(1)
74,400,000

 
84,100,000

Accounts payable and accrued liabilities(1)
22,963,000

 
19,428,000

Accounts payable due to affiliates(1)
8,225,000

 
8,118,000

Identified intangible liabilities, net
1,572,000

 
1,737,000

Security deposits, prepaid rent and other liabilities(1)
1,754,000

 
977,000

Total liabilities
125,999,000

 
125,927,000

 
 
 
 
Commitments and contingencies (Note 9)

 

 
 
 
 
Redeemable noncontrolling interests (Note 10)
1,002,000

 
1,002,000

 
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding

 

Class T common stock, $0.01 par value per share; 900,000,000 shares authorized; 51,244,832 and 39,972,049 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
512,000

 
400,000

Class I common stock, $0.01 par value per share; 100,000,000 shares authorized; 3,198,597 and 2,235,111 shares issued and outstanding as of June 30, 2018 and December 31, 2017, respectively
32,000

 
22,000

Additional paid-in capital
486,789,000

 
376,284,000

Accumulated deficit
(40,918,000
)
 
(23,482,000
)
Total stockholders’ equity
446,415,000

 
353,224,000

Total liabilities, redeemable noncontrolling interests and stockholders’ equity
$
573,416,000

 
$
480,153,000

___________


3


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
As of June 30, 2018 and December 31, 2017
(Unaudited)


(1)
Such liabilities of Griffin-American Healthcare REIT IV, Inc. as of June 30, 2018 and December 31, 2017 represented liabilities of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries. Griffin-American Healthcare REIT IV Holdings, LP is a variable interest entity and a consolidated subsidiary of Griffin-American Healthcare REIT IV, Inc. The creditors of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries do not have recourse against Griffin-American Healthcare REIT IV, Inc., except for the Corporate Line of Credit, as defined in Note 7, held by Griffin-American Healthcare REIT IV Holdings, LP in the amount of $74,400,000 and $84,100,000 as of June 30, 2018 and December 31, 2017, respectively, which is guaranteed by Griffin-American Healthcare REIT IV, Inc.

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


4


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)

 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
2018
 
2017
Revenues:
 
 
 
 
 
 
 
Real estate revenue
$
10,584,000

 
$
6,198,000

 
$
20,017,000

 
$
10,250,000

Resident fees and services
8,426,000

 

 
16,835,000

 

Total revenues
19,010,000

 
6,198,000

 
36,852,000

 
10,250,000

Expenses:
 
 
 
 
 
 
 
Rental expenses
2,552,000

 
1,611,000

 
4,903,000

 
2,798,000

Property operating expenses
6,766,000

 

 
13,999,000

 

General and administrative
1,578,000

 
952,000

 
3,698,000

 
1,700,000

Acquisition related expenses
61,000

 
140,000

 
156,000

 
213,000

Depreciation and amortization
7,851,000

 
2,466,000

 
15,046,000

 
4,177,000

Total expenses
18,808,000


5,169,000

 
37,802,000

 
8,888,000

Other income (expense):
 
 
 
 
 
 
 
Interest expense (including amortization of deferred financing costs and debt discount/premium)
(1,160,000
)
 
(409,000
)
 
(2,244,000
)
 
(827,000
)
Interest income

 
1,000

 

 
1,000

Net (loss) income
(958,000
)
 
621,000

 
(3,194,000
)
 
536,000

Less: net loss attributable to redeemable noncontrolling interests
58,000

 

 
125,000

 

Net (loss) income attributable to controlling interest
$
(900,000
)
 
$
621,000

 
$
(3,069,000
)
 
$
536,000

Net (loss) income per Class T and Class I common share attributable to controlling interest — basic and diluted
$
(0.02
)
 
$
0.03

 
$
(0.06
)
 
$
0.03

Weighted average number of Class T and Class I common shares outstanding — basic and diluted
51,277,753

 
24,035,973

 
48,224,165

 
19,371,454

Distributions declared per Class T and Class I common share
$
0.15

 
$
0.15

 
$
0.30

 
$
0.30


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

5


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)

 
Class T and Class I Common Stock
 
 
 
 
 
 
 
 
Number
of Shares
 
Amount
 
Additional
Paid-In Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
BALANCE — December 31, 2017
42,207,160

 
$
422,000

 
$
376,284,000

 
$
(23,482,000
)
 
$
353,224,000

 
Issuance of common stock
11,530,618

 
115,000

 
114,855,000

 

 
114,970,000

 
Offering costs — common stock

 

 
(10,928,000
)
 

 
(10,928,000
)
 
Issuance of common stock under the DRIP
818,534

 
8,000

 
7,759,000

 

 
7,767,000

 
Issuance of vested and nonvested restricted common stock
7,500

 

 
15,000

 

 
15,000

 
Amortization of nonvested common stock compensation

 

 
60,000

 

 
60,000

 
Repurchase of common stock
(120,383
)
 
(1,000
)
 
(1,131,000
)
 

 
(1,132,000
)
 
Fair value adjustment to redeemable noncontrolling interests

 

 
(125,000
)
 

 
(125,000
)
 
Distributions declared

 

 

 
(14,367,000
)
 
(14,367,000
)
 
Net loss

 

 

 
(3,069,000
)
 
(3,069,000
)
(1)
BALANCE — June 30, 2018
54,443,429

 
$
544,000

 
$
486,789,000

 
$
(40,918,000
)
 
$
446,415,000

 

 
Class T and Class I Common Stock
 
 
 
 
 
 
 
 
Number
of Shares
 
Amount
 
Additional
Paid-In Capital
 
Accumulated
Deficit
 
Total
Stockholders’
Equity
 
BALANCE — December 31, 2016
11,377,439

 
$
114,000

 
$
99,492,000

 
$
(7,351,000
)
 
$
92,255,000

 
Issuance of common stock
16,978,248

 
169,000

 
168,724,000

 

 
168,893,000

 
Offering costs — common stock

 

 
(16,693,000
)
 

 
(16,693,000
)
 
Issuance of common stock under the DRIP
305,798

 
3,000

 
2,871,000

 

 
2,874,000

 
Issuance of vested and nonvested restricted common stock
7,500

 

 
15,000

 

 
15,000

 
Amortization of nonvested common stock compensation

 

 
24,000

 

 
24,000

 
Repurchase of common stock
(7,174
)
 

 
(69,000
)
 

 
(69,000
)
 
Distributions declared

 

 

 
(5,770,000
)
 
(5,770,000
)
 
Net income

 

 

 
536,000

 
536,000

 
BALANCE — June 30, 2017
28,661,811

 
$
286,000

 
$
254,364,000

 
$
(12,585,000
)
 
$
242,065,000

 
___________
(1)
Amount excludes $125,000 of net loss attributable to redeemable noncontrolling interests for the six months ended June 30, 2018. See Note 10, Redeemable Noncontrolling Interests, for a further discussion.

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

6


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)

 
Six Months Ended June 30,
 
2018
 
2017
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net (loss) income
$
(3,194,000
)
 
$
536,000

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
15,046,000

 
4,177,000

Other amortization (including deferred financing costs, above/below-market leases, leasehold interests, above-market leasehold interests and debt discount/premium)
389,000

 
157,000

Deferred rent
(1,336,000
)
 
(556,000
)
Stock based compensation
75,000

 
39,000

Share discounts

 
3,000

Bad debt expense, net
146,000

 
69,000

Changes in operating assets and liabilities:
 
 
 
Accounts and other receivables
(2,743,000
)
 
(103,000
)
Other assets
(122,000
)
 
(326,000
)
Accounts payable and accrued liabilities
1,388,000

 
963,000

Accounts payable due to affiliates
55,000

 
123,000

Security deposits, prepaid rent and other liabilities
(11,000
)
 
(109,000
)
Net cash provided by operating activities
9,693,000

 
4,973,000

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Acquisitions of real estate investments
(65,505,000
)
 
(199,164,000
)
Capital expenditures
(3,729,000
)
 
(33,000
)
Real estate deposits
(8,565,000
)
 
179,000

Pre-acquisition expenses
(137,000
)
 

Net cash used in investing activities
(77,936,000
)

(199,018,000
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Payments on mortgage loans payable
(200,000
)
 
(125,000
)
Borrowings under the line of credit and term loan
116,500,000

 
172,100,000

Payments on the line of credit and term loan
(126,200,000
)
 
(134,900,000
)
Deferred financing costs
(129,000
)
 
(164,000
)
Proceeds from issuance of common stock
114,461,000

 
169,003,000

Repurchase of common stock
(1,132,000
)
 
(69,000
)
Payment of offering costs
(9,118,000
)
 
(8,697,000
)
Security deposits
(16,000
)
 

Distributions paid
(6,076,000
)
 
(2,077,000
)
Net cash provided by financing activities
88,090,000

 
195,071,000

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
19,847,000

 
1,026,000

CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period
7,103,000

 
2,237,000

CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period
$
26,950,000

 
$
3,263,000

 
 
 
 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
 
 
Beginning of period:
 
 
 
Cash and cash equivalents
$
7,087,000

 
$
2,237,000

Restricted cash
16,000

 

Cash, cash equivalents and restricted cash
$
7,103,000

 
$
2,237,000

 
 
 
 
 
 
 
 

7


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
For the Six Months Ended June 30, 2018 and 2017
(Unaudited)

 
Six Months Ended June 30,
 
2018
 
2017
End of period:
 
 
 
Cash and cash equivalents
$
26,788,000

 
$
3,247,000

Restricted cash
162,000

 
16,000

Cash, cash equivalents and restricted cash
$
26,950,000

 
$
3,263,000

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
 
 
Cash paid for:
 
 
 
Interest
$
1,796,000

 
$
672,000

Income taxes
$
6,000

 
$
7,000

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
 
 
 
Investing Activities:
 
 
 
Accrued capital expenditures
$
697,000

 
$
719,000

Accrued pre-acquisition expenses
$
402,000

 
$

Tenant improvement overage
$
435,000

 
$

The following represents the increase in certain assets and liabilities in connection with our acquisitions of real estate investments:
 
 
 
Other assets
$
83,000

 
$
122,000

Mortgage loans payable, net
$
5,808,000

 
$
8,000,000

Accounts payable and accrued liabilities
$
230,000

 
$
743,000

Security deposits and prepaid rent
$
371,000

 
$
519,000

Financing Activities:
 
 
 
Issuance of common stock under the DRIP
$
7,767,000

 
$
2,874,000

Distributions declared but not paid
$
2,641,000

 
$
1,351,000

Accrued Contingent Advisor Payment
$
7,790,000

 
$
7,774,000

Accrued stockholder servicing fee
$
14,351,000

 
$
9,603,000

Accrued deferred financing costs
$
10,000

 
$
11,000

Receivable from transfer agent
$
957,000

 
$
906,000


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

8


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three and Six Months Ended June 30, 2018 and 2017
The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT IV, Inc. and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where the context otherwise requires.
1. Organization and Description of Business
Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, was incorporated on January 23, 2015 and therefore we consider that our date of inception. We were initially capitalized on February 6, 2015. We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, hospitals, skilled nursing facilities, senior housing and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). We may also originate and acquire secured loans and real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income. We qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.
On February 16, 2016, we commenced our initial public offering, or our offering, in which we were initially offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock at a price of $10.00 per share in our primary offering and up to $150,000,000 in shares of our Class T common stock for $9.50 per share pursuant to our distribution reinvestment plan, as amended, or the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of Class T common stock being offered and began offering shares of Class I common stock, such that we are currently offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in our primary offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP, aggregating up to $3,150,000,000 or the maximum offering amount.
The shares of our Class T common stock in our primary offering were being offered at a price of $10.00 per share prior to April 11, 2018. The shares of our Class I common stock in our primary offering were being offered at a price of $9.30 per share prior to March 1, 2017 and $9.21 per share from March 1, 2017 to April 10, 2018. The shares of our Class T and Class I common stock issued pursuant to the DRIP were sold at a price of $9.50 per share prior to January 1, 2017 and $9.40 per share from January 1, 2017 to April 10, 2018. On April 6, 2018, our board of directors, at the recommendation of the audit committee of our board of directors, comprised solely of independent directors, unanimously approved and established an estimated per share net asset value, or NAV, of our common stock of $9.65. As a result, on April 6, 2018, our board of directors unanimously approved revised offering prices for each class of shares of our common stock to be sold in the primary portion of our initial public offering based on the estimated per share NAV of our Class T and Class I common stock of $9.65 plus any applicable per share up-front selling commissions and dealer manager fees funded by us, effective April 11, 2018. Accordingly, the revised offering price for shares of our Class T common stock and Class I common stock sold pursuant to our primary offering on or after April 11, 2018 is $10.05 per share and $9.65 per share, respectively. Effective April 11, 2018, the shares of our Class T and Class I common stock issued pursuant to the DRIP are sold at a price of $9.65 per share, the most recent estimated per share NAV approved and established by our board of directors.
We will sell shares of our Class T and Class I common stock in our offering until the earlier of February 16, 2019 or the date on which the maximum offering amount has been sold. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the DRIP, and among classes of stock. As of June 30, 2018, we had received and accepted subscriptions in our offering for 52,749,116 aggregate shares of our Class T and Class I common stock, or approximately $525,121,000, excluding shares of our common stock issued pursuant to the DRIP.
We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. We are externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one-year term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 14, 2018 and expires on February 16, 2019. Our advisor uses its best efforts, subject to the oversight and review of our board of directors, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by American Healthcare Investors, LLC, or

9


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

American Healthcare Investors, and 25.0% owned by a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors. American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony Capital, Inc. (NYSE: CLNY), or Colony Capital, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony Capital or Mr. Flaherty; however, we are affiliated with Griffin-American Healthcare REIT IV Advisor, LLC, American Healthcare Investors and AHI Group Holdings.
We currently operate through four reportable business segments — medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. As of June 30, 2018, we had completed 22 property acquisitions whereby we owned 43 properties, comprising 45 buildings, or approximately 2,727,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $536,090,000.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership and the wholly owned subsidiaries of our operating partnership, as well as any variable interest entities, or VIEs, in which we are the primary beneficiary. We evaluate our ability to control an entity, and whether the entity is a VIE and of which we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance as defined in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810, Consolidation, or ASC Topic 810.
We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of our operating partnership, and as of June 30, 2018 and December 31, 2017, we owned greater than a 99.99% general partnership interest therein. Our advisor is a limited partner, and as of June 30, 2018 and December 31, 2017, owned less than a 0.01% noncontrolling limited partnership interest in our operating partnership.
Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our condensed consolidated financial statements. All intercompany accounts and transactions are eliminated in consolidation.
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the United States Securities and Exchange Commission, or SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results that may be expected for the full year; such full year results may be less favorable.
In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2017 Annual Report on Form 10-K, as filed with the SEC on March 8, 2018.

10


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Use of Estimates
The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.
Revenue Recognition and Tenant and Resident Receivables
In May 2014, the FASB issued Accounting Standards Update, or ASU, 2014-09, Revenue from Contracts with Customers, which has been codified to ASC Topic 606. ASC Topic 606 provides additional guidance to clarify the principles for recognizing revenue. The standard and subsequent amendments are intended to develop a common revenue standard to remove inconsistencies, improve comparability, provide more useful information to users through improved disclosure requirements and simplify the preparation of financial statements. We have evaluated all of our revenue streams to identify whether each revenue stream would be subject to the provisions of ASC Topic 606 and whether there are any differences in the timing, measurement or presentation of revenue recognition. Based on a review of our various revenue streams, certain components of resident fees and services, such as revenues that are ancillary to the contractual rights of residents within our senior housing facilities operated utilizing a RIDEA structure, are subject to ASC Topic 606. While these revenue streams are subject to the provisions of ASC Topic 606, we believe that the pattern and timing of recognition of income are consistent with the previous accounting model. Virtually all resident fees and services are earned over a period of time and the majority of these revenues are paid by private payor types with the residual being paid by Medicaid. We adopted ASC Topic 606 on January 1, 2018 using the modified retrospective adoption method and the adoption did not have a material impact on our consolidated financial statements. Included within resident fees and services for the three and six months ended June 30, 2018 was $234,000 and $420,000, respectively, of ancillary service revenue.
Segment Disclosure
ASC Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about a public entity’s reportable segments. We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. Accordingly, when we acquired our first medical office building in June 2016; senior housing facility in December 2016; senior housing — RIDEA facility in November 2017; and skilled nursing facility in March 2018, we added a new reportable segment at each such time. As of June 30, 2018, we have determined that we operate through four reportable business segments, with activities related to investing in medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities.
See Note 15, Segment Reporting, for a further discussion.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases, or ASU 2016-02, which amends the guidance on accounting for leases, including extensive amendments to the disclosure requirements. Under ASU 2016-02, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease; and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Under ASU 2016-02 from a lessor perspective, the guidance will require bifurcation of lease revenues into lease components and non-lease components and to separately recognize and disclose non-lease components that are executory in nature. Lease components will continue to be recognized on a straight-line basis over the lease term and certain non-lease components may be accounted for under the new revenue recognition guidance in ASC Topic 606. In addition, ASU 2016-02 provides a practical expedient that allows an entity to not reassess the following upon adoption (must be elected as a group): (i) whether an expired or existing contract contains a lease arrangement; (ii) the lease classification related to expired or existing lease arrangements; or (iii) whether costs incurred on expired or existing leases qualify as initial direct costs. We plan to elect this practical expedient.
In July 2018, the FASB issued ASU 2018-10, Codification Improvements to Topic 842, Leases, or ASU 2018-10, and ASU 2018-11, Leases (Topic 842) Targeted Improvements, or ASU 2018-11, which updates the guidance on accounting for leases under ASU 2016-02. ASU 2018-10 was issued to increase stockholders’ awareness of narrow aspects of the guidance issued in the amendments and to expedite the improvements under ASU 2016-02. ASU 2018-11 provides (a) an alternative

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

transition method by allowing entities to initially apply the new leases standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption, in addition to the modified retrospective transition method prescribed by ASU 2016-02, which requires application of the new leases standard at the beginning of the earliest period presented in the financial statements for comparative purposes; and (b) a practical expedient that permits lessors to not separate non-lease components from the associated lease component if certain conditions are met.
ASU 2016-02, ASU 2018-10 and ASU 2018-11 are effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted for financial statements that have not yet been made available for issuance. As a result of the adoption of the new leases standard on January 1, 2019, we: (i) will recognize all of our operating leases for which we are the lessee, including facilities leases and ground leases, on our consolidated balance sheets; and (ii) may be required to increase our revenue and expense for the amount of real estate taxes and insurance paid by our tenants under triple-net leases; however, we are still evaluating the complete impact of the adoption of the new leases standard and its related expedients, in addition to the transition method, on January 1, 2019 to our consolidated financial statements and disclosures.
In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted after December 15, 2018. We do not expect the adoption of ASU 2016-13 on January 1, 2020 to have a material impact on our consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income, or ASU 2018-02, which amends the reclassification requirements from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017, or the Tax Act. Under ASU 2018-02, an entity will be required to provide certain disclosures regarding stranded tax effects. ASU 2018-02 is effective for fiscal years and interim periods beginning after December 15, 2018. Early adoption is permitted. We do not expect the adoption of ASU 2018-02 on January 1, 2019 to have a material impact on our consolidated financial statements.
In March 2018, the FASB issued ASU 2018-05, Amendments to the SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118, or ASU 2018-05, which updates the income tax accounting in GAAP to reflect the SEC’s interpretive guidance with regards to the Tax Act. See Note 14, Income Taxes, for a further discussion.
3. Real Estate Investments, Net
Our real estate investments, net consisted of the following as of June 30, 2018 and December 31, 2017:
 
June 30,
2018
 
December 31,
2017
Building and improvements
$
430,086,000

 
$
371,890,000

Land
60,274,000

 
52,202,000

Furniture, fixtures and equipment
4,635,000

 
4,458,000

 
494,995,000

 
428,550,000

Less: accumulated depreciation
(15,945,000
)
 
(8,885,000
)
 
$
479,050,000

 
$
419,665,000

Depreciation expense for the three months ended June 30, 2018 and 2017 was $3,781,000 and $1,665,000, respectively. Depreciation expense for the six months ended June 30, 2018 and 2017 was $7,197,000 and $2,805,000, respectively. In addition to the property acquisitions discussed below, for the three and six months ended June 30, 2018, we incurred capital expenditures of $258,000 and $1,216,000, respectively, on our medical office buildings and $2,202,000 and $2,290,000, respectively, on our senior housing — RIDEA facilities. We did not incur any capital expenditures on our senior housing facilities and skilled nursing facilities for the three and six months ended June 30, 2018.
We reimburse our advisor or its affiliates for acquisition expenses related to selecting, evaluating and acquiring assets. The reimbursement of acquisition expenses, acquisition fees, total development costs and real estate commissions and other fees paid to unaffiliated third parties will not exceed, in the aggregate, 6.0% of the contract purchase price of our property acquisitions, unless fees in excess of such limits are approved by a majority of our directors, including a majority of our independent directors. These fees and expenses paid did not exceed 6.0% of the contract purchase price of our property

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

acquisitions, except with respect to our acquisitions of Athens MOB and Northern California Senior Housing Portfolio for the six months ended June 30, 2018, and Auburn MOB and Pottsville MOB for the six months ended June 30, 2017. Our directors, including a majority of our independent directors, not otherwise interested in the transactions, approved the reimbursement of fees and expenses to our advisor or its affiliates for such acquisitions that exceeded the 6.0% limit and determined that such fees and expenses were commercially fair and reasonable to us.
Acquisitions in 2018
For the six months ended June 30, 2018, using net proceeds from our offering and debt financing, we completed four property acquisitions comprising five buildings from unaffiliated third parties. The following is a summary of our property acquisitions for the six months ended June 30, 2018:
Acquisition(1)
 
Location
 
Type
 
Date
Acquired
 
Contract
Purchase
Price
 
Mortgage
Loan
Payable(2)
 
Corporate
Line of
Credit(3)
 
Total
Acquisition
Fee(4)
Central Wisconsin Senior Care Portfolio
 
Sun Prairie and Waunakee, WI
 
Skilled Nursing
 
03/01/18
 
$
22,600,000

 
$

 
$
22,600,000

 
$
1,018,000

Sauk Prairie MOB
 
Prairie du Sac, WI
 
Medical Office
 
04/09/18
 
19,500,000

 

 
19,500,000

 
878,000

Surprise MOB
 
Surprise, AZ
 
Medical Office
 
04/27/18
 
11,650,000

 

 
8,000,000

 
524,000

Southfield MOB
 
Southfield, MI
 
Medical Office
 
05/11/18
 
16,200,000

 
6,071,000

 
10,000,000

 
728,000

Total
 
 
 
 
 
 
 
$
69,950,000

 
$
6,071,000

 
$
60,100,000

 
$
3,148,000

___________
(1)
We own 100% of our properties acquired for the six months ended June 30, 2018.
(2)
Represents the principal balance of the mortgage loan payable assumed by us at the time of acquisition.
(3)
Represents a borrowing under the Corporate Line of Credit, as defined in Note 7, Line of Credit and Term Loan, at the time of acquisition.
(4)
Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of our properties, a base acquisition fee of 2.25% of the portion of the aggregate contract purchase price paid by us. In addition, the total acquisition fee includes a Contingent Advisor Payment, as defined in Note 12, Related Party Transactions, in the amount of 2.25% of the portion of the aggregate contract purchase price paid by us, which shall be paid by us to our advisor, subject to the satisfaction of certain conditions. See Note 12, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, for a further discussion.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

We accounted for the four property acquisitions we completed for the six months ended June 30, 2018 as asset acquisitions in accordance with FASB ASU 2017-01, Clarifying the Definition of a Business, or ASU 2017-01. We incurred base acquisition fees and direct acquisition related expenses of $2,073,000, which were capitalized in accordance with ASU 2017-01. In addition, we incurred Contingent Advisor Payments of $1,574,000 to our advisor for such property acquisitions. The following table summarizes the purchase price of the assets acquired and liabilities assumed at the time of acquisition from our four property acquisitions in 2018 based on their relative fair values:
 
 
2018
Acquisitions
Building and improvements
 
$
54,974,000

Land
 
8,068,000

In-place leases
 
8,750,000

Above-market leases
 
87,000

Total assets acquired
 
71,879,000

Mortgage loan payable (including debt discount of $263,000)
 
(5,808,000
)
Below-market leases
 
(42,000
)
Total liabilities assumed
 
(5,850,000
)
Net assets acquired
 
$
66,029,000

4. Identified Intangible Assets, Net
Identified intangible assets, net consisted of the following as of June 30, 2018 and December 31, 2017:
 
June 30,
2018
 
December 31,
2017
In-place leases, net of accumulated amortization of $12,973,000 and $5,832,000 as of June 30, 2018 and December 31, 2017, respectively (with a weighted average remaining life of 8.2 years and 7.3 years as of June 30, 2018 and December 31, 2017, respectively)
$
38,685,000

 
$
37,766,000

Leasehold interests, net of accumulated amortization of $168,000 and $119,000 as of June 30, 2018 and December 31, 2017, respectively (with a weighted average remaining life of 70.1 years and 70.6 years as of June 30, 2018 and December 31, 2017, respectively)
6,243,000

 
6,292,000

Above-market leases, net of accumulated amortization of $230,000 and $173,000 as of June 30, 2018 and December 31, 2017, respectively (with a weighted average remaining life of 5.1 years and 5.6 years as of June 30, 2018 and December 31, 2017, respectively)
774,000

 
763,000

 
$
45,702,000

 
$
44,821,000

Amortization expense on identified intangible assets for the three months ended June 30, 2018 and 2017 was $4,124,000 and $859,000, respectively, which included $39,000 and $33,000, respectively, of amortization recorded against real estate revenue for above-market leases and $25,000 of amortization recorded to rental expenses for leasehold interests in our accompanying condensed consolidated statements of operations.
Amortization expense on identified intangible assets for the six months ended June 30, 2018 and 2017 was $7,957,000 and $1,487,000, respectively, which included $77,000 and $66,000, respectively, of amortization recorded against real estate revenue for above-market leases and $49,000 of amortization recorded to rental expenses for leasehold interests in our accompanying condensed consolidated statements of operations.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The aggregate weighted average remaining life of the identified intangible assets was 16.6 years and 16.2 years as of June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018, estimated amortization expense on the identified intangible assets for the six months ending December 31, 2018 and for each of the next four years ending December 31 and thereafter was as follows:
Year
 
Amount
2018
 
$
6,577,000

2019
 
6,047,000

2020
 
4,985,000

2021
 
4,433,000

2022
 
3,583,000

Thereafter
 
20,077,000

 
 
$
45,702,000

5. Other Assets, Net
Other assets, net consisted of the following as of June 30, 2018 and December 31, 2017:
 
June 30,
2018
 
December 31,
2017
Deferred rent receivables
$
3,248,000

 
$
1,912,000

Prepaid expenses and deposits
1,902,000

 
1,532,000

Deferred financing costs, net of accumulated amortization of $991,000 and $554,000 as of June 30, 2018 and December 31, 2017, respectively(1)
1,032,000

 
1,456,000

Lease commissions, net of accumulated amortization of $21,000 and $9,000 as of June 30, 2018 and December 31, 2017, respectively
546,000

 
326,000

 
$
6,728,000

 
$
5,226,000

___________
(1)
In accordance with ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03, and ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, or ASU 2015-15, deferred financing costs, net only include costs related to the Corporate Line of Credit, as defined in Note 7, Line of Credit and Term Loan.
Amortization expense on deferred financing costs of the Corporate Line of Credit for the three months ended June 30, 2018 and 2017 was $219,000 and $90,000, respectively, and for the six months ended ended June 30, 2018 and 2017 was $437,000 and $177,000, respectively. Amortization expense on deferred financing costs of the Corporate Line of Credit is recorded to interest expense in our accompanying condensed consolidated statements of operations. Amortization expense on lease commissions for the three months ended June 30, 2018 and 2017 was $10,000 and $0, respectively, and for the six months ended June 30, 2018 and 2017 was $18,000 and $0, respectively.
6. Mortgage Loans Payable, Net
As of June 30, 2018 and December 31, 2017, mortgage loans payable were $17,505,000 ($17,085,000, including discount/premium and deferred financing costs, net) and $11,634,000 ($11,567,000, including premium and deferred financing costs, net), respectively. As of June 30, 2018, we had three fixed-rate mortgage loans with interest rates ranging from 3.75% to 5.25% per annum, maturity dates ranging from April 1, 2020 to August 1, 2029 and a weighted average effective interest rate of 4.51%. As of December 31, 2017, we had two fixed-rate mortgage loans with interest rates ranging from 4.77% to 5.25% per annum, maturity dates ranging from April 1, 2020 to August 1, 2029 and a weighted average effective interest rate of 4.92%.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The changes in the carrying amount of mortgage loans payable, net consisted of the following for the six months ended June 30, 2018 and 2017:
 
Six Months Ended June 30,
 
2018
 
2017
Beginning balance
$
11,567,000

 
$
3,965,000

Additions:
 
 
 
Assumptions of mortgage loans payable, net
5,808,000

 
8,000,000

Amortization of deferred financing costs(1)
33,000

 
8,000

Deductions:
 
 
 
Deferred financing costs(1)
(123,000
)
 
(151,000
)
Scheduled principal payments on mortgage loans payable
(200,000
)
 
(125,000
)
Amortization of discount/premium on mortgage loans payable

 
(6,000
)
Ending balance
$
17,085,000

 
$
11,691,000

___________
(1)
In accordance with ASU 2015-03 and ASU 2015-15, deferred financing costs only includes costs related to our mortgage loans payable.
As of June 30, 2018, the principal payments due on our mortgage loans payable for the six months ending December 31, 2018 and for each of the next four years ending December 31 and thereafter were as follows:
Year
 
Amount
2018
 
$
248,000

2019
 
519,000

2020
 
8,151,000

2021
 
434,000

2022
 
455,000

Thereafter
 
7,698,000

 
 
$
17,505,000

7. Line of Credit and Term Loan
On August 25, 2016, we, through our operating partnership, as borrower, and certain of our subsidiaries, or the subsidiary guarantors, and us, collectively as guarantors, entered into a credit agreement, or the Credit Agreement, with Bank of America, N.A., or Bank of America, as administrative agent, swing line lender and letters of credit issuer; and KeyBank, National Association, or KeyBank, as syndication agent and letters of credit issuer, to obtain a revolving line of credit with an aggregate maximum principal amount of $100,000,000, or the Line of Credit, subject to certain terms and conditions.
On August 25, 2016, we also entered into separate revolving notes, or the Revolving Notes, with each of Bank of America and KeyBank, whereby we promised to pay the principal amount of each revolving loan and accrued interest to the respective lender or its registered assigns, in accordance with the terms and conditions of the Credit Agreement. The proceeds of loans made under the Line of Credit may be used for general working capital (including acquisitions), capital expenditures and other general corporate purposes not inconsistent with obligations under the Credit Agreement. We may obtain up to $20,000,000 in the form of standby letters of credit and up to $25,000,000 in the form of swing line loans. The Line of Credit matures on August 25, 2019, and may be extended for one 12-month period during the term of the Credit Agreement subject to satisfaction of certain conditions, including payment of an extension fee.
On October 31, 2017, we entered into an amendment to the Credit Agreement, or the Amendment, with Bank of America, as administrative agent, and the subsidiary guarantors and lenders named therein. The material terms of the Amendment provide for: (i) a $50,000,000 increase in the Line of Credit from an aggregate principal amount of $100,000,000 to $150,000,000; (ii) a term loan with an aggregate maximum principal amount of $50,000,000, or the Term Loan Credit Facility, that matures on August 25, 2019, and may be extended for one 12-month period during the term of the Credit Agreement subject to satisfaction of certain conditions, including payment of an extension fee; (iii) our right, upon at least five

16


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

business days’ prior written notice to Bank of America, to increase the Line of Credit or Term Loan Credit Facility provided that the aggregate principal amount of all such increases and additions shall not exceed $300,000,000; (iv) a revision to the definition of Threshold Amount, as defined in the Credit Agreement, to reflect an increase in such amount for any Recourse Indebtedness, as defined in the Credit Agreement, to $20,000,000, and an increase in such amount for any Non-Recourse Indebtedness, as defined in the Credit Agreement, to $50,000,000; (v) the revision of certain Unencumbered Property Pool Criteria, as defined and set forth in the Credit Agreement; and (vi) an increase in the maximum Consolidated Secured Leverage Ratio, as defined in the Credit Agreement, to be equal to or less than 40.0%. As a result of the Amendment, our aggregate borrowing capacity under the Line of Credit and the Term Loan Credit Facility, or collectively, the Corporate Line of Credit, is $200,000,000.
At our option, the Corporate Line of Credit bears interest at per annum rates equal to (a) (i) the Eurodollar Rate (as defined in the Credit Agreement, as amended) plus (ii) a margin ranging from 1.75% to 2.25% based on our Consolidated Leverage Ratio (as defined in the Credit Agreement, as amended), or (b) (i) the greater of: (1) the prime rate publicly announced by Bank of America, (2) the Federal Funds Rate (as defined in the Credit Agreement, as amended) plus 0.50%, (3) the one-month Eurodollar Rate plus 1.00%, and (4) 0.00%, plus (ii) a margin ranging from 0.55% to 1.05% based on our Consolidated Leverage Ratio. Accrued interest on the Corporate Line of Credit is payable monthly. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions.
We are required to pay a fee on the unused portion of the lenders’ commitments under the Credit Agreement, as amended, at a per annum rate equal to 0.20% if the average daily used amount is greater than 50.0% of the commitments and 0.25% if the average daily used amount is less than or equal to 50.0% of the commitments, which fee shall be measured and payable on a quarterly basis.
The Credit Agreement, as amended, contains various affirmative and negative covenants that are customary for credit facilities and transactions of this type, including limitations on the incurrence of debt by our operating partnership and its subsidiaries. The Credit Agreement, as amended, also imposes certain financial covenants based on the following criteria, which are specifically defined in the Credit Agreement, as amended: (a) Consolidated Leverage Ratio; (b) Consolidated Secured Leverage Ratio; (c) Consolidated Tangible Net Worth; (d) Consolidated Fixed Charge Coverage Ratio; (e) Unencumbered Indebtedness Yield; (f) Consolidated Unencumbered Leverage Ratio; (g) Consolidated Unencumbered Interest Coverage Ratio; (h) Secured Recourse Indebtedness; and (i) Consolidated Unsecured Indebtedness.
The Credit Agreement, as amended, permits us to add additional subsidiaries as guarantors. In the event of default, Bank of America has the right to terminate its obligations under the Credit Agreement, as amended, including the funding of future loans, and to accelerate the payment on any unpaid principal amount of all outstanding loans and interest thereon. Additionally, in connection with the Credit Agreement, as amended, we also entered into a Pledge Agreement on August 25, 2016, pursuant to which we pledged the capital stock of our subsidiaries which own the real property to be included in the Unencumbered Property Pool, as such term is defined in the Credit Agreement, as amended. The pledged collateral will be released upon achieving a consolidated total asset value of at least $750,000,000.
As of June 30, 2018 and December 31, 2017, our aggregate borrowing capacity under the Corporate Line of Credit was $200,000,000. As of June 30, 2018 and December 31, 2017, borrowings outstanding totaled $74,400,000 and $84,100,000, respectively, and the weighted average interest rate on such borrowings outstanding was 3.82% and 3.45% per annum, respectively.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

8. Identified Intangible Liabilities, Net
Identified intangible liabilities, net consisted of the following as of June 30, 2018 and December 31, 2017:
 
June 30,
2018
 
December 31,
2017
Below-market leases, net of accumulated amortization of $509,000 and $345,000 as of June 30, 2018 and December 31, 2017, respectively (with a weighted average remaining life of 6.1 years and 6.4 years as of June 30, 2018 and December 31, 2017, respectively)
$
1,187,000

 
$
1,349,000

Above-market leasehold interests, net of accumulated amortization of $10,000 and $6,000 as of June 30, 2018 and December 31, 2017, respectively (with a weighted average remaining life of 51.7 years and 52.2 years as of June 30, 2018 and December 31, 2017, respectively)
385,000

 
388,000

 
$
1,572,000

 
$
1,737,000

Amortization expense on identified intangible liabilities for the three months ended June 30, 2018 and 2017 was $122,000 and $69,000, respectively, which included $120,000 and $68,000, respectively, of amortization recorded to real estate revenue for below-market leases and $2,000 and $1,000, respectively, of amortization recorded against rental expenses for above-market leasehold interests in our accompanying condensed consolidated statements of operations.
Amortization expense on identified intangible liabilities for the six months ended June 30, 2018 and 2017 was $207,000 and $137,000, respectively, which included $203,000 and $135,000, respectively, of amortization recorded to real estate revenue for below-market leases and $4,000 and $2,000, respectively, of amortization recorded to rental expenses for above-market leasehold interests in our accompanying condensed consolidated statements of operations.
The aggregate weighted average remaining life of the identified intangible liabilities was 17.3 years and 16.7 years as of June 30, 2018 and December 31, 2017, respectively. As of June 30, 2018, estimated amortization expense on identified intangible liabilities for the six months ending December 31, 2018 and for each of the next four years ending December 31 and thereafter was as follows:
Year
 
Amount
2018
 
$
173,000

2019
 
318,000

2020
 
154,000

2021
 
129,000

2022
 
120,000

Thereafter
 
678,000

 
 
$
1,572,000

9. Commitments and Contingencies
Litigation
We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Environmental Matters
We follow a policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, which include calls/puts to sell/acquire properties. In our view, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.
10. Redeemable Noncontrolling Interests
On February 6, 2015, our advisor made an initial capital contribution of $2,000 to our operating partnership in exchange for Class T partnership units. Upon the effectiveness of the Advisory Agreement on February 16, 2016, Griffin-American Healthcare REIT IV Advisor, LLC became our advisor. As of June 30, 2018 and December 31, 2017, our advisor owned all of our 208 Class T partnership units outstanding. As of June 30, 2018 and December 31, 2017, we owned greater than a 99.99% general partnership interest in our operating partnership, and our advisor owned less than a 0.01% limited partnership interest in our operating partnership. As our advisor, Griffin-American Healthcare REIT IV Advisor, LLC is entitled to redemption rights of its limited partnership units. The noncontrolling interest of our advisor in our operating partnership, which has redemption features outside of our control, is accounted for as a redeemable noncontrolling interest and is presented outside of permanent equity in our accompanying condensed consolidated balance sheets. See Note 12, Related Party Transactions — Liquidity Stage — Subordinated Participation Interest — Subordinated Distribution Upon Listing, and Note 12, Related Party Transactions — Subordinated Distribution Upon Termination, for a further discussion of the redemption features of the limited partnership units.
On November 1, 2017, we completed the acquisition of Central Florida Senior Housing Portfolio pursuant to a joint venture with an affiliate of Meridian Senior Living, LLC, or Meridian, an unaffiliated third party. Our ownership of the joint venture is approximately 98%. The noncontrolling interest held by Meridian has redemption features outside of our control and is accounted for as redeemable noncontrolling interest in our accompanying condensed consolidated balance sheets. In addition, Meridian will be entitled to an incentive fee, subject to the satisfaction of certain terms and conditions set forth in the joint venture agreement.
We record the carrying amount of redeemable noncontrolling interests at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions; or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interests consisted of the following for the six months ended June 30, 2018 and 2017:
 
 
Six Months Ended June 30,
 
 
2018
 
2017
Beginning balance
 
$
1,002,000

 
$
2,000

Net loss attributable to redeemable noncontrolling interests
 
(125,000
)
 

Fair value adjustment to redemption value
 
125,000

 

Ending balance
 
$
1,002,000

 
$
2,000

11. Equity
Preferred Stock
Our charter authorizes us to issue 200,000,000 shares of our preferred stock, par value $0.01 per share. As of June 30, 2018 and December 31, 2017, no shares of our preferred stock were issued and outstanding.
Common Stock
Our charter authorizes us to issue 1,000,000,000 shares of our common stock, par value $0.01 per share. We commenced our public offering of shares of our common stock on February 16, 2016, and as of such date we were initially offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock in our primary offering and up to $150,000,000 in shares of our Class T common stock pursuant to the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of our Class T common stock being offered and began offering shares of our Class I common stock, such that we are currently offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in our primary offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP. Subsequent to the reallocation, of the 1,000,000,000 shares of common stock authorized, 900,000,000 shares are classified as Class T common stock and 100,000,000

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shares are classified as Class I common stock. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the DRIP, and among classes of stock.
Each share of our common stock, regardless of class, will be entitled to one vote per share on matters presented to the common stockholders for approval; provided, however, that stockholders of one share class shall have exclusive voting rights on any amendment to our charter that would alter only the contract rights of that share class, and no stockholders of another share class shall be entitled to vote thereon.
On February 6, 2015, our advisor acquired shares of our Class T common stock for total cash consideration of $200,000 and was admitted as our initial stockholder. We used the proceeds from the sale of shares of our Class T common stock to our advisor to make an initial capital contribution to our operating partnership. As of June 30, 2018 and December 31, 2017, our advisor owned 20,833 shares of our Class T common stock.
Through June 30, 2018, we had issued 52,749,116 aggregate shares of our Class T and Class I common stock in connection with the primary portion of our offering and 1,826,609 aggregate shares of our Class T and Class I common stock pursuant to the DRIP. We also granted an aggregate of 45,000 shares of our restricted Class T common stock to our independent directors and repurchased 198,129 shares of our common stock under our share repurchase plan through June 30, 2018. As of June 30, 2018 and December 31, 2017, we had 54,443,429 and 42,207,160 aggregate shares of our Class T and Class I common stock, respectively, issued and outstanding.
As of June 30, 2018, we had a receivable of $957,000 for offering proceeds, net of selling commissions and dealer manager fees, from our transfer agent, which was received in July 2018.
Distribution Reinvestment Plan
We have registered and reserved $150,000,000 in shares of our common stock for sale pursuant to the DRIP in our offering. The DRIP allows stockholders to purchase additional Class T shares and Class I shares of our common stock through the reinvestment of distributions during our offering. Pursuant to the DRIP, distributions with respect to Class T shares are reinvested in Class T shares and distributions with respect to Class I shares are reinvested in Class I shares.
For the three and six months ended June 30, 2018, $4,161,000 and $7,767,000, respectively, in distributions were reinvested and 434,778 and 818,534 shares of our common stock, respectively, were issued pursuant to the DRIP. For the three and six months ended June 30, 2017, $1,811,000 and $2,874,000, respectively, in distributions were reinvested and 192,651 and 305,798 shares of our common stock, respectively, were issued pursuant to the DRIP. As of June 30, 2018 and December 31, 2017, a total of $17,252,000 and $9,485,000, respectively, in distributions were reinvested that resulted in 1,826,609 and 1,008,075 shares of our common stock, respectively, being issued pursuant to the DRIP.
Share Repurchase Plan
In February 2016, our board of directors approved a share repurchase plan. The share repurchase plan allows for repurchases of shares of our common stock by us when certain criteria are met. Share repurchases will be made at the sole discretion of our board of directors. Subject to the availability of the funds for share repurchases, we will limit the number of shares of our common stock repurchased during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year; provided, however, that shares subject to a repurchase requested upon the death of a stockholder will not be subject to this cap. Funds for the repurchase of shares of our common stock will come exclusively from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to the DRIP.
All repurchases of our shares of common stock are subject to a one-year holding period, except for repurchases made in connection with a stockholder’s death or “qualifying disability,” as defined in our share repurchase plan. Further, all share repurchases are repurchased following a one-year holding period at a price between 92.5% to 100% of each stockholder’s repurchase amount depending on the period of time their shares have been held. During our offering, the repurchase amount for shares repurchased under our share repurchase plan shall be equal to the lesser of (i) the amount per share that a stockholder paid for their shares of our common stock, or (ii) the per share offering price in our offering. If we are no longer engaged in an offering, the repurchase amount for shares repurchased under our share repurchase plan will be determined by our board of directors. However, if shares of our common stock are repurchased in connection with a stockholder’s death or qualifying disability, the repurchase price will be no less than 100% of the price paid to acquire the shares of our common stock from us. Furthermore, our share repurchase plan provides that if there are insufficient funds to honor all repurchase requests, pending requests will be honored among all requests for repurchase in any given repurchase period, as follows: first, pro rata as to

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repurchases sought upon a stockholder’s death; next, pro rata as to repurchases sought by stockholders with a qualifying disability; and, finally, pro rata as to other repurchase requests.
For the three and six months ended June 30, 2018, we received share repurchase requests and repurchased 79,195 and 120,383 shares of our common stock, respectively, for an aggregate of $735,000 and $1,132,000, respectively, at an average repurchase price of $9.28 and $9.40 per share, respectively. For the three and six months ended June 30, 2017, we received share repurchase requests and repurchased 7,174 shares of our common stock for an aggregate of $69,000 at an average repurchase price of $9.66 per share.
As of June 30, 2018 and December 31, 2017, we received share repurchase requests and repurchased 198,129 and 77,746 shares of our common stock, respectively, for an aggregate of $1,867,000 and $735,000, respectively, at an average repurchase price of $9.42 and $9.45 per share, respectively. All shares were repurchased using proceeds we received from the sale of shares of our common stock pursuant to the DRIP.
2015 Incentive Plan
In February 2016, we adopted our incentive plan, pursuant to which our board of directors or a committee of our independent directors may make grants of options, shares of our restricted common stock, stock purchase rights, stock appreciation rights or other awards to our independent directors, employees and consultants. The maximum number of shares of our common stock that may be issued pursuant to our incentive plan is 4,000,000 shares. As of June 30, 2018, we have granted 45,000 shares of our restricted Class T common stock at a weighted average grant date fair value of $10.01 per share, to our independent directors in connection with their election or re-election to our board of directors, or in consideration for their past services rendered. Such shares vested 20.0% immediately on the grant date and 20.0% will vest on each of the first four anniversaries of the grant date. For the three and six months ended June 30, 2018, we recognized stock compensation expense of $45,000 and $75,000, respectively, and for the three and six months ended June 30, 2017, we recognized stock compensation expense of $25,000 and $39,000, respectively, which is included in general and administrative in our accompanying condensed consolidated statements of operations.
Offering Costs
Selling Commissions
Generally, we pay our dealer manager selling commissions of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our primary offering. To the extent that selling commissions are less than 3.0% of the gross offering proceeds for any Class T shares sold, such reduction in selling commissions will be accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No selling commissions are payable on Class I shares or shares of our common stock sold pursuant to the DRIP. Our dealer manager may re-allow all or a portion of these fees to participating broker-dealers. For the three and six months ended June 30, 2018, we incurred $1,679,000 and $3,141,000, respectively, and for the three and six months ended June 30, 2017, we incurred $2,634,000 and $4,704,000, respectively, in selling commissions to our dealer manager. Such commissions were charged to stockholders’ equity as such amounts were paid to our dealer manager from the gross proceeds of our offering.
Dealer Manager Fee
With respect to shares of our Class T common stock, our dealer manager generally receives a dealer manager fee of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds is funded by us and up to an amount equal to 2.0% of the gross offering proceeds is funded by our advisor. With respect to shares of our Class I common stock, prior to March 1, 2017, our dealer manager generally received a dealer manager fee up to 3.0% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds was funded by us and an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. Effective March 1, 2017, our dealer manager generally receives a dealer manager fee up to an amount equal to 1.5% of the gross offering proceeds from the sale of Class I shares pursuant to our primary offering, all of which is funded by our advisor. Our advisor intends to recoup the portion of the dealer manager fee it funds through the receipt of the Contingent Advisor Payment from us, as described below, through the payment of acquisition fees. Our dealer manager may enter into participating dealer agreements with participating dealers that provide for a reduction or waiver of dealer manager fees. To the extent that the dealer manager fee is less than 3.0% of the gross offering proceeds for any Class T shares sold and less than 1.5% of the gross offering proceeds for any Class I shares sold, such reduction will be applied first to the portion of the dealer manager fee funded by our advisor. To the extent that any reduction in dealer manager fee exceeds the portion of the dealer manager fee funded by our advisor, such excess reduction will be

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No dealer manager fee is payable on shares of our common stock sold pursuant to the DRIP. Our dealer manager may re-allow all or a portion of these fees to participating broker-dealers.
For the three and six months ended June 30, 2018, we incurred $568,000 and $1,061,000, respectively, and for the three and six months ended June 30, 2017, we incurred $889,000 and $1,622,000, respectively, in dealer manager fees to our dealer manager. Such fees were charged to stockholders’ equity as such amounts were paid to our dealer manager or its affiliates from the gross proceeds of our offering. See Note 12, Related Party Transactions — Offering Stage — Dealer Manager Fee, for a further discussion of the dealer manager fee funded by our advisor.
Stockholder Servicing Fee
We pay our dealer manager a quarterly stockholder servicing fee with respect to our Class T shares sold as additional compensation to the dealer manager and participating broker-dealers. No stockholder servicing fee shall be paid with respect to Class I shares or shares of our common stock sold pursuant to the DRIP. The stockholder servicing fee accrues daily in an amount equal to 1/365th of 1.0% of the purchase price per share of our Class T shares sold in our primary offering and, in the aggregate will not exceed an amount equal to 4.0% of the gross proceeds from the sale of Class T shares in our primary offering. We will cease paying the stockholder servicing fee with respect to our Class T shares sold in our offering upon the occurrence of certain defined events. Our dealer manager may re-allow to participating broker-dealers all or a portion of the stockholder servicing fee for services that such participating broker-dealers perform in connection with the shares of our Class T common stock. By agreement with participating broker-dealers, such stockholder servicing fee may be reduced or limited.
For the three and six months ended June 30, 2018, we incurred $1,918,000 and $3,618,000, respectively, and for the three and six months ended June 30, 2017, we incurred $3,384,000 and $6,138,000, respectively, in stockholder servicing fees to our dealer manager. As of June 30, 2018 and December 31, 2017, we accrued $14,351,000 and $12,611,000, respectively, in connection with the stockholder servicing fee payable, which is included in accounts payable and accrued liabilities with a corresponding offset to stockholders’ equity in our accompanying condensed consolidated balance sheets.
12. Related Party Transactions
Fees and Expenses Paid to Affiliates
All of our executive officers and one of our non-independent directors are also executive officers and employees and/or holders of a direct or indirect interest in our advisor, one of our co-sponsors or other affiliated entities. We are affiliated with our advisor, American Healthcare Investors and AHI Group Holdings; however, we are not affiliated with Griffin Capital, our dealer manager, Colony Capital or Mr. Flaherty. We entered into the Advisory Agreement, which entitles our advisor and its affiliates to specified compensation for certain services, as well as reimbursement of certain expenses. Our board of directors, including a majority of our independent directors, has reviewed the material transactions between our affiliates and us during the six months ended June 30, 2018 and 2017. Set forth below is a description of the transactions with affiliates. We believe that we have executed all of the transactions set forth below on terms that are fair and reasonable to us and on terms no less favorable to us than those available from unaffiliated third parties. For the three months ended June 30, 2018 and 2017, we incurred $4,154,000 and $5,688,000, respectively, and for the six months ended June 30, 2018 and 2017, we incurred $7,129,000 and $9,777,000, respectively, in fees and expenses to our affiliates as detailed below.
Offering Stage
Dealer Manager Fee
With respect to shares of our Class T common stock, our dealer manager generally receives a dealer manager fee of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds is funded by us and up to an amount equal to 2.0% of the gross offering proceeds is funded by our advisor. With respect to shares of our Class I common stock, prior to March 1, 2017, our dealer manager generally received a dealer manager fee up to 3.0% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds was funded by us and an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. Effective March 1, 2017, our dealer manager generally receives a dealer manager fee up to an amount equal to 1.5% of the gross offering proceeds from the sale of Class I shares pursuant to our primary offering, all of which is funded by our advisor. Our dealer manager may enter into participating dealer agreements with participating dealers that provide for a reduction or waiver of dealer manager fees. To the extent that the dealer manager fee is less than 3.0% of the gross offering proceeds for any Class T shares sold and less than 1.5% of the gross offering

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

proceeds for any Class I shares sold, such reduction will be applied first to the portion of the dealer manager fee funded by our advisor. To the extent that any reduction in dealer manager fee exceeds the portion of the dealer manager fee funded by our advisor, such excess reduction will be accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No dealer manager fee is payable on shares of our common stock sold pursuant to the DRIP. Our advisor intends to recoup the portion of the dealer manager fee it funds through the receipt of the Contingent Advisor Payment from us, as described below, through the payment of acquisition fees.
For the three months ended June 30, 2018 and 2017, we incurred $1,189,000 and $1,841,000, respectively, and for the six months ended June 30, 2018 and 2017, we incurred $2,200,000 and $3,337,000, respectively, payable to our advisor as part of the Contingent Advisor Payment in connection with the dealer manager fee that our advisor had incurred. Such fee was charged to stockholders’ equity as incurred with a corresponding offset to accounts payable due to affiliates in our accompanying condensed consolidated balance sheets. See Note 11, Equity — Offering Costs — Dealer Manager Fee, for a further discussion of the dealer manager fee funded by us.
Other Organizational and Offering Expenses
Our other organizational and offering expenses in connection with our offering (other than selling commissions, the dealer manager fee and the stockholder servicing fee) are funded by our advisor. Our advisor intends to recoup such expenses it funds through the receipt of the Contingent Advisor Payment from us, as described below, through the payment of acquisition fees. We anticipate that our other organizational and offering expenses will not exceed 1.0% of the gross offering proceeds for shares of our common stock sold pursuant to our primary offering. No other organizational and offering expenses will be paid with respect to shares of our common stock sold pursuant to the DRIP.
For the three months ended June 30, 2018 and 2017, we incurred $581,000 and $336,000, respectively, and for the six months ended June 30, 2018 and 2017, we incurred $908,000 and $892,000, respectively, payable to our advisor as part of the Contingent Advisor Payment in connection with the other organizational and offering expenses that our advisor had incurred. Such expenses were charged to stockholders’ equity as incurred with a corresponding offset to accounts payable due to affiliates in our accompanying condensed consolidated balance sheets.
Acquisition and Development Stage
Acquisition Fee
We pay our advisor an acquisition fee of up to 4.50% of the contract purchase price, including any contingent or earn-out payments that may be paid, of each property we acquire or, with respect to any real estate-related investment we originate or acquire, up to 4.25% of the origination or acquisition price, including any contingent or earn-out payments that may be paid. The 4.50% or 4.25% acquisition fees consist of a 2.25% or 2.00% base acquisition fee, or the base acquisition fee, for real estate and real estate-related acquisitions, respectively, and an additional 2.25% contingent advisor payment, or the Contingent Advisor Payment. The Contingent Advisor Payment allows our advisor to recoup the portion of the dealer manager fee and other organizational and offering expenses funded by our advisor. Therefore, the amount of the Contingent Advisor Payment paid upon the closing of an acquisition shall not exceed the then outstanding amounts paid by our advisor for dealer manager fees and other organizational and offering expenses at the time of such closing. For these purposes, the amounts paid by our advisor and considered as “outstanding” are reduced by the amount of the Contingent Advisor Payment previously paid. Notwithstanding the foregoing, the initial $7,500,000 of amounts paid by our advisor to fund the dealer manager fee and other organizational and offering expenses, or the Contingent Advisor Payment Holdback, shall be retained by us until the later of the termination of our last public offering or the third anniversary of the commencement date of our initial public offering, at which time such amount shall be paid to our advisor or its affiliates. In connection with any subsequent public offering of shares of our common stock, the Contingent Advisor Payment Holdback may increase, based upon the maximum offering amount in such subsequent public offering and the amount sold in prior offerings. Our advisor or its affiliates will be entitled to receive these acquisition fees for properties and real estate-related investments acquired with funds raised in our offering, including acquisitions completed after the termination of the Advisory Agreement (including imputed leverage of 50.0% on funds raised in our offering), or funded with net proceeds from the sale of a property or real estate-related investment, subject to certain conditions. Our advisor may waive or defer all or a portion of the acquisition fee at any time and from time to time, in our advisor’s sole discretion.
The base acquisition fee in connection with the acquisition of properties accounted for as business combinations in accordance with ASC Topic 805, Business Combinations, or ASC Topic 805, is expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. The base acquisition fee in

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

connection with the acquisition of properties accounted for as asset acquisitions in accordance with ASU 2017-01 or the acquisition of real estate-related investments is capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. For the three months ended June 30, 2018 and 2017, we paid base acquisition fees of $1,065,000 and $2,899,000, respectively, and for the six months ended June 30, 2018 and 2017, we paid base acquisition fees of $1,574,000 and $4,554,000, respectively, to our advisor. As of June 30, 2018 and December 31, 2017, we recorded $7,790,000 and $7,744,000, respectively, as part of the Contingent Advisor Payment, which is included in accounts payable due to affiliates with a corresponding offset to stockholders’ equity in our accompanying condensed consolidated balance sheets. As of June 30, 2018, we have paid $8,156,000 in Contingent Advisor Payments to our advisor. For a further discussion of amounts paid in connection with the Contingent Advisor Payment, see “Dealer Manager Fee” and “Other Organizational and Offering Expenses,” above. In addition, see Note 3, Real Estate Investments, Net, for a further discussion.
Development Fee
In the event our advisor or its affiliates provide development-related services, we pay our advisor or its affiliates a development fee in an amount that is usual and customary for comparable services rendered for similar projects in the geographic market where the services are provided; however, we will not pay a development fee to our advisor or its affiliates if our advisor or its affiliates elect to receive an acquisition fee based on the cost of such development.
For the three and six months ended June 30, 2018 and 2017, we did not incur any development fees to our advisor or its affiliates.
Reimbursement of Acquisition Expenses
We reimburse our advisor or its affiliates for acquisition expenses related to selecting, evaluating and acquiring assets, which are reimbursed regardless of whether an asset is acquired. The reimbursement of acquisition expenses, acquisition fees, total development costs and real estate commissions paid to unaffiliated third parties will not exceed, in the aggregate, 6.0% of the contract purchase price of the property or real estate-related investments, unless fees in excess of such limits are approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction. These fees and expenses paid did not exceed 6.0% of the contract purchase price of our property acquisitions, except with respect to our acquisitions of Athens MOB and Northern California Senior Housing Portfolio for the six months ended June 30, 2018, and Auburn MOB and Pottsville MOB for the six months ended June 30, 2017, which excess fees were approved by our directors as set forth above. For a further discussion, see Note 3, Real Estate Investments, Net.
Reimbursements of acquisition expenses in connection with the acquisition of properties accounted for as business combinations in accordance with ASC Topic 805 are expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. Reimbursements of acquisition expenses in connection with the acquisition of properties accounted for as asset acquisitions in accordance with ASU 2017-01 or the acquisition of real estate-related investments are capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. For both the three months ended June 30, 2018 and 2017, we incurred $1,000, and for the six months ended June 30, 2018 and 2017, we incurred $1,000 and $2,000, respectively, in acquisition expenses to our advisor or its affiliates.
Operational Stage
Asset Management Fee
We pay our advisor or its affiliates a monthly fee for services rendered in connection with the management of our assets equal to one-twelfth of 0.80% of average invested assets. For such purposes, average invested assets means the average of the aggregate book value of our assets invested in real estate properties and real estate-related investments, before deducting depreciation, amortization, bad debt and other similar non-cash reserves, computed by taking the average of such values at the end of each month during the period of calculation.
For the three months ended June 30, 2018 and 2017, we incurred $1,070,000 and $504,000, respectively, and for the six months ended June 30, 2018 and 2017, we incurred $2,028,000 and $805,000, respectively, in asset management fees to our advisor, which are included in general and administrative in our accompanying condensed consolidated statements of operations.
Property Management Fee
American Healthcare Investors or its designated personnel may provide property management services with respect to our properties or may sub-contract these duties to any third party and provide oversight of such third-party property manager.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

We pay American Healthcare Investors a monthly management fee equal to a percentage of the gross monthly cash receipts of such property as follows: (i) a property management oversight fee of 1.0% of the gross monthly cash receipts of any stand-alone, single-tenant, net leased property, except for such properties operated utilizing a RIDEA structure, for which we pay a property management oversight fee of 1.5% of the gross monthly cash receipts with respect to such property; (ii) a property management oversight fee of 1.5% of the gross monthly cash receipts of any property that is not a stand-alone, single-tenant, net leased property and for which American Healthcare Investors or its designated personnel provide oversight of a third party that performs the duties of a property manager with respect to such property; or (iii) a fair and reasonable property management fee that is approved by a majority of our directors, including a majority of our independent directors, that is not less favorable to us than terms available from unaffiliated third parties for any property that is not a stand-alone, single-tenant, net leased property and for which American Healthcare Investors or its designated personnel directly serve as the property manager without sub-contracting such duties to a third party.
Property management fees are included in property operating and rental expenses in our accompanying condensed consolidated statements of operations. For the three months ended June 30, 2018 and 2017, we incurred property management fees of $161,000 and $87,000, respectively, and for the six months ended June 30, 2018 and 2017, we incurred property management fees of $306,000 and $146,000, respectively, to American Healthcare Investors.
Lease Fees
We may pay our advisor or its affiliates a separate fee for any leasing activities in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. Such fee is generally expected to range from 3.0% to 6.0% of the gross revenues generated during the initial term of the lease.
Lease fees are capitalized as lease commissions, which are included in other assets, net in our accompanying condensed consolidated balance sheets, and amortized over the term of the lease. For the three and six months ended June 30, 2018, we incurred lease fees of $76,000 and $77,000, respectively. For the three and six months ended June 30, 2017, we did not incur any lease fees to our advisor or its affiliates.
Construction Management Fee
In the event that our advisor or its affiliates assist with planning and coordinating the construction of any capital or tenant improvements, we pay our advisor or its affiliates a construction management fee of up to 5.0% of the cost of such improvements. Construction management fees are capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets or are expensed and included in our accompanying condensed consolidated statements of operations, as applicable. For the three and six months ended June 30, 2018, we incurred construction management fees of $2,000. For the three and six months ended June 30, 2017, we did not incur any construction management fees to our advisor or its affiliates.
Operating Expenses
We reimburse our advisor or its affiliates for operating expenses incurred in rendering services to us, subject to certain limitations. However, we cannot reimburse our advisor or its affiliates at the end of any fiscal quarter for total operating expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of: (i) 2.0% of our average invested assets, as defined in the Advisory Agreement; or (ii) 25.0% of our net income, as defined in the Advisory Agreement, unless our independent directors determined that such excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient.
Our operating expenses as a percentage of average invested assets and as a percentage of net income were 1.3% and 26.9%, respectively, for the 12 months ended June 30, 2018; however, our operating expenses did not exceed the aforementioned limitation as 2.0% of our average invested assets was greater than 25.0% of our net income.
For the three months ended June 30, 2018 and 2017, our advisor incurred operating expenses on our behalf of $9,000 and $20,000, respectively, and for the six months ended June 30, 2018 and 2017, our advisor incurred operating expenses on our behalf of $33,000 and $41,000, respectively. Operating expenses are generally included in general and administrative in our accompanying condensed consolidated statements of operations.

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Compensation for Additional Services
We pay our advisor and its affiliates for services performed for us other than those required to be rendered by our advisor or its affiliates under the Advisory Agreement. The rate of compensation for these services has to be approved by a majority of our board of directors, including a majority of our independent directors, and cannot exceed an amount that would be paid to unaffiliated third parties for similar services. For the three and six months ended June 30, 2018 and 2017, our advisor and its affiliates were not compensated for any additional services.
Liquidity Stage
Disposition Fees
For services relating to the sale of one or more properties, we pay our advisor or its affiliates a disposition fee up to the lesser of 2.0% of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, in each case as determined by our board of directors, including a majority of our independent directors, upon the provision of a substantial amount of the services in the sales effort. The amount of disposition fees paid, when added to the real estate commissions paid to unaffiliated third parties, will not exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. For the three and six months ended June 30, 2018 and 2017, we did not incur any disposition fees to our advisor or its affiliates.
Subordinated Participation Interest
Subordinated Distribution of Net Sales Proceeds
In the event of liquidation, we will pay our advisor a subordinated distribution of net sales proceeds. The distribution will be equal to 15.0% of the remaining net proceeds from the sales of properties, after distributions to our stockholders, in the aggregate, of: (i) a full return of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan); plus (ii) an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock, as adjusted for distributions of net sales proceeds. Actual amounts to be received depend on the sale prices of properties upon liquidation. For the three and six months ended June 30, 2018 and 2017, we did not pay any such distributions to our advisor.
Subordinated Distribution Upon Listing
Upon the listing of shares of our common stock on a national securities exchange, in redemption of our advisor’s limited partnership units, we will pay our advisor a distribution equal to 15.0% of the amount by which: (i) the market value of our outstanding common stock at listing plus distributions paid prior to listing exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the amount of cash equal to an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the date of listing. Actual amounts to be received depend upon the market value of our outstanding stock at the time of listing, among other factors. For the three and six months ended June 30, 2018 and 2017, we did not pay any such distributions to our advisor.
Subordinated Distribution Upon Termination
Pursuant to the Agreement of Limited Partnership, as amended, of our operating partnership upon termination or non-renewal of the Advisory Agreement, our advisor will also be entitled to a subordinated distribution in redemption of its limited partnership units from our operating partnership equal to 15.0% of the amount, if any, by which: (i) the appraised value of our assets on the termination date, less any indebtedness secured by such assets, plus total distributions paid through the termination date, exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the total amount of cash equal to an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the termination date. In addition, our advisor may elect to defer its right to receive a subordinated distribution upon termination until either a listing or other liquidity event, including a liquidation, sale of substantially all of our assets or merger in which our stockholders receive in exchange for their shares of our common stock, shares of a company that are traded on a national securities exchange.
As of June 30, 2018 and December 31, 2017, we did not have any liability related to the subordinated distribution upon termination.

26


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Stock Purchase Plans
On December 30, 2016, our Chief Executive Officer and Chairman of the Board of Directors, Jeffrey T. Hanson, our President and Chief Operating Officer, Danny Prosky, and our Executive Vice President and General Counsel, Mathieu B. Streiff, each executed stock purchase plans, or the 2017 Stock Purchase Plans, whereby they each irrevocably agreed to invest 100% of their net after-tax base salary and cash bonus compensation earned as employees of American Healthcare Investors directly into our company by purchasing shares of our Class I common stock. In addition, on December 30, 2016, three Executive Vice Presidents of American Healthcare Investors, including our Executive Vice President of Acquisitions, Stefan K.L. Oh, as well as our Vice Presidents of Asset Management, Wendie Newman and Christopher M. Belford, each executed similar 2017 Stock Purchase Plans whereby they each irrevocably agreed to invest a portion of their net after-tax base salary or a portion of their net after-tax base salary and cash bonus compensation, ranging from 5.0% to 15.0%, earned as employees of American Healthcare Investors directly into our company by purchasing shares of our Class I common stock. The 2017 Stock Purchase Plans terminated on December 31, 2017.
Purchases of shares of our Class I common stock pursuant to the 2017 Stock Purchase Plans commenced beginning with the officers’ regularly scheduled payroll payment on January 23, 2017. The shares of Class I common stock were purchased pursuant to the 2017 Stock Purchase Plans at a price of $9.21 per share, reflecting the purchase price of shares of Class I common stock offered to the public reduced by the dealer manager fees funded by us, as applicable. No selling commissions, dealer manager fees (including the portion of such dealer manager fees funded by our advisor) or stockholder servicing fees were paid with respect to such sales of our Class I common stock.
On December 31, 2017, Messrs. Hanson, Prosky, and Streiff each executed stock purchase plans for the purchase of shares of our Class I common stock, or the 2018 Stock Purchase Plans, on terms similar to their 2017 Stock Purchase Plans. In addition, on December 31, 2017, four Executive Vice Presidents of American Healthcare Investors, including Messrs. Oh and Belford, Ms. Newman and our Chief Financial Officer, Brian S. Peay, each executed similar 2018 Stock Purchase Plans whereby they each irrevocably agreed to invest a portion of their net after-tax base salary or a portion of their net after-tax base salary and cash bonus compensation, ranging from 5.0% to 15.0%, earned on or after January 1, 2018 as employees of American Healthcare Investors directly into shares of our Class I common stock. The 2018 Stock Purchase Plans terminate on December 31, 2018 or earlier upon the occurrence of certain events, such as any earlier termination of our public offering of securities, unless otherwise renewed or extended.
Purchases of shares of our Class I common stock pursuant to the 2018 Stock Purchase Plans commenced beginning with the first regularly scheduled payroll payment on January 22, 2018. The shares of Class I common stock were or will be purchased pursuant to the 2018 Stock Purchase Plans at a per share purchase price equal to the per share purchase price of our Class I common stock offered to the public, which was $9.21 per share prior to April 11, 2018 and is currently $9.65 per share effective April 11, 2018. No selling commissions, dealer manager fees (including the portion of such dealer manager fees funded by our advisor) or stockholder servicing fees will be paid with respect to such sales of our Class I common stock.

27


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

For the three and six months ended June 30, 2018 and 2017, our officers invested the following amounts and we issued the following shares of our Class T and Class I common stock pursuant to the applicable stock purchase plan:
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
 
 
 
2018
 
2017
 
2018
 
2017
Officer’s Name
 
Title
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
 
Amount
 
Shares
Jeffrey T. Hanson
 
Chief Executive Officer and Chairman of the Board of Directors
 
$
70,000

 
7,321

 
$
66,000

 
7,179

 
$
188,000

 
20,106

 
$
123,000

 
13,357

Danny Prosky
 
President and Chief Operating Officer
 
74,000

 
7,820

 
67,000

 
7,323

 
197,000

 
21,125

 
127,000

 
13,746

Mathieu B. Streiff
 
Executive Vice President and General Counsel
 
65,000

 
6,828

 
67,000

 
7,336

 
188,000

 
20,145

 
127,000

 
13,772

Brian S. Peay
 
Chief Financial Officer
 
6,000

 
582

 

 

 
19,000

 
1,987

 

 

Stefan K.L. Oh
 
Executive Vice President of Acquisitions
 
9,000

 
893

 
8,000

 
859

 
17,000

 
1,762

 
16,000

 
1,701

Christopher M. Belford
 
Vice President of Asset Management
 
6,000

 
662

 
6,000

 
653

 
42,000

 
4,552

 
53,000

 
5,708

Wendie Newman
 
Vice President of Asset Management
 
2,000

 
236

 
2,000

 
221

 
4,000

 
469

 
4,000

 
386

 
 
 
 
$
232,000

 
24,342

 
$
216,000

 
23,571

 
$
655,000

 
70,146

 
$
450,000

 
48,670

Accounts Payable Due to Affiliates
The following amounts were outstanding to our affiliates as of June 30, 2018 and December 31, 2017:
Fee
 
June 30,
2018
 
December 31,
2017
Contingent Advisor Payment
 
$
7,790,000

 
$
7,744,000

Asset management fees
 
366,000

 
316,000

Property management fees
 
53,000

 
43,000

Lease commissions
 
11,000

 
8,000

Operating expenses
 
3,000

 
6,000

Construction management fees
 
2,000

 
1,000

 
 
$
8,225,000

 
$
8,118,000

13. Fair Value Measurements
ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial instruments, whether or not recognized on the face of the balance sheet. Fair value is defined under ASC Topic 820, Fair Value Measurements and Disclosures.
Our accompanying condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, accounts and other receivables, restricted cash, real estate deposits, accounts payable and accrued liabilities, accounts payable due to affiliates, mortgage loans payable and borrowings under the Corporate Line of Credit.
We consider the carrying values of cash and cash equivalents, accounts and other receivables, restricted cash, real estate deposits and accounts payable and accrued liabilities to approximate the fair values for these financial instruments based upon an evaluation of the underlying characteristics, market data and because of the short period of time between origination of the instruments and their expected realization. The fair value of cash and cash equivalents is classified in Level 1 of the fair value hierarchy. The fair value of accounts payable due to affiliates is not determinable due to the related party nature of the accounts payable. The fair value of the other financial instruments is classified in Level 2 of the fair value hierarchy.

28


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The fair value of our mortgage loans payable and the Corporate Line of Credit is estimated using a discounted cash flow analysis using borrowing rates available to us for debt instruments with similar terms and maturities. We have determined that the valuations of our mortgage loans payable and line of credit and term loans are classified in Level 2 within the fair value hierarchy. The carrying amounts and estimated fair values of such financial instruments as of June 30, 2018 and December 31, 2017 were as follows:
 
June 30, 2018
 
December 31, 2017
 
Carrying
Amount
 
Fair
Value
 
Carrying
Amount
 
Fair
Value
Financial Liabilities:
 
 
 
 
 
 
 
Mortgage loans payable
$
17,085,000

 
$
17,070,000

 
$
11,567,000

 
$
11,819,000

Line of credit and term loan
$
73,368,000

 
$
74,388,000

 
$
82,644,000

 
$
84,088,000

14. Income Taxes
As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. We have elected to treat certain of our consolidated subsidiaries as wholly-owned taxable REIT subsidiaries, or TRSs, pursuant to the Code. TRSs may participate in services that would otherwise be considered impermissible for REITs and are subject to federal and state income tax at regular corporate tax rates. We did not incur income taxes for the three and six months ended June 30, 2018 and 2017.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation pursuant to the Tax Act. The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate to 21.0%, eliminating the corporate alternative minimum tax, or AMT, and changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017.
We adopted ASU 2018-05 which allows us to record provisional amounts during the period of enactment. Any change to the provisional amounts will be recorded as an adjustment to the provision for income taxes in the period the amounts are determined. The measurement period ends when we have obtained, prepared and analyzed the information necessary to finalize the provision, but cannot extend beyond one year of the enactment date. 
We did not incur income taxes for the three and six months ended June 30, 2017. The components of income tax expense (benefit) for the three and six months ended June 30, 2018 were as follows:
 
Three Months Ended
June 30, 2018
 
Six Months Ended
June 30, 2018
Federal deferred
$
(642,000
)
 
$
(1,382,000
)
State deferred
(133,000
)
 
(286,000
)
Valuation allowances
775,000

 
1,668,000

Total income tax expense (benefit)
$

 
$

Current Income Tax
Federal and state income taxes are generally a function of the level of income recognized by our TRSs.
Deferred Taxes
Deferred income tax is generally a function of the period’s temporary differences (primarily basis differences between tax and financial reporting for real estate assets and equity investments) and generation of tax net operating losses that may be realized in future periods depending on sufficient taxable income.
We apply the rules under ASC 740-10, Accounting for Uncertainty in Income Taxes, for uncertain tax positions using a “more likely than not” recognition threshold for tax positions. Pursuant to these rules, we will initially recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits of the tax position, that such a position will be sustained upon examination by the relevant tax authorities. If the tax benefit meets the “more likely than not” threshold, the measurement of the tax benefit will be based on our estimate of the ultimate tax benefit to be sustained if audited by the taxing authority. As of June 30, 2018 and December 31, 2017, we did not have any tax benefits or liabilities for uncertain tax positions that we believe should be recognized in our accompanying condensed consolidated financial statements.

29


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A valuation allowance is established if we believe it is more likely than not that all or a portion of the deferred tax assets are not realizable. As of June 30, 2018, our valuation allowance fully reserves the net deferred tax asset due to inherent uncertainty of future income. We will continue to monitor industry and economic conditions, and our ability to generate taxable income based on our business plan and available tax planning strategies, which would allow us to utilize the tax benefits of the net deferred tax assets and thereby allow us to reverse all, or a portion of, our valuation allowance in the future.
15. Segment Reporting
ASC Topic 280 establishes standards for reporting financial and descriptive information about a public entity’s reportable segments. We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. Accordingly, when we acquired our first medical office building in June 2016; senior housing facility in December 2016; senior housing — RIDEA facility in November 2017; and skilled nursing facility in March 2018, we established a new reportable segment at each such time. As of June 30, 2018, we evaluated our business and made resource allocations based on four reportable business segments — medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities.
Our medical office buildings are typically leased to multiple tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). Our senior housing facilities and skilled nursing facilities are primarily single-tenant properties for which we lease the facilities to unaffiliated tenants under triple-net and generally master leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. Our senior housing — RIDEA properties include senior housing facilities that are owned and operated utilizing a RIDEA structure.
We evaluate performance based upon segment net operating income. We define segment net operating income as total revenues, less rental expenses, which excludes depreciation and amortization, general and administrative expenses, acquisition related expenses and interest expense for each segment. We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measurement. However, we believe that segment net operating income serves as an appropriate supplemental performance measure to net income (loss) because it allows investors and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies and between periods on a consistent basis.
Interest expense, depreciation and amortization and other expenses not attributable to individual properties are not allocated to individual segments for purposes of assessing segment performance.
Non-segment assets primarily consist of corporate assets including cash and cash equivalents, other receivables, real estate deposits and other assets not attributable to individual properties.

30


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Summary information for the reportable segments during the three and six months ended June 30, 2018 and 2017 was as follows:


Medical
Office
Buildings

Senior
Housing —
RIDEA
 
Senior
Housing
 
Skilled
Nursing
Facilities

Three Months
Ended
June 30, 2018
Revenues:



 
 

 
 


Real estate revenue

$
7,775,000


$

 
$
2,210,000

 
$
599,000


$
10,584,000

Resident fees and services
 

 
8,426,000

 

 

 
8,426,000

Total revenues
 
7,775,000

 
8,426,000

 
2,210,000

 
599,000

 
19,010,000

Expenses:



 
 

 
 


Rental expenses

2,142,000



 
310,000

 
100,000


2,552,000

Property operating expenses
 

 
6,766,000

 

 

 
6,766,000

Segment net operating income

$
5,633,000


$
1,660,000

 
$
1,900,000

 
$
499,000


$
9,692,000

Expenses:



 
 

 
 


General and administrative



 
 

 
 

$
1,578,000

Acquisition related expenses



 
 

 
 

61,000

Depreciation and amortization



 
 

 
 

7,851,000

Other income (expense):
 
 
 
 
 
 
 
 
 
 
Interest expense (including amortization of deferred financing costs and debt discount/premium)



 
 

 
 

(1,160,000
)
Net loss



 
 

 
 

$
(958,000
)


Medical
Office
Buildings

Senior
Housing

Three Months
Ended
June 30, 2017
Revenue:






Real estate revenue

$
5,455,000


$
743,000


$
6,198,000

Expenses:






Rental expenses

1,534,000


77,000


1,611,000

Segment net operating income

$
3,921,000


$
666,000


$
4,587,000

Expenses:
 
 
 
 
 
 
General and administrative





$
952,000

Acquisition related expenses





140,000

Depreciation and amortization
 
 
 
 
 
2,466,000

Other income (expense):
 
 
 
 
 
 
Interest expense (including amortization of deferred financing costs and debt premium)
 
 
 
 
 
(409,000
)
Interest income
 
 
 
 
 
1,000

Net income





$
621,000


31


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

 
 
Medical
Office
Buildings
 
Senior
Housing —
RIDEA
 
Senior
Housing
 
Skilled
Nursing
Facilities
 
Six Months
Ended
June 30, 2018
Revenues:
 
 
 
 
 
 
 
 
 
 
Real estate revenue
 
$
14,719,000

 
$

 
$
4,498,000

 
$
800,000

 
$
20,017,000

Resident fees and services
 

 
16,835,000

 

 

 
16,835,000

Total revenues
 
14,719,000

 
16,835,000

 
4,498,000

 
800,000

 
36,852,000

Expenses:
 
 
 
 
 
 
 
 
 
 
Rental expenses
 
4,089,000

 

 
681,000

 
133,000

 
4,903,000

Property operating expenses
 

 
13,999,000

 

 

 
13,999,000

Segment net operating income
 
$
10,630,000

 
$
2,836,000

 
$
3,817,000

 
$
667,000

 
$
17,950,000

Expenses:
 
 
 
 
 
 
 
 
 
 
General and administrative
 
 
 
 
 
 
 
 
 
$
3,698,000

Acquisition related expenses
 
 
 
 
 
 
 
 
 
156,000

Depreciation and amortization
 
 
 
 
 
 
 
 
 
15,046,000

Other income (expense):
 
 
 
 
 
 
 
 
 
 
Interest expense (including amortization of deferred financing costs and debt discount/premium)
 
 
 
 
 
 
 
 
 
(2,244,000
)
Net loss
 
 
 
 
 
 
 
 
 
$
(3,194,000
)
 
 
Medical
Office
Buildings
 
Senior
Housing
 
Six Months
Ended
June 30, 2017
Revenue:
 
 
 
 
 
 
Real estate revenue
 
$
9,126,000

 
$
1,124,000

 
$
10,250,000

Expenses:
 
 
 
 
 
 
Rental expenses
 
2,686,000

 
112,000

 
2,798,000

Segment net operating income
 
$
6,440,000

 
$
1,012,000

 
$
7,452,000

Expenses:
 
 
 
 
 
 
General and administrative
 
 
 
 
 
$
1,700,000

Acquisition related expenses
 
 
 
 
 
213,000

Depreciation and amortization
 
 
 
 
 
4,177,000

Other income (expense):
 
 
 
 
 
 
Interest expense (including amortization of deferred financing costs and debt premium)
 
 
 
 
 
(827,000
)
Interest income
 
 
 
 
 
1,000

Net income
 
 
 
 
 
$
536,000

Assets by reportable segment as of June 30, 2018 and December 31, 2017 were as follows:
 
June 30,
2018
 
December 31,
2017
Medical office buildings
$
305,802,000

 
$
262,260,000

Senior housing — RIDEA
112,826,000

 
115,402,000

Senior housing
97,694,000

 
98,519,000

Skilled nursing facilities
23,146,000

 

Other
33,948,000

 
3,972,000

Total assets
$
573,416,000

 
$
480,153,000


32


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

16. Concentration of Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk are primarily cash and cash equivalents, accounts and other receivables, restricted cash and real estate deposits. Cash and cash equivalents are generally invested in investment-grade, short-term instruments with a maturity of three months or less when purchased. We have cash and cash equivalents in financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. As of June 30, 2018 and December 31, 2017, we had cash and cash equivalents in excess of FDIC insured limits. We believe this risk is not significant. Concentration of credit risk with respect to accounts receivable from tenants is limited. In general, we perform credit evaluations of prospective tenants and security deposits are obtained at the time of property acquisition and upon lease execution.
Based on leases in effect as of June 30, 2018, three states in the United States accounted for 10.0% or more of our total property portfolio’s annualized base rent or annualized net operating income. Our properties located in Florida, Nevada and Alabama accounted for approximately 16.7%, 11.7% and 10.9%, respectively, of our total property portfolio’s annualized base rent or annualized net operating income. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.
Based on leases in effect as of June 30, 2018, our four reportable business segments, medical office buildings, senior housing — RIDEA, senior housing and skilled nursing facilities accounted for 62.3%, 16.7%, 16.5% and 4.5%, respectively, of our total property portfolio’s annualized base rent or annualized net operating income.
As of June 30, 2018, we had one tenant that accounted for 10.0% or more of our total property portfolio’s annualized base rent or annualized net operating income as follows:
Tenant
 
Annualized
Base Rent(1)
 
Percentage of
Annualized Base
Rent
 
Acquisition
 
Reportable
Segment
 
GLA
(Sq Ft)
 
Lease Expiration
Date
Colonial Oaks Master Tenant, LLC
 
$
4,112,000

 
10.6%
 
Lafayette Assisted Living Portfolio and Northern California Senior Housing Portfolio
 
Senior Housing
 
215,000

 
06/30/32
___________
(1)
Annualized base rent is based on contractual base rent from leases in effect as of June 30, 2018. The loss of this tenant or its inability to pay rent could have a material adverse effect on our business and results of operations.
17. Per Share Data
We report earnings (loss) per share pursuant to ASC Topic 260, Earnings per Share. Basic earnings (loss) per share for all periods presented are computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of our common stock outstanding during the period. Net income (loss) applicable to common stock is calculated as net income (loss) attributable to controlling interest less distributions allocated to participating securities of $4,000 and $2,000, respectively, for the three months ended June 30, 2018 and 2017, and $8,000 and $3,000, respectively, for the six months ended June 30, 2018 and 2017. Diluted earnings (loss) per share are computed based on the weighted average number of shares of our common stock and all potentially dilutive securities, if any. Nonvested shares of our restricted common stock and redeemable limited partnership units of our operating partnership are participating securities and give rise to potentially dilutive shares of our common stock. As of June 30, 2018 and 2017, there were 28,500 and 15,000 nonvested shares, respectively, of our restricted common stock outstanding, but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during these periods. As of June 30, 2018 and 2017, there were 208 units of redeemable limited partnership units of our operating partnership outstanding, but such units were excluded from the computation of diluted earnings per share because such units were anti-dilutive during these periods.
18. Subsequent Events
Status of Our Offering
As of August 3, 2018, we had received and accepted subscriptions in our offering for 55,061,108 aggregate shares of our Class T and Class I common stock, or $548,259,000, excluding shares of our common stock issued pursuant to the DRIP.

33


GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Property Acquisitions
Subsequent to June 30, 2018, we completed four property acquisitions comprising four buildings from unaffiliated third parties. The following is a summary of our property acquisitions subsequent to June 30, 2018:
Acquisition(1)
 
Location
 
Type
 
Date
Acquired
 
Contract
Purchase
Price
 
Corporate
Line of
Credit(2)
 
Total
Acquisition
Fee(3)
Pinnacle Beaumont ALF(4)
 
Beaumont, TX
 
Senior Housing — RIDEA
 
07/01/18
 
$
19,500,000

 
$
19,400,000

 
$
868,000

Grand Junction MOB
 
Grand Junction, CO
 
Medical Office
 
07/06/18
 
31,500,000

 
31,400,000

 
1,418,000

Edmonds MOB
 
Edmonds, WA
 
Medical Office
 
07/30/18
 
23,500,000

 
22,000,000

 
1,058,000

Pinnacle Warrenton ALF(4)
 
Warrenton, MO
 
Senior Housing — RIDEA
 
08/01/18
 
8,100,000

 
8,100,000

 
360,000

 
 
 
 
 
 
 
 
$
82,600,000

 
$
80,900,000

 
$
3,704,000

___________
(1)
We own 100% of our properties acquired subsequent to June 30, 2018, with the exception of Pinnacle Beaumont ALF and Pinnacle Warrenton ALF.
(2)
Represents borrowings under the Corporate Line of Credit, as amended, at the time of acquisition.
(3)
Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of our properties, a base acquisition fee of 2.25% of the portion of the aggregate contract purchase price paid by us. In addition, the total acquisition fee includes a Contingent Advisor Payment, as defined in Note 12, Related Party Transactions, in the amount of 2.25% of the portion of the aggregate contract purchase price paid by us, which shall be paid by us to our advisor, subject to the satisfaction of certain conditions. See Note 12, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, for a further discussion.
(4)
On July 1, 2018 and August 1, 2018, we completed the acquisitions of Pinnacle Beaumont ALF and Pinnacle Warrenton ALF, respectively, pursuant to a joint venture with an affiliate of Meridian Senior Living, LLC, an unaffiliated third party. Our ownership of the joint venture is approximately 98%.





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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT IV, Inc. and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where the context otherwise requires.
The following discussion should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2017 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on March 8, 2018. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of June 30, 2018 and December 31, 2017, together with our results of operations and cash flows for the three and six months ended June 30, 2018 and 2017.
Forward-Looking Statements
Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking. Actual results may differ materially from those included in the forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “expect,” “project,” “may,” “will,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future investments on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs; the availability of capital; changes in interest rates; competition in the real estate industry; the supply and demand for operating properties in our proposed market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the success of our best efforts initial public offering; the availability of properties to acquire; the availability of financing; and our ongoing relationship with American Healthcare Investors, LLC, or American Healthcare Investors, and Griffin Capital Company, LLC, or Griffin Capital, and their affiliates. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview and Background
Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, was incorporated on January 23, 2015 and therefore we consider that our date of inception. We were initially capitalized on February 6, 2015. We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, hospitals, skilled nursing facilities, senior housing and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). We may also originate and acquire secured loans and real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income. We qualified to be taxed as a REIT under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.
On February 16, 2016, we commenced our initial public offering, or our offering, in which we were initially offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock in our primary offering and up to $150,000,000 in shares of our Class T common stock pursuant to our distribution reinvestment plan, as amended, or the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of Class T common stock being offered and began offering shares of Class I common stock, such that we are currently offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in our primary offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP, aggregating up to $3,150,000,000 or the maximum offering amount.
The shares of our Class T common stock in our primary offering were being offered at a price of $10.00 per share prior to April 11, 2018. The shares of our Class I common stock in our primary offering were being offered at a price of $9.30 per share prior to March 1, 2017 and $9.21 per share from March 1, 2017 to April 10, 2018. The shares of our Class T and Class I common stock issued pursuant to the DRIP were sold at a price of $9.50 per share prior to January 1, 2017 and $9.40 per share from January 1, 2017 to April 10, 2018. On April 6, 2018, our board of directors, at the recommendation of the audit committee of our board of directors, comprised solely of independent directors, unanimously approved and established an estimated per share net asset value, or NAV, of our common stock of $9.65, as discussed further below. As a result, on April 6, 2018, our

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board of directors unanimously approved revised offering prices for each class of shares of our common stock to be sold in the primary portion of our initial public offering based on the estimated per share NAV of our Class T and Class I common stock of $9.65 plus any applicable per share up-front selling commissions and dealer manager fees funded by us, effective April 11, 2018. Accordingly, the revised offering price for shares of our Class T common stock and Class I common stock sold pursuant to our primary offering on or after April 11, 2018 is $10.05 per share and $9.65 per share, respectively. Effective April 11, 2018, the shares of our Class T and Class I common stock issued pursuant to the DRIP are sold at a price of $9.65 per share, the most recent estimated per share NAV approved and established by our board of directors.
We will sell shares of our Class T and Class I common stock in our offering until the earlier of February 16, 2019 or the date on which the maximum offering amount has been sold. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the DRIP, and among classes of stock. As of June 30, 2018, we had received and accepted subscriptions in our offering for 52,749,116 aggregate shares of our Class T and Class I common stock, or approximately $525,121,000, excluding shares of our common stock issued pursuant to the DRIP.
On April 6, 2018, our board of directors, at the recommendation of the audit committee of our board of directors, comprised solely of independent directors, unanimously approved and established an estimated per share NAV of our common stock of $9.65. We provide this estimated per share NAV to assist broker-dealers in connection with their obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, or FINRA, with respect to customer account statements. The estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares outstanding on a fully diluted basis, calculated as of December 31, 2017. This valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC. Going forward, we intend to publish an updated estimated per share NAV on at least an annual basis. See our Current Report on Form 8-K filed with the SEC on April 9, 2018, for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our estimated per share NAV.
We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. We are externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one-year term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 14, 2018 and expires on February 16, 2019. Our advisor uses its best efforts, subject to the oversight and review of our board of directors, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by American Healthcare Investors and 25.0% owned by a wholly owned subsidiary of Griffin Capital, or collectively, our co-sponsors. American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony Capital, Inc. (NYSE: CLNY), or Colony Capital, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony Capital or Mr. Flaherty; however, we are affiliated with Griffin-American Healthcare REIT IV Advisor, American Healthcare Investors and AHI Group Holdings.
We currently operate through four reportable business segments — medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. As of June 30, 2018, we had completed 22 property acquisitions whereby we owned 43 properties, comprising 45 buildings, or approximately 2,727,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $536,090,000.
Critical Accounting Policies
The complete listing of our Critical Accounting Policies was previously disclosed in our 2017 Annual Report on Form 10-K, as filed with the SEC on March 8, 2018, and there have been no material changes to our Critical Accounting Policies as disclosed therein, except as noted below.
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected

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for the full year; such full year results may be less favorable. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2017 Annual Report on Form 10-K, as filed with the SEC on March 8, 2018.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers, which has been codified to Accounting Standards Codification, or ASC, Topic 606, or ASC Topic 606. ASC Topic 606 provides additional guidance to clarify the principles for recognizing revenue. The standard and subsequent amendments are intended to develop a common revenue standard to remove inconsistencies, improve comparability, provide more useful information to users through improved disclosure requirements and simplify the preparation of financial statements. We have evaluated all of our revenue streams to identify whether each revenue stream would be subject to the provisions of ASC Topic 606 and any differences in the timing, measurement or presentation of revenue recognition. Based on a review of our various revenue streams, certain components of resident fees and services, such as revenues that are ancillary to the contractual rights of residents within our senior housing campuses, are subject to ASC Topic 606. While these revenue streams are subject to the provisions of ASC Topic 606, we believe that the pattern and timing of recognition of income are consistent with the previous accounting model. Virtually all resident fees and services are earned over a period of time and the majority of these revenues are paid by private payor types with the residual being paid by Medicaid. We adopted ASC Topic 606 on January 1, 2018 using the modified retrospective adoption method and the adoption did not have a material impact on our consolidated financial statements.
Recently Issued Accounting Pronouncements
For a discussion of recently issued accounting pronouncements, see Note 2, Summary of Significant Accounting Policies — Recently Issued Accounting Pronouncements, to our accompanying condensed consolidated financial statements.
Acquisitions in 2018
For a discussion of our property acquisitions in 2018, see Note 3, Real Estate Investments, Net, and Note 18, Subsequent Events — Property Acquisitions, to our accompanying condensed consolidated financial statements.
Factors Which May Influence Results of Operations
We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, management and operation of properties other than those listed in Part II, Item 1A. Risk Factors, of this Quarterly Report on Form 10-Q and those Risk Factors previously disclosed in our 2017 Annual Report on Form 10-K, as filed with the SEC on March 8, 2018.
Real Estate Revenue
The amount of revenue generated by our properties depends principally on our ability to maintain the occupancy rates of leased space and to lease available space and space available from lease terminations at the then existing rental rates. Negative trends in one or more of these factors could adversely affect our revenue in the future.
Offering Proceeds
If we fail to raise significant additional proceeds in our offering, we will not have enough proceeds to invest in a diversified real estate portfolio. Our real estate portfolio would be concentrated in a small number of properties, resulting in increased exposure to local and regional economic downturns and the poor performance of one or more of our properties and, therefore, expose our stockholders to increased risk. In addition, many of our expenses are fixed regardless of the size of our real estate portfolio. Therefore, depending on the amount of proceeds we raise from our offering, we would expend a larger portion of our income on operating expenses. This would reduce our profitability and, in turn, the amount of net income available for distribution to our stockholders.
Scheduled Lease Expirations
Excluding our senior housing — RIDEA facilities, as of June 30, 2018, our properties were 95.1% leased and during the remainder of 2018, 1.0% of the leased GLA is scheduled to expire. For the three and six months ended June 30, 2018, our senior housing — RIDEA facilities were 76.7% and 76.5% leased, respectively. Substantially all of our leases with residents at such properties are for a term of one year or less. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy.

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As of June 30, 2018, our remaining weighted average lease term was 8.8 years, excluding our senior housing — RIDEA facilities.
Results of Operations
Comparison of the Three and Six Months Ended June 30, 2018 and 2017
Our primary sources of revenue include rent and resident fees and services from our properties. Our primary expenses include property operating expenses and rental expenses. In general, we expect amounts related to our portfolio of operating properties to increase in the future based on a full year of operations as well as any additional real estate and real estate-related investments we may acquire.
We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. Accordingly, when we acquired our first medical office building in June 2016; senior housing facility in December 2016; senior housing — RIDEA facility in November 2017; and skilled nursing facility in March 2018, we established a new reportable segment at each such time. As of June 30, 2018, we operated through four reportable business segments — medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities.
Except where otherwise noted, the changes in our results of operations are primarily due to owning 45 buildings as of June 30, 2018, as compared to owning 28 buildings as of June 30, 2017. As of June 30, 2018 and 2017, we owned the following types of properties:
 
June 30,
 
2018
 
2017
 
Number of
Buildings
 
Aggregate
Contract
Purchase Price
 
Leased %
 
Number of
Buildings
 
Aggregate
Contract
Purchase Price
 
Leased %
Medical office buildings
21