Healthcare Trust, Inc. - Quarter Report: 2018 March (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2018



	OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to __________

Commission file number: 000-55201

Healthcare Trust, Inc.

(Exact name of registrant as specified in its charter)



Maryland		38-3888962
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
405 Park Ave., 4^th Floor, New York, NY		10022
(Address of principal executive offices)		(Zip Code)
(212) 415-6500
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant submitted electronically and posted on its corporate Web Site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.



Large accelerated filer o		Accelerated filer o
Non-accelerated filer x	(Do not check if a smaller reporting company)	Smaller reporting company o
		Emerging growth company x

If an emerging growth company indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of April 30, 2018, the registrant had 91,374,181 shares of common stock outstanding.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



	Page
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

Consolidated Balance Sheets as of March 31, 2018 (Unaudited) and December 31, 2017	3
Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	4
Consolidated Statement of Changes in Equity for the Three Months Ended March 31, 2018 (Unaudited)	5
Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2018 and 2017 (Unaudited)	6
Notes to Consolidated Financial Statements (Unaudited)	8

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.	36

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	53

Item 4. Controls and Procedures.	53

PART II - OTHER INFORMATION	55

Item 1. Legal Proceedings.	55

Item 1A. Risk Factors.	55

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of Registered Securities.	55

Item 3. Defaults Upon Senior Securities.	55

Item 4. Mine Safety Disclosures.	55

Item 5. Other Information.	55

Item 6. Exhibits.	55

Signatures.	56

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Part I — FINANCIAL INFORMATION

Item 1. Financial Statements.

HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)



	March 31,			December 31,
	2018			2017
	(Unaudited)
ASSETS
Real estate investments, at cost:
Land	$	204,522		$	201,427
Buildings, fixtures and improvements	1,968,694			1,955,940
Construction in progress	74,926			72,007
Acquired intangible assets	258,340			256,678
Total real estate investments, at cost	2,506,482			2,486,052
Less: accumulated depreciation and amortization	(330,573		)	(309,711		)
Total real estate investments, net	2,175,909			2,176,341
Cash and cash equivalents	61,277			94,177
Restricted cash	9,753			8,411
Assets held for sale	37,822			37,822
Derivative assets, at fair value	6,823			2,550
Straight-line rent receivable, net	15,995			15,327
Prepaid expenses and other assets (including $181 due from related parties as of March 31, 2018)	25,505			22,099
Deferred costs, net	15,263			15,134
Total assets	$	2,348,347		$	2,371,861

LIABILITIES AND EQUITY
Mortgage notes payable, net	$	345,213		$	406,630
Credit facilities	599,022			534,869
Market lease intangible liabilities, net	18,356			18,829
Accounts payable and accrued expenses (including $2,383 and $1,637 due to related parties as of March 31, 2018 and December 31, 2017, respectively)	39,369			38,112
Deferred rent	8,185			6,201
Distributions payable	6,585			11,161
Total liabilities	1,016,730			1,015,802

Stockholders' Equity
Preferred stock, $0.01 par value, 50,000,000 authorized, none issued and outstanding as of March 31, 2018 and December 31, 2017	—			—
Common stock, $0.01 par value, 300,000,000 shares authorized, 91,251,142 and 91,002,766 shares of common stock issued and outstanding as of March 31, 2018 and December 31, 2017, respectively	912			910
Additional paid-in capital	2,014,844			2,009,197
Accumulated other comprehensive income	6,437			2,473
Accumulated deficit	(698,920		)	(665,026		)
Total stockholders' equity	1,323,273			1,347,554
Non-controlling interests	8,344			8,505
Total equity	1,331,617			1,356,059
Total liabilities and equity	$	2,348,347		$	2,371,861

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)



	Three Months Ended March 31,
	2018			2017
Revenues:
Rental income	$	25,286		$	24,022
Operating expense reimbursements	4,971			4,104
Resident services and fee income	59,181			46,489
Total revenues	89,438			74,615

Operating expenses:
Property operating and maintenance	53,106			42,611
Impairment charges	733			35
Operating fees to related parties	5,727			5,301
Acquisition and transaction related	173			2,845
General and administrative	3,652			4,157
Depreciation and amortization	20,769			20,483
Total expenses	84,160			75,432
Operating gain (loss)	5,278			(817		)
Other income (expense):
Interest expense	(11,157		)	(5,482		)
Interest and other income	3			1
Gain (loss) on non-designated derivatives	178			(64		)
Total other expenses	(10,976		)	(5,545		)
Loss before income taxes	(5,698		)	(6,362		)
Income tax (expense) benefit	(309		)	195
Net loss	(6,007		)	(6,167		)
Net income attributable to non-controlling interests	16			28
Net loss attributable to stockholders	(5,991		)	(6,139		)
Other comprehensive income (loss):
Unrealized gain on designated derivative	3,964			—
Comprehensive loss attributable to stockholders	$	(2,027	)	$	(6,139	)

Basic and diluted weighted-average shares outstanding	90,783,065			89,639,676
Basic and diluted net loss per share	$	(0.07	)	$	(0.07	)
Distributions declared per share	$	0.31		$	0.42

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2018

(In thousands, except share data)

(Unaudited)



	Common Stock								Accumulated Other Comprehensive Income
	Number of Shares		Par Value			Additional Paid-in Capital			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders' Equity			Non-controlling Interests			Total Equity
Balance, December 31, 2017	91,002,766		$	910		$	2,009,197		$	2,473	$	(665,026	)	$	1,347,554		$	8,505		$	1,356,059
Common stock issued through distribution reinvestment plan	622,343		6			13,349			—		—			13,355			—			13,355
Common stock repurchases	(373,967	)	(4		)	(8,021		)	—		—			(8,025		)	—			(8,025		)
Share-based compensation	—		—			319			—		—			319			—			319
Distributions declared	—		—			—			—		(27,903		)	(27,903		)	—			(27,903		)
Contributions from non-controlling interest holders	—		—			—			—		—			—			—			—
Distributions to non-controlling interest holders	—		—			—			—		—			—			(145		)	(145		)
Other comprehensive income	—		—			—			3,964		—			3,964			—			3,964
Net loss	—		—			—			—		(5,991		)	(5,991		)	(16		)	(6,007		)
Balance, March 31, 2018	91,251,142		$	912		$	2,014,844		$	6,437	$	(698,920	)	$	1,323,273		$	8,344		$	1,331,617

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2018			2017
Cash flows from operating activities:
Net loss	$	(6,007	)	$	(6,167	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	20,769			20,483
Amortization of deferred financing costs	2,227			1,277
Amortization of mortgage premiums and discounts, net	(69		)	(440		)
Amortization of market lease and other intangibles, net	86			118
Bad debt expense	2,586			3,510
Share-based compensation	319			14
(Gain) loss on non-designated derivatives	(178		)	64
Impairment charges	733			35
Changes in assets and liabilities:
Straight-line rent receivable	(2,136		)	(1,419		)
Prepaid expenses and other assets	(4,627		)	(1,634		)
Due from affiliate	(29		)	—
Accounts payable, accrued expenses and other liabilities	1,260			1,893
Deferred rent	1,984			1,325
Net cash provided by operating activities	16,918			19,059
Cash flows from investing activities:
Investments in real estate	(20,311		)	(2,844		)
Deposits paid for unconsummated acquisitions	—			(600		)
Capital expenditures	(1,174		)	(1,141		)
Net cash used in investing activities	(21,485		)	(4,585		)
Cash flows from financing activities:
Proceeds from credit facilities	64,153			99,439
Payments on mortgage notes payable	(62,112		)	(590		)
Payments for derivative instruments	(131		)	(67		)
Payments of deferred financing costs	(1,606		)	(2,475		)
Common stock repurchases	(8,025		)	(27,518		)
Distributions paid	(19,125		)	(20,215		)
Distributions to non-controlling interest holders	(145		)	(169		)
Net cash (used in) provided by financing activities	(26,991		)	48,405
Net change in cash, cash equivalents and restricted cash	(31,558		)	62,879
Cash, cash equivalents and restricted cash, beginning of period	102,588			33,187
Cash, cash equivalents and restricted cash, end of period	$	71,030		$	96,066

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended March 31,
	2018		2017
Supplemental disclosures of cash flow information:
Cash paid for interest	$	9,598	$	4,977
Cash paid for income taxes	16		—

Non-cash investing and financing activities:
Common stock issued through distribution reinvestment plan	13,355		17,321

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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Note 1 — Organization

Healthcare Trust, Inc. (including, as required by context, Healthcare Trust Operating Partnership, LP (the "OP") and its subsidiaries, the "Company") invests in healthcare real estate, focusing on seniors housing and medical office buildings ("MOB") located in the United States. As of March 31, 2018, the Company owned 190 properties located in 30 states and comprised of 9.1 million rentable square feet.

The Company, which was incorporated on October 15, 2012, is a Maryland corporation that elected and qualified to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes beginning with its taxable year ended December 31, 2013. Substantially all of the Company's business is conducted through the OP.

The Company has no employees. Healthcare Trust Advisors, LLC (the "Advisor") has been retained by the Company to manage the Company's affairs on a day-to-day basis. The Company has retained Healthcare Trust Properties, LLC (the "Property Manager") to serve as the Company's property manager. The Advisor and Property Manager are under common control with AR Global Investments, LLC (the successor business to AR Capital, LLC, "AR Global"), the parent of the Company's sponsor, American Realty Capital VII, LLC (the "Sponsor"), as a result of which they are related parties, and each have received or will receive compensation, fees and expense reimbursements from the Company for services related to managing its business. The Advisor, Healthcare Trust Special Limited Partnership, LLC (the "Special Limited Partner") and Property Manager also have received or will receive compensation, fees and expense reimbursements related to the investment and management of the Company's assets.

Note 2 — Summary of Significant Accounting Policies

The accompanying unaudited consolidated financial statements of the Company included herein were prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The information furnished includes all adjustments and accruals of a normal recurring nature, which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. The results of operations for the quarter ended March 31, 2018 are not necessarily indicative of the results for the entire year or any subsequent interim period.

These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto as of and for the year ended December 31, 2017, which are included in the Company's Annual Report on Form 10-K filed with the SEC on March 20, 2018. There have been no significant changes to the Company's significant accounting policies during the quarter ended March 31, 2018 other than the updates described below.

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements include the accounts of the Company, the OP and its subsidiaries. All intercompany accounts and transactions are eliminated in consolidation. In determining whether the Company has a controlling financial interest in a joint venture and the requirement to consolidate the accounts of that entity, management considers factors such as ownership interest, authority to make decisions and contractual and substantive participating rights of the other partners or members as well as whether the entity is a variable interest entity ("VIE") for which the Company is the primary beneficiary. The Company has determined the OP is a VIE of which the Company is the primary beneficiary. Substantially all of the Company's assets and liabilities are held by the OP.

Reclassifications

Certain prior year amounts have been reclassified to conform with the current year presentation.

Revenue Recognition

The Company's rental income is primarily related to rent received from tenants in MOBs and triple-net leased healthcare facilities. Rent from tenants in the Company's MOB and triple-net leased healthcare facilities operating segments (as discussed below) is recorded in accordance with the terms of each lease on a straight-line basis over the initial term of the lease. Because many of the leases provide for rental increases at specified intervals, GAAP requires the Company to record a receivable, and include in revenues on a straight-line basis, unbilled rent receivables that the Company will only receive if the tenant makes all rent payments required through the expiration of the initial term of the lease. When the Company acquires a property, the acquisition date is considered to be the commencement date for purposes of this calculation.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Cost recoveries from tenants are included in operating expense reimbursement in the period the related costs are incurred, as applicable.

Resident services and fee income primarily relates to rent from residents in the Company's seniors housing — operating properties ("SHOP") held using a structure permitted by the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA") and to fees for ancillary services performed for SHOP residents. Rental income from residents in the Company's SHOP operating segment is recognized as earned. Residents pay monthly rent that covers occupancy of their unit and basic services, including utilities, meals and some housekeeping services. The terms of the rent are short term in nature, primarily month-to-month. Fees for ancillary services are recorded in the period in which the services are performed.

The Company defers the revenue related to lease payments received from tenants and residents in advance of their due dates.

The Company continually reviews receivables related to rent and unbilled rent receivables and determines collectability by taking into consideration the tenant's payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic conditions in the area in which the property is located. In the event that the collectability of a receivable is in doubt, the Company records an increase in the allowance for uncollectible accounts on the consolidated balance sheets or records a direct write-off of the receivable in the consolidated statements of operations.

Recently Issued Accounting Pronouncements

Adopted as of January 1, 2018

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), and has since issued several additional amendments thereto (collectively referred to herein as "ASC 606"). ASC 606 establishes a comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Under ASC 606, an entity is required to recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. A reporting entity may apply the amendments in ASC 606 using either a modified retrospective approach, by recording a cumulative-effect adjustment to equity as of the beginning of the fiscal year of adoption or a full retrospective approach. The Company adopted this guidance effective January 1, 2018 under the modified retrospective approach and it did not have an impact on the Company's consolidated financial statements. See above for further information on the Company's Revenue Recognition Accounting Policies under ASC606.

In January 2016, the FASB issued ASU 2016-01, Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The revised guidance amends the recognition and measurement of financial instruments. The new guidance significantly revises an entity’s accounting related to equity investments and the presentation of certain fair value changes for financial liabilities measured at fair value. Among other things, it also amends the presentation and disclosure requirements associated with the fair value of financial instruments. The Company adopted this guidance effective January 1, 2018, using the modified retrospective transition method, and there was no impact to the Company's consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, which provides guidance on how certain transactions should be classified and presented in the statement of cash flows as either operating, investing or financing activities. Among other things, the update provides specific guidance on where to classify debt prepayment and extinguishment costs, payments for contingent consideration made after a business combination and distributions received from equity method investments. The Company adopted the new guidance on January 1, 2018 and it did not have an impact on its statement of cash flows.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Assets Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets, which provides guidance related to partial sales of non-financial assets, eliminates rules specifically addressing the sales of real estate, clarifies the definition of in substance non-financial assets, removes the exception to the financial asset derecognition model and clarifies the accounting for contributions of non-financial assets to joint ventures. The Company adopted this guidance effective January 1, 2018 using the modified transition method and it did not have an impact on its financial statements. The Company expects that any future sales of real estate in which the Company retains a non-controlling interest in the property would result in the full gain amount being recognized at the time of the partial sale. Historically, the Company has not retained any interest in properties it has sold.

In May 2017, the FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting, which provides guidance that clarifies which changes to the terms or conditions of a share-based payment award

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

require an entity to apply modification accounting. The update states that modification accounting should be used unless the fair value of the award, the vesting terms of the award, and the classification of the award as either equity or liability, all do not change as a result of the modification. The Company adopted this guidance effective January 1, 2018 using the modified retrospective transition method and it did not have an impact on its consolidated financial statements. The Company expects that any future modifications to the Company's issued share-based awards will be accounted for using modification accounting, unless the modification meets all of the exception criteria noted above. As a result, the modification would be treated as an exchange of the original award for a new award, with any incremental fair value being treated as additional compensation cost.

Pending Adoption as of March 31, 2018

In February 2016, the FASB issued ASC 842, which originally stated that companies would be required to bifurcate certain lease revenues between lease and non-lease components, however, the FASB issued an exposure draft in January 2018 (the "2018 Exposure Draft") which, if adopted as written, would allow lessors a practical expedient by class of underlying assets to account for lease and non-lease components as a single lease component if certain criteria are met. Additionally, only incremental direct leasing costs may be capitalized under this new guidance, which is consistent with the Company’s existing policies. ASU 842 originally required a modified retrospective method of adoption, however, the 2018 Exposure Draft indicates that companies may be permitted to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The pronouncement allows some optional practical expedients.

From a lessor perspective the Company expects that the new standard will impact the presentation of lease and non-lease components of revenue such as rent, and operating expense reimbursements including common area maintenance, taxes, and insurance from leases for which the Company is a lessor. The Company does not expect this guidance to impact its existing lessor revenue recognition pattern.

The Company is a lessee for 19 of its properties for which it has ground leases as of March 31, 2018. For these leases, the Company will be required to record a right-of-use asset and lease liability equal to the present value of the remaining lease payments upon adoption of this update. The new standard requires lessees to apply a dual lease classification approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today.

The Company is continuing to evaluate any differences in the timing, measurement, or presentation of lessor revenues as well as the impact of the new lessee accounting model on the Company’s consolidated financial position, results of operations and disclosures.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which changes how entities measure credit losses for financial assets carried at amortized cost. The update eliminates the requirement that a credit loss must be probable before it can be recognized and instead requires an entity to recognize the current estimate of all expected credit losses. Additionally, the update requires credit losses on available-for-sale debt securities to be carried as an allowance rather than as a direct write-down of the asset. The amendments become effective for reporting periods beginning after December 15, 2019. Early adoption is permitted for reporting periods beginning after December 15, 2018. The Company is currently evaluating the impact of this new guidance.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Non-Controlling Interests with a Scope Exception guidance that changes the method to determine the classification of certain financial instruments with a down round feature as liabilities or equity instruments and clarify existing disclosure requirements for equity-classified instruments. A down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. As a result, a freestanding equity-linked financial instrument no longer would be accounted for as a derivative liability, rather, an entity that presents earnings per share is required to recognize the effect of the down round feature when it is triggered. That effect is treated as a dividend and as a reduction of income available to common shareholders in basic EPS. Convertible instruments with embedded conversion options that have down round features are now subject to the specialized guidance for contingent beneficial conversion features. The revised guidance is effective for annual periods and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted, including adoption in an interim period. Adoption should be applied retrospectively to outstanding financial instruments

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

with a down round feature with a cumulative-effect adjustment to the statement of financial position. The Company is currently evaluating the impact of this new guidance.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The purpose of this updated guidance is to better align a company’s financial reporting for hedging activities with the economic objectives of those activities. The transition guidance provides companies with the option of early adopting the new standard using a modified retrospective transition method in any interim period after issuance of the update, or alternatively requires adoption for fiscal years beginning after December 15, 2018. This adoption method will require the Company to recognize the cumulative effect of initially applying the ASU as an adjustment to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that the Company adopts the update. The Company is currently assessing the potential impacts of this new standard.

Note 3 — Real Estate Investments

The Company owned 190 properties as of March 31, 2018. The Company invests in MOBs, seniors housing communities and other healthcare-related facilities primarily to expand and diversify its portfolio and revenue base.

During the quarter ended March 31, 2018, the Company, through wholly-owned subsidiaries of the OP, completed its acquisitions of four single tenant MOBs, one multi-tenant MOB, and acquired a parcel of land attached to an existing investment property for an aggregate contract purchase price of $17.4 million. Additionally, the Company incurred construction in progress costs during the period of $2.9 million. The following table presents the allocation of real estate assets acquired and liabilities assumed during the quarter ended March 31, 2018 as well as capitalized construction in progress during the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
(In thousands)	2018			2017
Real estate investments, at cost:
Land	$	3,169		$	—
Buildings, fixtures and improvements	12,615			—
Construction in progress	2,919			2,844
Total tangible assets	18,703			2,844
Acquired intangibles:
In-place leases ⁽¹⁾	1,633			—
Market lease and other intangible assets ⁽¹⁾	30			—
Market lease liabilities ⁽¹⁾	(55		)	—
Total intangible assets and liabilities	1,608			—
Cash paid for acquired real estate investments	$	20,311		$	2,844
Number of properties purchased	5			—

_______________


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

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The following table presents future minimum base rental cash payments due to the Company over the next five years and thereafter as of March 31, 2018. These amounts exclude contingent rent payments, as applicable, that may be collected from certain tenants based on provisions related to performance thresholds and increases in annual rent based on exceeding certain economic indexes, among other items.



(In thousands)	Future Minimum Base Rent Payments
April 1, 2018 - December 31, 2018	$	67,893
2019	87,524
2020	82,331
2021	76,588
2022	69,838
Thereafter	312,440
Total	$	696,614

As of March 31, 2018 and 2017, the Company did not have any tenants (including for this purpose, all affiliates of such tenants) whose annualized rental income on a straight-line basis represented 10% or greater of total annualized rental income for the portfolio on a straight-line basis. The following table lists the states where the Company had concentrations of properties where annualized rental income on a straight-line basis represented 10% or more of consolidated annualized rental income on a straight-line basis for all properties as of March 31, 2018 and 2017:



	March 31,
State	2018	2017
Florida	16.1%	19.4%
Georgia	*	10.2%
Iowa	*	10.5%
Michigan	12.4%	*
Pennsylvania	*	12.0%

_______________


*	State's annualized rental income on a straight-line basis was not greater than 10% of total annualized rental income for all portfolio properties as of the date specified.

Intangible Assets and Liabilities

Acquired intangible assets and liabilities consisted of the following as of the periods presented:



	March 31, 2018						December 31, 2017
(In thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Intangible assets:
In-place leases	$	217,085	$	135,581	$	81,504	$	215,453	$	130,749	$	84,704
Market lease assets	30,666		8,419		22,247		30,636		7,853		22,783
Other intangible assets	10,589		904		9,685		10,589		838		9,751
Total acquired intangible assets	$	258,340	$	144,904	$	113,436	$	256,678	$	139,440	$	117,238
Intangible liabilities:
Market lease liabilities	$	26,011	$	7,655	$	18,356	$	25,956	$	7,127	$	18,829

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The following table discloses amounts recognized within the consolidated statements of operations and comprehensive loss related to amortization of in-place leases and other intangible assets, amortization and accretion of above- and below-market lease assets and liabilities, net and the amortization and accretion of above- and below-market ground leases, for the periods presented:



	Three Months Ended March 31,
(In thousands)	2018		2017
Amortization of in-place leases and other intangible assets ⁽¹⁾	$	4,898	$	5,536
Amortization and (accretion) of above- and below-market leases, net ⁽²⁾	$	1	$	(153	)
Amortization and (accretion) of above- and below-market ground leases, net ⁽³⁾	$	37	$	43

_______________


⁽¹⁾	Reflected within depreciation and amortization expense


⁽²⁾	Reflected within rental income


⁽³⁾	Reflected within property operating and maintenance expense

The following table provides the projected amortization expense and adjustments to revenues for the next five years:



(In thousands)	April 1, 2018 - December 31, 2018			2019			2020			2021			2022
In-place lease assets	$	18,164		$	14,242		$	12,083		$	9,746		$	7,934
Other intangible assets	459			568			414			414			414
Total to be added to amortization expense	$	18,623		$	14,810		$	12,497		$	10,160		$	8,348

Above-market lease assets	$	(1,379	)	$	(1,603	)	$	(1,265	)	$	(912	)	$	(561	)
Below-market lease liabilities	1,419			1,652			1,495			1,345			1,315
Total to be added to rental income	$	40		$	49		$	230		$	433		$	754

Below-market ground lease assets	$	159		$	212		$	212		$	212		$	212
Above-market ground lease liabilities	(49		)	(65		)	(65		)	(65		)	(63		)
Total to be added to property operating and maintenance expense	$	110		$	147		$	147		$	147		$	149

Assets Held for Sale

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The following table details the major classes of assets associated with the properties that have been classified as held for sale as of March 31, 2018 and December 31, 2017:



(In thousands)	Amount
Real estate held for sale, at cost:
Land	$	3,131
Buildings, fixtures and improvements	38,596
Total real estate held for sale, at cost	41,727
Less accumulated depreciation and amortization	(3,870		)
Real estate assets held for sale, net	37,857
Impairment charges related to properties reclassified as held for sale	(35		)
Assets held for sale	$	37,822

Impairment of Held for Use Real Estate Investments

As of March 31, 2018, the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators. As a result, the Company evaluated the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended holding period. The Company primarily used an undiscounted cash flow approach to estimate the future cash flows expected to be generated. The Company made certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessment of terminal values. As these factors are difficult to predict and are subject to future events that may alter management's assumptions, the future cash flows estimated by management in its impairment analysis may not be achieved, and actual losses for impairment may be realized in the future.

For some of these held for use properties, the Company used a broker opinion of value to estimate future cash flows expected to be generated. The Company made certain assumptions in this approach as well, mainly that the sale of these properties would close at this value and within a specified time in the future. There can be no guarantee that the sales of these properties would close under these terms or at all.

As a result of its consideration of impairment, the Company determined that the carrying value of one held for use property exceeded its estimated undiscounted cash flows and recognized an aggregate impairment charge of $0.7 million, which is included on the consolidated statement of operations and comprehensive loss for the three ended March 31, 2018. The estimated undiscounted cash flows of the remaining properties evaluated were greater than their carrying value.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Note 4 — Mortgage Notes Payable

The following table reflects the Company's mortgage notes payable as of March 31, 2018 and December 31, 2017:



		Outstanding Loan Amount as of						Effective Interest Rate as of
Portfolio	Encumbered Properties ⁽¹⁾	March 31, 2018			December 31, 2017			March 31, 2018			Interest Rate		Maturity
		(In thousands)			(In thousands)
Countryside Medical Arts - Safety Harbor, FL	1	$	5,752		$	5,773		4.98	%		Variable		Apr. 2019
St. Andrews Medical Park - Venice, FL	3	6,357			6,381			4.98	%		Variable		Apr. 2019
Palm Valley Medical Plaza - Goodyear, AZ	1	3,301			3,327			4.15	%		Fixed		Jun. 2023
Medical Center V - Peoria, AZ	1	3,044			3,066			4.75	%		Fixed		Sep. 2023
Courtyard Fountains - Gresham, OR	1	24,254			24,372			3.87	%		Fixed		Jan. 2020
Fox Ridge Bryant - Bryant, AR	1	7,531			7,565			3.98	%		Fixed		May 2047
Fox Ridge Chenal - Little Rock, AR	1	17,200			17,270			3.98	%		Fixed		May 2049
Fox Ridge North Little Rock - North Little Rock, AR	1	10,672			10,716			3.98	%		Fixed		May 2049
Philip Professional Center - Lawrenceville, GA	2	4,871			4,895			4.00	%		Fixed		Oct. 2019
MOB Loan	32	250,000			250,000			4.44	%		Fixed	⁽³⁾	June 2022
Bridge Loan	16	20,271			82,000			4.13	%		Variable		Dec. 2018
Gross mortgage notes payable	60	353,253			415,365			4.35	%	⁽²⁾
Deferred financing costs, net of accumulated amortization		(6,861		)	(7,625		)
Mortgage premiums and discounts, net		(1,179		)	(1,110		)
Mortgage notes payable, net		$	345,213		$	406,630

_______________

⁽¹⁾

Does not include real estate assets mortgaged to secure advances under the Fannie Mae Master Credit Facilities (as defined below) or eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility. The equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease these real estate assets have been pledged for the benefit of the lenders thereunder. See Note 5 — Credit Facilities for further details.


⁽²⁾	Calculated on a weighted average basis for all mortgages outstanding as of March 31, 2018.


⁽³⁾	Variable rate loan which is fixed as a result of entering into interest rate swap agreements. Note 7 — Derivatives and Hedging Activities.

As of March 31, 2018, the Company had pledged $805.4 million in total real estate investments, at cost, as collateral for its $353.3 million of mortgage notes payable. This real estate is not available to satisfy other debts and obligations unless first satisfying the mortgage notes payable secured by these properties. The Company makes payments of principal and interest, or interest only, depending upon the specific requirements of each mortgage note, on a monthly basis.

Some of the Company's mortgage note agreements (including the MOB Loan) require compliance with certain property-level financial covenants, including debt service coverage ratios. As of March 31, 2018, the Company was in compliance with these financial covenants.

MOB Loan

On June 30, 2017, Capital One, National Association ("Capital One"), as administrative agent and lender, and certain other lenders, made a loan in the aggregate amount of $250.0 million (the “MOB Loan”) to certain subsidiaries of the OP. As of March 31, 2018, there was $250.0 million outstanding under the MOB Loan.

Bridge Loan

On December 28, 2017, 23 wholly owned subsidiaries (the “Borrowers”) of the OP entered into a loan agreement (the “Bridge Loan Agreement”) with Capital One, as administrative agent and lender.

The Bridge Loan Agreement provides for a $82.0 million loan (the “Bridge Loan”) with a floating interest rate equal to one-month LIBOR plus 2.5% per annum and a maturity date of December 28, 2019. Subject to meeting certain conditions, including a minimum debt yield and debt service coverage ratio, the Borrowers have the right to extend the maturity date for one year.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The Bridge Loan may be prepaid at any time in whole or in part, subject to certain conditions and limitations. Upon repayment of all or any part of the principal of the Bridge Loan, whether as a prepayment or as a repayment at maturity, the Borrowers are obligated to pay to an exit fee of: (i) 2.0% of the principal amount with respect to the aggregate of approximately $63.0 million principal amount allocated under the Bridge Loan to the seven mortgaged properties that have been identified for refinancing through Fannie Mae or Freddie Mac, and (ii) 1.0% of the principal amount with respect to the aggregate of approximately $19.0 million principal amount allocated under the Bridge Loan to the other sixteen mortgaged properties. No exit fee will be due or payable: (i) with respect to any portion of the Bridge Loan refinanced through Fannie Mae’s Multifamily MBS program with Capital One or one of its affiliates acting as agent, originator or seller, (ii) with respect to any portion of the Bridge Loan that is not refinanced through Fannie Mae’s Multifamily MBS program due to the program no longer being available under applicable law or because the applicable mortgaged property being refinanced does not qualify for financing through the program, or (iii) with respect to any prepayment in connection with a casualty or a condemnation.

On March 2, 2018, the Company used $64.2 million of advances under a Fannie Mae Master Credit Facility with Capital One to prepay a portion of the Bridge Loan (see Note 5 — Credit Facilities for more information). Concurrent with this prepayment the seven mortgaged properties that were identified for refinancing at the time the Bridge Loan was entered, were added to the collateral pool securing the Fannie Mae Master Credit Facility with Capital One.

Future Principal Payments

The following table summarizes the scheduled aggregate principal payments on mortgage notes payable for the five years subsequent to March 31, 2018 and thereafter:



(In thousands)	Future Principal Payments
April 1, 2018 - December 31, 2018	$	21,422
2019	18,078
2020	24,279
2021	892
2022	250,928
Thereafter	37,654
Total	$	353,253

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Note 5 — Credit Facilities

The Company had the following credit facilities outstanding as of March 31, 2018 and December 31, 2017:



			Outstanding Facility Amount as of				Effective Interest Rate
Credit Facility	Encumbered Properties ⁽¹⁾		March 31, 2018		December 31, 2017		March 31, 2018			December 31, 2017			Maturity
			(In thousands)		(In thousands)
Revolving Credit Facility	54	⁽²⁾	$	239,700	$	239,700	3.66	%		3.33	%		Mar. 2019
Fannie Mae Master Credit Facilities:
Capital One Facility	12	⁽³⁾	216,614		152,461		4.12	%		3.88	%		Nov. 2026
KeyBank Facility	10	⁽⁴⁾	142,708		142,708		4.19	%		3.89	%		Nov. 2026
Total Fannie Mae Master Credit Facilities			359,322		295,169
Total Credit Facilities	76		$	599,022	$	534,869	3.95	%	⁽⁵⁾	3.63	%	⁽⁵⁾

_______________


⁽¹⁾	Encumbered as of March 31, 2018.


⁽²⁾	The equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base of the Revolving Credit Facility have been pledged for the benefit of the lenders thereunder.


⁽³⁾	Secured by first-priority mortgages on 12 of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan as of March 31, 2018.


⁽⁴⁾	Secured by first-priority mortgages on 10 of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa as of March 31, 2018.


⁽⁵⁾	Calculated on a weighted average basis for all credit facilities outstanding as of March 31, 2018 and December 31, 2017.

Revolving Credit Facility

On March 21, 2014, the Company entered into a senior secured revolving credit facility (as amended from time to time, the "Revolving Credit Facility"). The Revolving Credit Facility is secured by a pledged pool of the equity interests and related rights in the Company's wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base thereunder.

The Revolving Credit Facility allows for committed borrowings of up to $565.0 million. The Revolving Credit Facility also contains a sub-facility for letters of credit of up to $25.0 million and an "accordion" feature to allow the Company, under certain circumstances and at the discretion of the participating lenders, to increase the aggregate borrowings under the Revolving Credit Facility to a maximum of $750.0 million.

The Company has the option, to have the Revolving Credit Facility priced at either: (a) LIBOR, plus an applicable margin that ranges, depending on the Company's leverage, from 1.60% to 2.20%; or (b) the Base Rate, plus an applicable margin that ranges, depending on the Company's leverage, from 0.35% to 0.95%. The Base Rate is defined in the Revolving Credit Facility as the greater of (i) the fluctuating annual rate of interest announced from time to time by the lender as its “prime rate,” (ii) 0.5% above the federal funds effective rate or (iii) the applicable one-month LIBOR plus 1.0%.

The Revolving Credit Facility requires the Company to meet certain financial covenants. As of March 31, 2018, the Company was in compliance with the financial covenants under the Revolving Credit Facility.

Fannie Mae Master Credit Facilities

On October 31, 2016, the Company, through wholly-owned subsidiaries of the OP, entered into a master credit facility agreement (the “KeyBank Credit Agreement”) relating to a secured credit facility (the "Key Bank Facility") with KeyBank National Association (“KeyBank”) and a master credit facility agreement (the “Capital One Credit Agreement” and, together with the KeyBank Credit Agreement, the “Fannie Mae Master Credit Agreements”) for a secured credit facility (the "Capital One Facility" the Capital One Facility and the Key Bank Facility are referred to herein individually as a "Fannie Mae Master Credit Facility" and together as the "Fannie Mae Master Credit Facilities") with Capital One Multifamily Finance, LLC (an affiliate of Capital One). Advances made under the Fannie Mae Master Credit Agreements are assigned by Capital One and KeyBank to Fannie Mae at closing for inclusion in Fannie Mae’s Multifamily MBS program.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Effective October 31, 2016, in conjunction with the execution of the Fannie Mae Master Credit Facilities, the OP entered into two interest rate cap agreements (the "IR Caps") with an unrelated third party, which caps interest paid on amounts outstanding under the Fannie Mae Master Credit Facilities at a maximum of 3.5%. See Note 7 — Derivatives and Hedging Activities for further disclosure over the Company's derivatives.

The Company may request future advances under the Fannie Mae Master Credit Facilities by borrowing against the value of the initial mortgaged properties, as described below, or by adding eligible properties to the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. During the year ended December 31, 2017, the Company increased its advances under the Capital One Facility and the KeyBank Facility to $152.5 million and $142.7 million, respectively. On March 2, 2018, the Company, increased its advances under the Capital One Facility by $64.2 million. The advance was secured by the addition of seven mortgaged properties subject to the Capital One Facility. All of the $61.7 million of the net proceeds, after closing costs, of the advance was used by the Company to prepay a portion of the Bridge Loan.

As of March 31, 2018, approximately $216.6 million was outstanding under the Fannie Mae Master Credit Facility. The Capital One Facility is secured by first-priority mortgages on twelve of the Company’s seniors housing properties located in Florida, Georgia, Iowa and Michigan. The KeyBank Facility is secured by first-priority mortgages on ten of the Company’s seniors housing properties located in Michigan, Missouri, Kansas, California, Florida, Georgia and Iowa.

Note 6 — Fair Value of Financial Instruments

GAAP establishes a hierarchy of valuation techniques based on the observability of inputs used in measuring financial instruments at fair value. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The three levels of the hierarchy are described below:

Level 1 — Quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the entire contractual term of the asset or liability.

Level 3 — Unobservable inputs that reflect the entity's own assumptions that market participants would use in the pricing of the asset or liability and are consequently not based on market activity, but rather through particular valuation techniques.

The determination of where an asset or liability falls in the hierarchy requires significant judgment and considers factors specific to the asset or liability. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company evaluates its hierarchy disclosures each quarter and depending on various factors, it is possible that an asset or liability may be classified differently from quarter to quarter. However, the Company expects that changes in classifications between levels will be rare.

Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of March 31, 2018, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company's derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.

The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments, are incorporated into the fair values to account for the Company's potential nonperformance risk and the performance risk of the counterparties.

The Company also had impaired real estate investments held for use, which were carried at fair value on a non-recurring basis on the consolidated balance sheet as of March 31, 2018. As of March 31, 2018, the Company owned held for use properties for which the Company had reconsidered the projected cash flows due to various performance indicators. As a result, the Company evaluated the impact on its ability to recover the carrying value of such properties based on the expected cash flows over its intended

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

holding period. The Company primarily used an undiscounted cash flow approach to estimate the future cash flows expected to be generated. As a result of this evaluation and its consideration of impairment, the Company determined that the carrying value of one held for use property exceeded its estimated undiscounted cash flows and recognized an impairment charge of $0.7 million, which is included on the consolidated statement of operations and comprehensive loss for the three months ended March 31, 2018. The Company made certain assumptions in this approach including, among others, the market and economic conditions, expected cash flow projections, intended holding periods and assessment of terminal values, all of which are unobservable inputs. As a result, the impaired property that the Company evaluated using this approach is classified in Level 3 of the fair value hierarchy.

The following table presents information about the Company's assets and liabilities measured at fair value as of March 31, 2018 and December 31, 2017, aggregated by the level in the fair value hierarchy within which those instruments fall.



(In thousands)	Basis of Measurement	Quoted Prices in Active Markets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3		Total
March 31, 2018
Derivatives, net	Recurring	$	—	$	6,823	$	—	$	6,823
Impaired assets held for use	Non-recurring	—		—		5,189		5,189
Impaired assets held for sale	Non-recurring	—		1,323		—		1,323
Total		$	—	$	8,146	$	5,189	$	13,335

December 31, 2017
Derivatives, net	Recurring	$	—	$	2,550	$	—	$	2,550
Impaired assets held for sale	Non-recurring	—		1,323		—		1,323
		$	—	$	3,873	$	—	$	3,873

A review of the fair value hierarchy classification is conducted on a quarterly basis. Changes in the type of inputs may result in a reclassification for certain assets. There were no transfers between Level 1 and Level 2 of the fair value hierarchy during the quarter ended March 31, 2018.

The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of short-term financial instruments such as cash and cash equivalents, restricted cash, straight-line rent receivable, net, prepaid expenses and other assets, deferred costs, net, accounts payable and accrued expenses, deferred rent and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature. The fair values of the Company's remaining financial instruments that are not reported at fair value on the consolidated balance sheets are reported below:



		March 31, 2018				December 31, 2017
(In thousands)	Level	Carrying Amount ⁽¹⁾		Fair Value		Carrying Amount ⁽¹⁾		Fair Value
Gross mortgage notes payable and mortgage premium and discounts, net	3	$	352,074	$	348,619	$	414,255	$	411,749
Revolving Credit Facility	3	$	239,700	$	239,700	$	239,700	$	239,700
Fannie Mae Master Credit Facilities	3	$	359,322	$	360,976	$	295,169	$	296,151

⁽¹⁾ Carrying value includes mortgage notes payable of $353.3 million and $415.4 million and mortgage premiums and (discounts), net of $(1.2) million and $(1.1) million as of March 31, 2018 and December 31, 2017, respectively.

The fair value of the mortgage notes payable is estimated using a discounted cash flow analysis, based on the Advisor's experience with similar types of borrowing arrangements. Advances under the Revolving Credit Facility and Fannie Mae Master Credit Facilities are considered to be reported at fair value, because their interest rates vary with changes in LIBOR and there has not been a significant change in credit risk of the Company or credit markets since origination.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Note 7 — Derivatives and Hedging Activities

Risk Management Objective of Using Derivatives

The Company may use derivative financial instruments, including interest rate swaps, caps, collars, options, floors and other interest rate derivative contracts, to hedge all or a portion of the interest rate risk associated with its borrowings.

The principal objective of such arrangements is to minimize the risks and/or costs associated with the Company's operating and financial structure as well as to hedge specific anticipated transactions. Additionally, in using interest rate derivatives, the Company aims to add stability to interest expense and to manage its exposure to interest rate movements. The Company does not intend to utilize derivatives for speculative purposes or purposes other than interest rate risk management. The use of derivative financial instruments carries certain risks, including the risk that the counterparties to these contractual arrangements are not able to perform under the agreements. To mitigate this risk, the Company only enters into derivative financial instruments with counterparties with high credit ratings and with major financial institutions with which the Company, and its affiliates, may also have other financial relationships. The Company does not anticipate that any of the counterparties will fail to meet their obligations.

The table below presents the fair value of the Company’s derivative financial instruments as well as their classification on the consolidated balance sheets as of March 31, 2018 and December 31, 2017:



(In thousands)	Balance Sheet Location	March 31, 2018		December 31, 2017
Derivatives designated as hedging instruments:
Interest rate swaps	Derivative assets, at fair value	$	6,437	$	2,473
Derivatives not designated as hedging instruments:
Interest rate caps	Derivative assets, at fair value	$	386	$	77

Cash Flow Hedges of Interest Rate Risk

The Company currently has two interest rate swaps that are designated as cash flow hedges. The interest rate swaps are used as part of the Company's interest rate risk management strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount. During the first quarter of 2018, such derivatives were used to hedge the variable cash flows associated with variable-rate debt.

The effective portion of changes in the fair value of derivatives designated and that qualify as cash flow hedges is recorded in accumulated other comprehensive income and is subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. During the first quarter of 2018, such derivatives were used to hedge the variable cash flows associated with variable-rate debt. The ineffective portion of the change in fair value of the derivatives is recognized directly in earnings.

Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to interest expense as interest payments are made on the Company’s variable-rate debt. During the next 12 months, from April 1, 2018 through March 31, 2019, the Company estimates that $0.6 million will be reclassified from other comprehensive income as a decrease to interest expense.

As of March 31, 2018 and December 31, 2017, the Company had the following derivatives that were designated as cash flow hedges of interest rate risk.

March 31, 2018

December 31, 2017

Interest Rate Derivative

Number of Instruments

Notional Amount

Number of Instruments

Notional Amount

(In thousands)

Interest rate swap

250,000

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)



	Three Months Ended March 31,
(In thousands)	2018
Amount of gain recognized in accumulated other comprehensive income on interest rate derivatives (effective portion)	$	3,790
Amount of loss reclassified from accumulated other comprehensive income into income as interest expense	$	(174	)

Non-Designated Derivatives

These derivatives are used to manage the Company's exposure to interest rate movements, but do not meet the strict hedge accounting requirements to be classified as hedging instruments. Changes in the fair value of derivatives not designated as hedges under a qualifying hedging relationship are recorded directly to net income (loss) and was a gain of $0.2 million.

The Company had the following outstanding interest rate derivatives that were not designated as hedges in qualified hedging relationships as of March 31, 2018 and December 31, 2017:

March 31, 2018

December 31, 2017

Interest Rate Derivative

Number of Instruments

Notional Amount

Number of Instruments

Notional Amount

(In thousands)

Interest rate caps

359,322

295,169

Offsetting Derivatives

The table below presents a gross presentation, the effects of offsetting, and a net presentation of the Company’s derivatives as of March 31, 2018 and December 31, 2017. The net amounts of derivative assets or liabilities can be reconciled to the tabular disclosure of fair value. The tabular disclosure of fair value provides the location that derivative assets and liabilities are presented on the Consolidated Balance Sheet.



									Gross Amounts Not Offset in the Consolidated Balance Sheet
(In thousands)	Gross Amounts of Recognized Assets		Gross Amounts of Recognized (Liabilities)		Gross Amounts Offset in the Consolidated Balance Sheet		Net Amounts of Assets presented in the Consolidated Balance Sheet		Financial Instruments		Cash Collateral Received		Net Amount
March 31, 2018	$	6,823	$	—	$	—	$	6,823	$	—	$	—	$	6,823
December 31, 2017	$	2,550	$	—	$	—	$	2,550	$	—	$	—	$	2,550

Credit-risk-related Contingent Features

The Company has agreements in place with each of its derivative counterparties that contain a provision where if the Company either defaults or is capable of being declared in default on any of its indebtedness, then the Company could also be declared in default on its derivative obligations.

As of March 31, 2018, there were no derivatives with a fair value in a net liability position, including accrued interest but excluding any adjustment for nonperformance risk related to these agreements. As of March 31, 2018, the Company has not posted any collateral related to these agreements and was not in breach of any agreement provisions. If the Company had breached any of these provisions, it could have been required to settle its obligations under the agreements at their aggregate termination value.

Note 8 — Common Stock

As of March 31, 2018 and December 31, 2017, the Company had 91.3 million and 91.0 million shares of common stock outstanding, respectively, including unvested restricted shares and shares issued pursuant to the Company's distribution reinvestment plan ("DRIP"), net of shares repurchases. As of March 31, 2018 and December 31, 2017, the Company had received total net proceeds from its initial public offering (the "IPO") and DRIP, net of shares repurchases, of $2.2 billion.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

In April 2013, the Company's board of directors (the "Board") authorized, and the Company began paying distributions on a monthly basis at a rate equivalent to $1.70 per annum, per share of common stock, which began in May 2013. In March 2017, the Board authorized a decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of April 1, 2017, to a rate equivalent to $1.45 per annum per share of common stock. On February 20, 2018, the Board authorized a further decrease in the rate at which the Company pays monthly distributions to stockholders, effective as of March 1, 2018, to a rate equivalent to $0.85 per annum per share of common stock.

Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month. Distribution payments are dependent on the availability of funds. The Board may further reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

On March 29, 2018, the independent directors of the Board approved an updated estimate of per-share net asset value ("Estimated Per-Share NAV") as of December 31, 2017, which was published on April 4, 2018. The Company intends to publish Estimated Per-Share NAV periodically at the discretion of the Company's Board, provided that such estimates will be made at least once annually.

Share Repurchase Program

Under the Company's SRP, as amended from time to time stockholders are able to sell their shares to the Company in limited circumstances. The SRP permits investors to sell their shares back to the Company after they have held them for at least one year, subject to the significant conditions and limitations described below.

Beginning on April 7, 2016 (the "Original NAV Pricing Date"), the price per share that the Company will pay to repurchase its shares would have been prior to amendment and restatement of the SRP effective in July 2017 as described below, equal to its Estimated Per-Share NAV multiplied by a percentage equal to:


•	92.5%, if the person seeking repurchase has held his or her shares for a period greater than one year and less than two years;


•	95.0%, if the person seeking repurchase has held his or her shares for a period greater than two years and less than three years;


•	97.5%, if the person seeking repurchase has held his or her shares for a period greater than three years and less than four years; or


•	100.0% if the person seeking repurchase has held his or her shares for a period greater than four years.

In cases of requests for death and disability, the repurchase price is equal to Estimated Per-Share NAV at the time of repurchase.

Repurchases of shares of the Company's common stock, when requested, are at the sole discretion of the Board. Until the First SRP Amendment (described below), the Company limited the number of shares repurchased during any calendar year to 5% of the weighted average number of shares of common stock outstanding on December 31st of the previous calendar year. In addition, the Company was only authorized to repurchase shares in a given quarter up to the amount of proceeds received from its DRIP in that same quarter.

On January 26, 2016, the Board approved and amended the SRP (the "First SRP Amendment") to supersede and replace the existing SRP. Under the First SRP Amendment, repurchases of shares of the Company's common stock, when requested, are at the sole discretion of the Board and generally will be made semiannually (each six-month period ending June 30 or December 31, a “fiscal semester”). Repurchases for any fiscal semester will be limited to a maximum of 2.5% of the weighted average number of shares of common stock outstanding during the previous fiscal year (the "Prior Year Outstanding Shares"), with a maximum for any fiscal year of 5.0% of the Prior Year Outstanding Shares. In addition, the Company is only authorized to repurchase shares in a given fiscal semester up to the amount of proceeds received from its DRIP in that same fiscal semester. If an updated Estimated Per-Share NAV is published during any fiscal semester, any repurchase requests received during such fiscal semester will be paid at the applicable Estimated Per-Share NAV then in effect.

On June 14, 2017, the Board approved and adopted an amended and restated SRP that superseded and replaced the existing SRP, effective as of July 14, 2017. Under the amended and restated SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of our common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions would be considered for repurchase. Other terms and provisions of the amended and restated SRP remained consistent with the existing SRP.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

When a stockholder requests redemption and redemption is approved by the Company's board of directors, the Company will reclassify such obligation from equity to a liability based on the settlement value of the obligation. Shares repurchased under the SRP have the status of authorized but unissued shares. The following table reflects the number of shares repurchased cumulatively through March 31, 2018:



	Number of Shares Repurchased	Average Price per Share
Cumulative repurchases as of December 31, 2017 ⁽¹⁾	2,529,798	$	22.43
Three months ended March 31, 2018⁽²⁾	373,967	$	21.45
Cumulative repurchases as of March 31, 2018	2,903,765	$	22.30

_______________

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

⁽²⁾ Includes 373,967 shares repurchased during January 2018 with respect to requests received following the death or qualifying disability of stockholders during the six months ended December 31, 2017 for approximately $8.0 million at a weighted average price per share of $21.45.

Tender Offer

On March 13, 2018, the Company announced a tender offer (the "Tender Offer") to purchase up to 2.0 million shares of the Company’s common stock for cash at a purchase price equal to $13.15 per share with the proration period and withdrawal rights expiring on April 12, 2018. The Company made the Tender Offer in response to an unsolicited offer to stockholders commenced on February 27, 2018. On April 4, 2018 and April 16, 2018 the Tender Offer was amended to reduce the number of shares the Company was offering to purchase to 230,000 shares and extend the expiration date to May 1, 2018. The Tender Offer expired in accordance with its terms on May 1, 2018. In accordance with the terms of the Tender Offer, we accepted for purchase 229,999 shares for a total cost of approximately $3.0 million. See Note 17 — Subsequent Events for further discussion on the Tender Offer.

Distribution Reinvestment Plan

Pursuant to the DRIP, stockholders may elect to reinvest distributions by purchasing shares of common stock in lieu of receiving cash. No dealer manager fees or selling commissions are paid with respect to shares purchased under the DRIP. The shares purchased pursuant to the DRIP have the same rights and are treated in the same manner as the shares issued pursuant to the IPO. The Board may designate that certain cash or other distributions be excluded from reinvestment pursuant to the DRIP. The Company has the right to amend any aspect of the DRIP or terminate the DRIP with ten days' notice to participants. Shares issued under the DRIP are recorded as equity in the accompanying consolidated balance sheet in the period distributions are declared. During the quarter ended March 31, 2018, the Company issued 0.6 million shares of common stock pursuant to the DRIP, generating aggregate proceeds of $13.4 million.

The Company offers shares pursuant to the DRIP at the then-current Estimated Per-Share NAV approved by the Company's board of directors.

Note 9 — Related Party Transactions and Arrangements

As of March 31, 2018 and December 31, 2017, the Special Limited Partner owned 8,888 shares of the Company's outstanding common stock. The Advisor and its affiliates may incur and pay costs and fees on behalf of the Company. As of March 31, 2018 and December 31, 2017, the Advisor held 90 partnership units in the OP designated as "OP Units" ("OP Units").

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Realty Capital Securities, LLC (the "Former Dealer Manager") served as the dealer manager of the IPO. American National Stock Transfer, LLC ("ANST"), a subsidiary of the parent company of the Former Dealer Manager, provided other general professional services through January 2016. RCS Capital Corporation ("RCAP"), the parent company of the Former Dealer Manager and certain of its affiliates that provided the Company with services, filed for Chapter 11 bankruptcy protection in January 2016, prior to which it was also under common control with AR Global, the parent of the Sponsor. In May 2016, RCAP and its affiliated debtors emerged from bankruptcy under the new name Aretec Group, Inc. On March 8, 2017, the creditor trust established in connection with the RCAP bankruptcy filed suit against AR Global, the Advisor, advisors of other entities sponsored by AR Global, and AR Global’s principals (including Mr. Weil, a member of the Board). The suit alleges, among other things, certain breaches of duties to RCAP. The Company is not named in the suit, nor are there any allegations related to the services the Advisor provides to the Company. On May 26, 2017, the defendants moved to dismiss. On November 30, 2017, the Court issued an opinion partially granting the defendants’ motion. The Advisor has informed the Company that it believes that the suit is without merit and intends to defend against it vigorously.

The limited partnership agreement of the OP provides for a special allocation, solely for tax purposes, of excess depreciation deductions of up to $10.0 million to the Company's Advisor, a limited partner of the OP. In connection with this special allocation, the Company's Advisor has agreed to restore a deficit balance in its capital account in the event of a liquidation of the OP and has agreed to provide a guaranty or indemnity of indebtedness of the OP.

Fees Incurred in Connection with the Operations of the Company

On February 17, 2017, the members of a special committee of the Board unanimously approved certain amendments to the Amended and Restated Advisory Agreement, as amended (the "Original A&R Advisory Agreement"), by and among the Company, the OP and the Advisor (the "Second A&R Advisory Agreement"). The Second A&R Advisory Agreement, which superseded the Original A&R Advisory Agreement, took effect on February 17, 2017. The initial term of the Second A&R Advisory Agreement is ten years beginning on February 17, 2017, and is automatically renewable for another ten-year term upon each ten-year anniversary unless the Second A&R Advisory Agreement is terminated (i) with notice of an election not to renew at least 365 days prior to the applicable tenth anniversary, (ii) in accordance with a change of control or a transition to self-management (see the section titled "Termination Fees" included within this footnote), (iii) by 67% of the independent directors of the Board for cause, without penalty, with 45 days' notice or (iv) with 60 days prior written notice by the Advisor for (a) a failure to obtain a satisfactory agreement for any successor to the Company to assume and agree to perform obligations under the Second A&R Advisory Agreement or (b) any material breach of the Second A&R Advisory Agreement of any nature whatsoever by the Company.

Acquisition Fees

Under the Original A&R Advisory Agreement and until February 17, 2017, the Advisor was paid an acquisition fee equal to 1.0% of the contract purchase price of each acquired property and 1.0% of the amount advanced for a loan or other investment. The Advisor was also reimbursed for services provided for which it incurred investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses was not permitted to exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimbursed the Advisor for third party acquisition expenses. The aggregate amount of acquisition fees and financing coordination fees (as described below) could not exceed 1.5% of the contract purchase price and the amount advanced for a loan or other investment for all the assets acquired. As of March 31, 2018, aggregate acquisition fees and financing fees did not exceed the 1.5% threshold. In no event was the total of all acquisition fees, acquisition expenses and any financing coordination fees payable with respect to the Company's portfolio of investments or reinvestments permitted to exceed 4.5% of the contract purchase price of the Company's portfolio to be measured at the close of the acquisition phase or 4.5% of the amount advanced for all loans or other investments. As of March 31, 2018, the total of all cumulative acquisition fees, acquisition expenses and financing coordination fees did not exceed the 4.5% threshold.

The Second A&R Advisory Agreement does not provide for an acquisition fee, however the Advisor may continue to be reimbursed for services provided for which it incurs investment-related expenses, or insourced expenses. The amount reimbursed for insourced expenses may not exceed 0.5% of the contract purchase price of each acquired property or 0.5% of the amount advanced for a loan or other investment. Additionally, the Company reimburses the Advisor for third party acquisition expenses.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Financing Coordination Fees

Under the Original A&R Advisory Agreement and until February 17, 2017, if the Advisor provided services in connection with the origination or refinancing of any debt that the Company obtained and used to acquire properties or to make other permitted investments, or that was assumed, directly or indirectly, in connection with the acquisition of properties, the Company paid the Advisor a financing coordination fee equal to 0.75% of the amount available and/or outstanding under such financing, subject to certain limitations.

The Second A&R Advisory Agreement does not provide for a financing coordination fee.

Asset Management Fees and Variable Management/Incentive Fees

Under an advisory agreement that was superseded by the Original A&R Advisory Agreement and until March 31, 2015 and the limited partnership agreement of the OP, for its asset management services, the Company issued the Advisor an asset management subordinated participation by causing the OP to issue (subject to periodic approval by the Board) to the Advisor partnership units of the OP designated as "Class B Units" ("Class B Units"). The Class B Units were intended to be profit interests and vest, and no longer are subject to forfeiture, at such time as: (x) the value of the OP's assets plus all distributions made equals or exceeds the total amount of capital contributed by investors plus a 6.0% cumulative, pre-tax, non-compounded annual return thereon (the "economic hurdle"); (y) any one of the following occurs: (1) a listing; (2) an other liquidity event or (3) the termination of the advisory agreement by an affirmative vote of a majority of the Company's independent directors without cause; and (z) the Advisor is still providing advisory services to the Company (the "performance condition"). Unvested Class B Units will be forfeited immediately if: (a) the advisory agreement is terminated for any reason other than a termination without cause; or (b) the advisory agreement is terminated by an affirmative vote of a majority of the Company's independent directors without cause before the economic hurdle has been met.

Subject to approval by the Board, the Class B Units were issued to the Advisor quarterly in arrears pursuant to the terms of the limited partnership agreement of the OP. The number of Class B Units issued in any quarter was equal to: (i) the excess of (A) the product of (y) the cost of assets multiplied by (z) 0.1875% over (B) any amounts payable as an oversight fee (as described below) for such calendar quarter; divided by (ii) the value of one share of common stock as of the last day of such calendar quarter, which was initially equal to $22.50 (the IPO price minus the selling commissions and dealer manager fees). The value of issued Class B Units will be determined and expensed when the Company deems the achievement of the performance condition to be probable. As of March 31, 2018, the Company cannot determine the probability of achieving the performance condition. The Advisor receives cash distributions on each issued Class B Units equal to the distribution rate received on the Company's common stock. Such distributions on Class B Units are included in general and administrative expenses in the consolidated statement of operations and comprehensive loss until the performance condition is considered probable to occur. As of March 31, 2018, the Board had approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement.

On May 12, 2015, the Company, the OP and the Advisor entered into an amendment (the “Amendment”) to the advisory agreement, which, among other things, provided that the Company would cease causing the OP to issue Class B Units to the Advisor with respect to any period ending after March 31, 2015. Effective April 1, 2015, the Company began paying an asset management fee to the Advisor or its assignees as compensation for services rendered in connection with the management of the Company’s assets. The asset management fee was payable on the first business day of each month in the amount of 0.0625% multiplied by the lesser of (a) cost of assets or (b) fair value of assets for the preceding monthly period. The asset management fee was payable to the Advisor or its assignees in cash, in shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor. For the purposes of the payment of any fees in shares (a) prior to the Original NAV Pricing Date, each share was valued at $22.50, (b) after the Original NAV Pricing Date and prior to any listing on a national securities exchange, if it occurs, each share will be valued at the then-current Estimated Per-Share NAV and (c) at all other times, each share shall be valued by the Board in good faith at the fair market value.

Effective February 17, 2017, the Second A&R Advisory Agreement requires the Company to pay the Advisor a base management fee, which is payable on the first business day of each month. The fixed portion of the base management fee is equal to $1.625 million per month, while the variable portion of the base management fee is equal to one-twelfth of 1.25% of the cumulative net proceeds of any equity (including convertible equity and certain convertible debt but excluding proceeds from the DRIP) raised subsequent to February 17, 2017 per month. The base management fee is payable to the Advisor or its assignees in cash, OP Units or shares, or a combination thereof, the form of payment to be determined at the discretion of the Advisor and the value of any OP Unit or share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

In addition, the Second A&R Advisory Agreement requires the Company to pay the Advisor a variable management/incentive fee quarterly in arrears equal to (1) the product of fully diluted shares of common stock outstanding multiplied by (2) (x) 15.0% of the applicable prior quarter's Core Earnings (as defined below) per share in excess of $0.375 per share plus (y) 10.0% of the applicable prior quarter's Core Earnings per share in excess of $0.47 per share. Core Earnings is defined as, for the applicable period, net income or loss, computed in accordance with GAAP, excluding non-cash equity compensation expense, the variable management/incentive fee, acquisition and transaction related fees and expenses, financing related fees and expenses, depreciation and amortization, realized gains and losses on the sale of assets, any unrealized gains or losses or other non-cash items recorded in net income or loss for the applicable period, regardless of whether such items are included in other comprehensive income or loss, or in net income, one-time events pursuant to changes in GAAP and certain non-cash charges, impairment losses on real estate related investments and other than temporary impairments of securities, amortization of deferred financing costs, amortization of tenant inducements, amortization of straight-line rent and any associated bad debt reserves, amortization of market lease intangibles, provision for loss loans, and other non-recurring revenue and expenses (in each case after discussions between the Advisor and the independent directors and approved by a majority of the independent directors). The variable management/incentive fee is payable to the Advisor or its assignees in cash or shares, or a combination of both, the form of payment to be determined in the sole discretion of the Advisor and the value of any share to be determined by the Advisor acting in good faith on the basis of such quotations and other information as it considers, in its reasonable judgment, appropriate.

Property Management Fees

Unless the Company contracts with a third party, the Company pays the Property Manager a property management fee of 1.5% of gross revenues from the Company's stand-alone single-tenant net leased properties and 2.5% of gross revenues from all other types of properties, respectively. The Company also reimburses the Property Manager for property level expenses incurred by the Property Manager. If the Company contracts directly with third parties for such services, the Company will pay them customary market fees and will pay the Property Manager an oversight fee of up to 1.0% of the gross revenues of the property managed. In no event will the Company pay the Property Manager or any affiliate of the Property Manager both a property management fee and an oversight fee with respect to any particular property.

On February 17, 2017, the Company entered into the Amended and Restated Property Management and Leasing Agreement (the “A&R Property Management Agreement”) with the OP and the Property Manager. The A&R Property Management Agreement was entered into to reflect amendments to the original agreement between the parties and further amends the original agreement by extending the term of the agreement from one to two years, until February 17, 2019. The A&R Property Management Agreement will automatically renew for successive one-year terms unless any party provides written notice of its intention to terminate the A&R Property Management Agreement at least ninety days prior to the end of the term. The Property Manager may assign the A&R Property Management Agreement to any party with expertise in commercial real estate which has, together with its affiliates, over $100.0 million in assets under management.

Professional Fees and Other Reimbursements

The Company reimburses the Advisor's costs of providing administrative services. Until June 2015, reimbursement of these expenses was subject to the limitation that the Company did not reimburse the Advisor for any amount by which the Company's operating expenses at the end of the four preceding fiscal quarters exceeded the greater of (a) 2.0% of average invested assets and (b) 25.0% of net income other than any additions to reserves for depreciation, bad debt or other similar non-cash expenses and excluding any gain from the sale of assets for that period (the "2%/25% Limitation"), unless the Company's independent directors determined that such excess was justified based on unusual and nonrecurring factors which they deemed sufficient, in which case the excess amount could be reimbursed to the Advisor in subsequent periods. This limitation ceased to exist after June 2015, when the Original A&R Advisory Agreement became effective. The Company reimburses the Advisor for personnel costs, excluding any compensation paid to individuals who also serve as the Company’s executive officers, or the executive officers of the Advisor, the Property Manager or their respective affiliates. This reimbursement includes reasonable overhead expenses for employees of the Advisor or its affiliates directly involved in the performance of services on behalf of the Company, including the reimbursement of rent expense at certain properties that are both occupied by employees of the Advisor or its affiliates and owned by affiliates of the Advisor. During the quarters ended March 31, 2018 and 2017 the Company incurred $1.9 million and $1.3 million, respectively, of reimbursement expenses from the Advisor for providing administrative services.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The Advisor may elect to forgive and absorb certain fees. Because the Advisor may forgive or absorb certain fees, cash flow from operations that would have been paid to the Advisor may be available to pay distributions to stockholders. The fees that are forgiven are not deferrals and, accordingly, will not be paid to the Advisor in the future. There were no such fees forgiven during the quarters ended March 31, 2018 or 2017. In certain instances, to improve the Company's working capital, the Advisor may elect to absorb a portion of the Company's property operating and general and administrative costs, which the Company will not repay. No such fees were absorbed during the quarters ended March 31, 2018 or 2017.

The Advisor elected to, without interest accrual, defer cash payment of $1.7 million in certain fees and reimbursements due to the Advisor as of March 31, 2018 and December 31, 2017. As of December 31, 2017, a portion of these fees and reimbursements were already paid and the Company had recorded a $0.7 million receivable due from the Advisor. As of March 31, 2018, there was no remaining receivable due from the Advisor. The $1.7 million in deferred fees and reimbursements were repaid during April 2018.

The following table details amounts incurred, forgiven and payable in connection with the Company's operations-related services described above as of and for the periods presented:



	Three Months Ended March 31,				Payable (Receivable) as of
	2018		2017		March 31,				December 31,
(In thousands)	Incurred⁽¹⁾		Incurred⁽¹⁾		2018				2017
One-time fees and reimbursements:
Acquisition cost reimbursements	$	60	$	—	$	60			$	36
Due to(from) HT III related to Asset Purchase⁽²⁾	—		—		(181		)		196
Ongoing fees and reimbursements:
Asset management fees	4,875		4,564		—				—
Property management fees	852		737		579				66
Professional fees and other reimbursements	2,046		1,442		1,704			⁽⁴⁾	1,339		⁽⁴⁾
Distributions on Class B Units ⁽³⁾	110		151		40				—
Total related party operation fees and reimbursements	$	7,943	$	6,894	$	2,202			$	1,637

_______________


⁽¹⁾	There were no fees or reimbursements forgiven during the three months ended March 31, 2018 or 2017.

⁽²⁾

On December 22, 2017, the Company purchased substantially all the assets of HT III. Certain proration estimates were included within the Closing. The purchase agreement calls for a final purchase price adjustment. The Company had a $181 thousand net receivable and $196 thousand net payable related to the HT III Asset Purchase included on its Consolidated Balance Sheet as of March 31, 2018 and December 31, 2017, respectively. Please see below for additional information related to the asset purchase.

⁽³⁾

Prior to April 1, 2015, the Company caused the OP to issue (subject to periodic approval by the Board) to the Advisor restricted performance based Class B Units for asset management services. As of December 31, 2017, the Board had approved the issuance of 359,250 Class B Units to the Advisor in connection with this arrangement. Effective April 1, 2015, in connection with the Amendment, the Company began paying an asset management fee to the Advisor or its assignees in cash, in shares, or a combination of both and no longer issues any Class B Units.


⁽⁴⁾	Balance includes costs which were incurred and accrued due to ANST and a subsidiary of RCAP which were related parties of the Company. See above for further details on the status of the ANST and RCAP relationship.

Fees and Participations Incurred in Connection with a Listing or the Liquidation of the Company's Real Estate Assets

Fees Incurred in Connection with a Listing

If the common stock of the Company is listed on a national exchange, the Special Limited Partner will be entitled to receive a subordinated incentive listing distribution from the OP equal to 15.0% of the amount by which the market value of all issued and outstanding shares of common stock plus distributions exceeds the aggregate capital contributed by investors plus an amount equal to a 6.0% cumulative, pre-tax non-compounded annual return to investors. The Special Limited Partner will not be entitled to the subordinated incentive listing distribution unless investors have received a 6.0% cumulative, pre-tax non-compounded annual return on their capital contributions. No such distribution was incurred during the quarters ended March 31, 2018 or 2017. Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in net sales proceeds and the subordinated incentive listing distribution.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Annual Subordinated Performance Fees and Brokerage Commissions

Under the Original A&R Advisory Agreement and until February 17, 2017, the Advisor was entitled to an annual subordinated performance fee calculated on the basis of the Company's total return to stockholders, payable annually in arrears, such that for any year in which the Company's total return on stockholders' capital exceeded 6.0% per annum, the Advisor was entitled to 15.0% of the excess total return but not to exceed 10.0% of the aggregate total return for such year. This fee would have been payable only upon the sale of assets, distributions or another event which resulted in the return on stockholders' capital exceeding 6.0% per annum. No subordinated performance fees were incurred during the quarters ended March 31, 2018 or 2017.

Under the Original A&R Advisory Agreement and until February 17, 2017, the Advisor was entitled to a brokerage commission on the sale of property, not to exceed the lesser of (a) 2.0% of the contract sale price of the property and (b) 50.0% of the total brokerage commission paid if a third party broker was also involved; provided, however, that in no event could the real estate commissions paid to the Advisor, its affiliates and unaffiliated third parties exceed the lesser of (a) 6.0% of the contract sales price and (b) a reasonable, customary and competitive real estate commission. The brokerage commission payable to the Advisor was subject to approval by a majority of the independent directors upon a finding that the Advisor provided a substantial amount of services in connection with the sale. No such fees were incurred during the quarters ended March 31, 2018 or 2017.

The Second A&R Advisory Agreement does not provide for the annual subordinated performance fee and brokerage commissions payable to the Advisor, (all as defined in the Original A&R Advisory Agreement) effective February 17, 2017 and no such fees or commissions were incurred prior thereto.

Subordinated Participation in Real Estate Sales

The Special Limited Partner is entitled to receive a subordinated participation in the net sales proceeds of the sale of real estate assets from the OP equal to 15.0% of remaining net sale proceeds after return of capital contributions to investors plus payment to investors of a 6.0% cumulative, pre-tax non-compounded annual return on the capital contributed by investors. The Special Limited Partner is not entitled to the subordinated participation in net sale proceeds unless the Company's investors have received their capital contributions, plus a 6.0% cumulative, pre-tax non-compounded annual return on their capital contributions. No such participation in net sales proceeds became due and payable during the quarters ended March 31, 2018 or 2017. Neither the Special Limited Partner nor any of its affiliates can earn both the subordinated participation in net sales proceeds and the subordinated incentive listing distribution described above.

Termination Fees

Under the operating partnership agreement of the OP, upon termination or non-renewal of the advisory agreement with the Advisor, with or without cause, the Special Limited Partner is entitled to receive distributions from the OP equal to 15.0% of the amount by which the sum of the Company's market value plus distributions exceeds the sum of the aggregate capital contributed by investors plus an amount equal to an annual 6.0% cumulative, pre-tax, non-compounded annual return to investors. The Special Limited Partner is able to elect to defer its right to receive a subordinated distribution upon termination until either a listing on a national securities exchange or other liquidity event occurs.

Under the Second A&R Advisory Agreement, upon the termination or non-renewal of the agreement, the Advisor will be entitled to receive from the Company all amounts due to the Advisor, including any change in control fee and transition fee (both described below), as well as the then-present fair market value of the Advisor's interest in the Company. All fees will be due within 30 days after the effective date of the termination of the Second A&R Advisory Agreement.

Upon a termination by either party in connection with a change of control (as defined in the Second A&R Advisory Agreement), the Company would pay the Advisor a change of control fee equal to the product of four (4) and the "Subject Fees."

Upon a termination by the Company in connection with transition to self-management, the Company would pay the Advisor a transition fee equal to (i) $15.0 million plus (ii) the product of four multiplied by the Subject Fees, provided that the transition fee shall not exceed an amount equal (i) 4.5 multiplied by (ii) the Subject Fees.

The Subject Fees are equal to (i) the product of four (4) multiplied by the actual base management fee plus (ii) the product of four (4) multiplied by the actual variable management/incentive fee, in each of clauses (i) and (ii), payable for the fiscal quarter immediately prior to the fiscal quarter in which the change of control or the transition to self-management is consummated, as applicable, plus (iii) without duplication, the annual increase in the base management fee resulting from the cumulative net proceeds of any equity raised in respect to the fiscal quarter immediately prior to the fiscal quarter in which the change of control or the transition to self-management is consummated, as applicable.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The right to termination of the Second A&R Advisory Agreement in connection with a change of control or transition to self-management is subject to a lockout period that requires the notice of any termination in connection with a change of control or transition to self-management to be delivered after February 14, 2019.

American Realty Capital Healthcare Trust III, Inc. Asset Purchase

On December 22, 2017, the Company, Healthcare Trust Operating Partnership, L.P., the Company's operating partnership, and its subsidiary, ARHC TRS Holdco II, LLC, purchased all of the membership interests in indirect subsidiaries of American Realty Capital Healthcare Trust III, Inc. (“HT III”) that own the 19 properties comprising substantially all of HT III’s assets (the “Asset Purchase”), pursuant to a purchase agreement (the “Purchase Agreement”), dated as of June 16, 2017. HT III is sponsored and advised by an affiliate of the Company’s advisor. As of March 31, 2018 and December 31, 2017 the Company had a $181,000 net receivable and $196,000 net payable, respectively, to HT III included on its Consolidated Balance Sheet.

At the closing of the Asset Purchase, the Company paid HT III $108.4 million, representing the purchase price under the Purchase Agreement of $120.0 million, less (i) $0.7 million reflecting prorations and closing adjustments in accordance with the Purchase Agreement, (ii) $4.9 million reflecting the outstanding principal amount of the loan secured by HT III’s Philip Center property assumed by the Company at the closing in accordance with the Purchase Agreement, and (iii) $6.0 million deposited by the Company into an escrow account in accordance with the Purchase Agreement. This escrow amount, less any amounts paid or reserved for pending or unsatisfied indemnification claims that the Company may make pursuant to the Purchase Agreement, will be released to HT III in installments over a period of 14 months following the closing.

Note 10 — Economic Dependency

Under various agreements, the Company has engaged or will engage the Advisor, its affiliates and entities under common control with the Advisor to provide certain services that are essential to the Company, including asset management services, supervision of the management and leasing of properties owned by the Company and asset acquisition and disposition decisions, as well as other administrative responsibilities for the Company including accounting services and investor relations.

As a result of these relationships, the Company is dependent upon the Advisor and its affiliates. In the event that the Advisor and its affiliates are unable to provide the Company with the respective services, the Company will be required to find alternative providers of these services.

Note 11 — Share-Based Compensation

Restricted Share Plan

The Company has adopted an employee and director incentive restricted share plan (as amended from time to time, the "RSP"), which provides the Company with the ability to grant awards of restricted shares of common stock ("restricted shares") to the Company's directors, officers and employees (if the Company ever has employees), employees of the Advisor and its affiliates, employees of entities that provide services to the Company, directors of the Advisor or of entities that provide services to the Company, certain consultants to the Company and the Advisor and its affiliates or to entities that provide services to the Company. The total number of shares of common stock that may be subject to awards granted under the RSP may not exceed 5.0% of the Company's outstanding shares of common stock on a fully diluted basis at any time and in any event will not exceed 3.4 million shares (as such number may be adjusted for stock splits, stock dividends, combinations and similar events).

Prior to August 2017, the RSP provided for an automatic grant of 1,333 restricted shares to each of the independent directors, without any further approval by the Board or the stockholders, on the date of his or her initial election to the Board and thereafter on the date of each annual stockholder meeting. The restricted shares granted as annual automatic awards prior to August 2017 were subject to vesting over a five-year period following the date of grant.

In August 2017, the Board amended the RSP to provide that the number of restricted shares comprising the automatic annual award to each of the independent directors would be equal to the quotient of $30,000 divided by the then-current Estimated Per-Share NAV and subsequently amended and restated the RSP to eliminate the automatic annual awards and to make other revisions related to the implementation of a new independent director equity compensation program. As part of this new independent director equity compensation program, the Board approved a one-time grant of restricted share awards to the independent directors as follows: (i) 300,000 restricted shares to the chairman, with one-seventh of the shares vesting annually in equal increments over a seven-year period with initial vesting on August 4, 2018; and (ii) 25,000 restricted shares to each of the three other independent directors, with one-fifth of the shares vesting annually in equal increments over a five-year period with initial vesting on August 4, 2018. In connection with these one-time grants, the restricted shares granted as automatic annual awards in connection with the Company’s 2017 annual meeting of stockholders on July 21, 2017 were forfeited. Restricted shares may not, in general, be sold or otherwise transferred until restrictions are removed and the shares have vested. Holders of restricted shares may receive cash distributions prior to the time that the restrictions on the restricted shares have lapsed. Any distributions payable in shares of common stock shall be subject to the same restrictions as the underlying restricted shares.

The following table reflects restricted share award activity for the period presented:



	Number of Shares of Common Stock		Weighted Average Issue Price
Unvested, December 31, 2017	382,510		$	21.47
Granted	—		—
Vested	(267	)	$	22.50
Forfeitures	—		—
Unvested, March 31, 2018	382,243		$	21.50

As of March 31, 2018, the Company had $8.2 million of unrecognized compensation cost related to unvested restricted share awards granted under the Company's RSP. That cost is expected to be recognized over a weighted-average period of 5.9 years.

Compensation expense related to restricted shares was approximately $319,000 and $14,000 during the three months ended March 31, 2018 and 2017, respectively. Compensation expense related to restricted shares is recorded as general and administrative expense in the accompanying consolidated statements of operations and comprehensive loss.

Other Share-Based Compensation

The Company may issue common stock in lieu of cash to pay fees earned by the Company's directors at the respective director's election. There are no restrictions on shares issued in lieu of cash compensation since these payments in lieu of cash relate to fees earned for services performed. No such shares were issued during the three months ended March 31, 2018 or 2017.

Note 12 — Accumulated Other Comprehensive Income

The following table illustrates the changes in accumulated other comprehensive income as of and for the period presented:



(In thousands)	Unrealized Gain on Designated Derivative
Balance, December 31, 2017	$	2,473
Other comprehensive income, before reclassifications	3,790
Amount of loss reclassified from accumulated other comprehensive income	174
Balance, March 31, 2018	$	6,437

Note 13 — Non-controlling Interests

Non-Controlling Interests in the Operating Partnership

The Company is the sole general partner and holds substantially all of the OP Units. As of March 31, 2018 and December 31, 2017, the Advisor held 90 OP Units, which represents a nominal percentage of the aggregate OP ownership.

In November 2014, the Company partially funded the purchase of a MOB from an unaffiliated third party by causing the OP to issue 405,908 OP Units, with a value of $10.1 million, or $25.00 per unit, to the unaffiliated third party.

A holder of OP Units has the right to distributions. After holding the OP Units for a period of one year, a holder of OP Units has the right to redeem OP Units for, at the option of the OP, the cash value of a corresponding number of shares of the Company's common stock or a corresponding number of shares of the Company's common stock. The remaining rights of the limited partners in the OP are limited, however, and do not include the ability to replace the general partner or to approve the sale, purchase or refinancing of the OP's assets. During the quarters ended March 31, 2018 and 2017, OP Unit non-controlling interest holders were paid distributions of $0.1 million and $0.2 million, respectively.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Non-Controlling Interests in Property Owning Subsidiaries

The Company also has investment arrangements with other unaffiliated third parties whereby such investors receive an ownership interest in certain of the Company's property-owning subsidiaries and are entitled to receive a proportionate share of the net operating cash flow derived from the subsidiaries' property. Upon disposition of a property subject to non-controlling interest, the investor will receive a proportionate share of the net proceeds from the sale of the property. The investor has no recourse to any other assets of the Company. Due to the nature of the Company's involvement with these arrangements and the significance of its investment in relation to the investment of the third party, the Company has determined that it controls each entity in these arrangements and therefore the entities related to these arrangements are consolidated within the Company's financial statements. A non-controlling interest is recorded for the investor's ownership interest in the properties. During the quarters ended March 31, 2018 and 2017, no distributions were paid to non-controlling interest holders in property owning subsidiaries.

The following table summarizes the activity related to investment arrangements with the unaffiliated third parties:



		Third Party Net Investment Amount		Non-Controlling Ownership Percentage		Net Real Estate Assets Subject to Investment Arrangement⁽¹⁾
Property Name (Dollar amounts in thousands)	Investment Date	As of March 31, 2018		As of March 31, 2018		As of March 31, 2018		As of December 31, 2017
Plaza Del Rio Medical Office Campus Portfolio	May 2015	$	413	4.1	%	$	11,001	$	10,784
UnityPoint Clinic Portfolio ⁽²⁾	December 2017	$	477	5.0	%	$	9,540	$	9,639

______________

⁽¹⁾ There are no mortgage notes payable subject to these investment arrangements.

⁽²⁾ Assumed as part of the HT III Asset Purchase. See Note 9 - Related Party Transactions and Arrangements for further information on the

Asset Purchase.

Note 14 — Net Loss Per Share

The following is a summary of the basic and diluted net loss per share computation for the quarters ended March 31, 2018 and 2017:



	Three Months Ended March 31,
	2018			2017
Net loss attributable to stockholders (in thousands)	$	(5,991	)	$	(6,139	)
Basic and diluted weighted-average shares outstanding	90,783,065			89,639,676
Basic and diluted net loss per share	$	(0.07	)	$	(0.07	)

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

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



	Three Months Ended March 31,
	2018	2017
Unvested restricted shares ⁽¹⁾	382,409	9,785
OP Units ⁽²⁾	405,998	405,998
Class B Units ⁽³⁾	359,250	359,250
Total weighted average antidilutive common stock equivalents	1,147,657	775,033

_______________


⁽¹⁾	Weighted average number of antidilutive unvested restricted shares outstanding for the periods presented. There were 382,243 and 9,654 unvested restricted shares outstanding as of March 31, 2018 and 2017, respectively.


⁽²⁾	Weighted average number of antidilutive OP Units outstanding for the periods presented. There were 405,998 and 405,998 OP Units outstanding as of March 31, 2018 and 2017, respectively.


⁽³⁾	Weighted average number of antidilutive Class B Units outstanding for the periods presented. There were 359,250 and 359,250 Class B Units outstanding as of March 31, 2018 and 2017, respectively.

Note 15 — Segment Reporting

During the quarters ended March 31, 2018 and 2017, the Company operated in three reportable business segments for management and internal financial reporting purposes: MOBs, triple-net leased healthcare facilities, and seniors housing - operating properties ("SHOP").

The Company evaluates performance and makes resource allocations based on its three business segments. The medical office building segment primarily consists of MOBs leased to healthcare-related tenants under long-term leases, which may require such tenants to pay a pro rata share of property-related expenses. The triple-net leased healthcare facilities segment primarily consists of investments in seniors housing communities, hospitals, inpatient rehabilitation facilities and skilled nursing facilities under long-term leases, under which tenants are generally responsible to directly pay property-related expenses. The SHOP segment consists of direct investments in seniors housing communities, primarily providing assisted living, independent living and memory care services, which are operated through engaging independent third-party managers. There were no intersegment sales or transfers during the periods presented.

On June 8, 2017, the Company's taxable REIT subsidiary, through 12 separately executed membership interest or stock transfer agreements, acquired 12 operating entities that leased 12 healthcare facilities included in the Company's triple-net leased healthcare facilities segment. Concurrently with the acquisition of the 12 operating entities, the Company transitioned the management of the healthcare facilities to a third-party management company that manages other healthcare facilities in the Company's SHOP operating segment. The segment reporting results of these 12 operating entities is included in the Company's triple-net leased healthcare facilities segment through June 8, 2017. Subsequent to June 8, 2017, these operating entities are operated under the RIDEA structure and are included in the Company's SHOP segment.

On January 1, 2018, the Company transitioned six properties in its triple-net leased healthcare facilities segment to operating properties under a structure permitted by the RIDEA structure. The properties consist of two assisted living facilities located in Burlington and Cudahy, Wisconsin, two assisted living facilities located in Dixon and Rockford, Illinois, an assisted living facility located in Richmond, Kentucky and a skilled nursing facility located in Lutz, Florida. The prior tenants of the six properties transferred the operations of the properties to newly-formed subsidiaries of the Company and third-party managers engaged by those Company subsidiaries pursuant to market operations transfer agreements. The Company’s subsidiaries simultaneously entered into new management agreements with the third-party managers, who will operate and manage the facilities on behalf of the Company subsidiaries.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The Company evaluates the performance of the combined properties in each segment based on net operating income ("NOI"). NOI is defined as total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss). The Company uses NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. The Company believes that NOI is useful as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).

NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by the Company may not be comparable to NOI reported by other REITs that define NOI differently. The Company believes that in order to facilitate a clear understanding of the Company's operating results, NOI should be examined in conjunction with net income (loss) as presented in the Company's consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of the Company's performance or to cash flows as a measure of the Company's liquidity or ability to make distributions.

The following tables reconcile the segment activity to consolidated net loss for the quarters ended March 31, 2018 and 2017:



	Three Months Ended March 31, 2018
(In thousands)	Medical Office Buildings		Triple-Net Leased Healthcare Facilities		Seniors Housing — Operating Properties		Consolidated
Revenues:
Rental income	$	19,355	$	5,928	$	3	$	25,286
Operating expense reimbursements	4,634		337		—		4,971
Resident services and fee income	—		—		59,181		59,181
Total revenues	23,989		6,265		59,184		89,438
Property operating and maintenance	7,216		2,426		43,464		53,106
NOI	$	16,773	$	3,839	$	15,720	36,332
Impairment charges							(733		)
Operating fees to related parties							(5,727		)
Acquisition and transaction related							(173		)
General and administrative							(3,652		)
Depreciation and amortization							(20,769		)
Interest expense							(11,157		)
Interest and other income							3
Gain (loss) on non-designated derivatives							178
Income tax expense							(309		)
Net income attributable to non-controlling interests							16
Net loss attributable to stockholders							$	(5,991	)

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)



	Three Months Ended March 31, 2017
(In thousands)	Medical Office Buildings		Triple-Net Leased Healthcare Facilities		Seniors Housing — Operating Properties		Consolidated
Revenues:
Rental income	$	16,348	$	7,671	$	3	$	24,022
Operating expense reimbursements	3,785		319		—		4,104
Resident services and fee income	—		—		46,489		46,489
Total revenues	20,133		7,990		46,492		74,615
Property operating and maintenance	5,735		4,766		32,110		42,611
NOI	$	14,398	$	3,224	$	14,382	32,004
Impairment charges							(35		)
Operating fees to related parties							(5,301		)
Acquisition and transaction related							(2,845		)
General and administrative							(4,157		)
Depreciation and amortization							(20,483		)
Interest expense							(5,482		)
Interest and other income							1
Loss on non-designated derivative instruments							(64		)
Gain on sale of real estate investment							—
Income tax (expense) benefit							195
Net income attributable to non-controlling interests							28
Net loss attributable to stockholders							$	(6,139	)

The following table reconciles the segment activity to consolidated total assets as of the periods presented:



	March 31,		December 31,
(In thousands)	2018		2017
ASSETS
Investments in real estate, net:
Medical office buildings	$	904,938	$	897,264
Triple-net leased healthcare facilities	250,544		294,727
Construction in progress	84,926		82,007
Seniors housing — operating properties	935,501		902,343
Total investments in real estate, net	2,175,909		2,176,341
Cash and cash equivalents	61,277		94,177
Restricted cash	9,753		8,411
Assets held for sale	37,822		37,822
Derivative assets, at fair value	6,823		2,550
Straight-line rent receivable, net	15,995		15,327
Prepaid expenses and other assets	25,505		22,099
Deferred costs, net	15,263		15,134
Total assets	$	2,348,347	$	2,371,861

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

The following table reconciles capital expenditures by reportable business segment, excluding corporate non-real estate expenditures, for the periods presented:



	Three Months Ended March 31,
(In thousands)	2018		2017
Medical office buildings	$	523	$	553
Triple-net leased healthcare facilities	38		—
Seniors housing — operating properties	613		588
Total capital expenditures	$	1,174	$	1,141

Note 16 — Commitments and Contingencies

The Company has entered into operating and capital lease agreements related to certain acquisitions under leasehold interests arrangements. The following table reflects the minimum base cash rental payments due from the Company over the next five years and thereafter under these arrangements, including the present value of the net minimum payment due under capital leases. These amounts exclude contingent rent payments, as applicable, that may be payable based on provisions related to increases in annual rent based on exceeding certain economic indexes among other items.



	Future Minimum Base Rent Payments
(In thousands)	Operating Leases		Capital Leases
April 1, 2018 - December 31, 2018	$	598	$	59
2019	780		80
2020	781		82
2021	774		84
2022	790		86
Thereafter	35,104		7,678
Total minimum lease payments	$	38,827	8,069
Less: amounts representing interest			(3,245		)
Total present value of minimum lease payments			$	4,824

Total rental expense from operating leases was $0.2 million during the three months ended March 31, 2018 and 2017. Interest expense related to capital leases was approximately $21,000 during the three months ended March 31, 2018 and 2017.

Litigation and Regulatory Matters

In the ordinary course of business, the Company may become subject to litigation, claims and regulatory matters. There are no material legal or regulatory proceedings pending or known to be contemplated against the Company or its properties.

Environmental Matters

In connection with the ownership and operation of real estate, the Company may potentially be liable for costs and damages related to environmental matters. As of March 31, 2018, the Company had not been notified by any governmental authority of any non-compliance, liability or other claim, and is not aware of any other environmental condition that it believes will have a material adverse effect on the results of operations.

Development Project Funding

In August 2015, the Company entered into an asset purchase agreement and development agreement to acquire land and construction in progress, and subsequently fund the remaining construction, of a development property in Jupiter, Florida for $82.0 million. As of March 31, 2018, the Company had funded $84.9 million, including $10.0 million for the land and $74.9 million for construction in progress. As a result, the Company believes that it has satisfied its funding commitments for the construction. As of March 31, 2018, the Company had funded $2.9 million in excess of its $72.0 million funding commitment for the construction. The Company has and may continue to, at its election, provide additional funding to ensure completion of the construction. To the extent the Company funds additional monies for the completion of the development, Palm Health Partners, LLC ("Palm"), the developer of the facility, is responsible for reimbursing the Company for any amounts so funded. Entities related to Palm are, however, in default to the Company under leases at other properties in the Company's portfolio. There can be no assurance that Palm will reimburse the Company for construction overruns.

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HEALTHCARE TRUST, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018

(Unaudited)

Palm is responsible for completing the development and obtaining a final certificate of occupancy for the facility (the "CO"). However, Palm is in default of the development agreement and has provided notice that it will cease providing services under the development agreement, which may result in additional delays in obtaining the CO. Until the CO is obtained the Company will not receive income from the property. There is no assurance as to when and if Palm will comply with its obligations. The Company is currently working to obtain the CO.

Concurrent with the acquisition, the Company entered into a loan agreement and lease agreement with an affiliate of the project developer. The loan agreement is intended to provide working capital to the tenant during the initial operating period of the facility and allows for borrowings of up to $2.7 million from the Company on a non-revolving basis. Any outstanding principal balances under the loan will bear interest at 7.0% per year, payable on the first day of each fiscal quarter. As of March 31, 2018 and December 31, 2017, there were no amounts outstanding under the loan agreement as operations at the facility have not yet started.

Note 17 — Subsequent Events

The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have not been any events that have occurred that would require adjustments to disclosures in the consolidated financial statements except the following disclosures:

Tender Offer

On April 4, 2018, the Tender Offer was amended to reduce the number of shares the Company was offering to purchase to 230,000 shares and extend the expiration date to April 30, 2018. On April 16, 2018, the Tender Offer was amended to extend the expiration date to May 1, 2018. The Tender Offer expired in accordance with its terms on May 1, 2018. In accordance with the terms of the Tender Offer, we accepted for purchase 229,999 shares for a total cost of approximately $3.0 million. See Note 8 — Common Stock for further discussion on the Tender Offer.

Estimated Per-Share NAV

On March 29, 2018, the independent directors of the Board approved an updated estimate of Estimated Per-Share NAV as of December 31, 2017, which was published on April 3, 2018.

KeyBank MOB Loan Agreement

On April 10, 2018, the Company, entered into a $118.7 million loan agreement (the “KeyBank MOB Loan Agreement”) with KeyBank.

The KeyBank MOB Loan Agreement has a fixed interest rate of 4.541%, and a maturity date of May 1, 2028. The KeyBank MOB Loan requires monthly interest-only payments, with the principal balance due on the maturity date. The KeyBank MOB Loan is secured by, among other things, mortgages on 20 medical office buildings in 12 states. The KeyBank MOB Loan Agreement permits KeyBank to securitize the KeyBank MOB Loan or any portion thereof.

At the closing of the KeyBank MOB Loan, the net proceeds after accrued interest and closing costs were used to (i) repay approximately $80 million of indebtedness under the Revolving Credit Facility, under which 14 of the properties were included as part of the borrowing base prior to the KeyBank MOB Loan, and (ii) fund approximately $3.8 million in deposits required to be made at closing into reserve accounts required under the loan agreement.

Amendment to Existing Property Management Agreement

On April 10, 2018, in connection with the KeyBank MOB Loan, the Company and the OP entered into the First Amendment (the “First Amendment”) to the A&R Property Management Agreement confirming, consistent with the intent of the parties, that the borrowers under the KeyBank MOB Loan and other subsidiaries of the OP that actually own or lease the Company’s properties are the direct obligors under the arrangements pursuant to which the Company’s properties are actually managed by either the Property Manager or a third party overseen by the Property Manager pursuant to the A&R Property Management Agreement.

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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements of Healthcare Trust, Inc. and the notes thereto. As used herein, the terms the "Company," "we," "our" and "us" refer to Healthcare Trust, Inc., a Maryland corporation, including, as required by context, Healthcare Trust Operating Partnership, LP (our "OP"), a Delaware limited partnership, and its subsidiaries. The Company is externally managed by Healthcare Trust Advisors, LLC (our "Advisor"), a Delaware limited liability company. Capitalized terms used herein, but not otherwise defined, have the meaning ascribed to those terms in "Part I — Financial Information" included in the notes to the consolidated financial statements and contained herein.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q are forward-looking statements. Those statements include statements regarding the intent, belief or current expectations of the Company and members of our management team, as well as the assumptions on which such statements are based, and generally are identified by the use of words such as "may," "will," "seeks," "anticipates," "believes," "estimates," "expects," "plans," "intends," "should" or similar expressions. Actual results may differ materially from those contemplated by such forward-looking statements. Further, forward-looking statements speak only as of the date they are made, and we undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results over time, unless required by law.

The following are some of the risks and uncertainties, although not all risks and uncertainties, that could cause our actual results to differ materially from those presented in our forward-looking statements:

•

Certain of our executive officers and directors are also officers, managers, employees or holders of a direct or indirect controlling interest in our Advisor and other entities affiliated with AR Global Investments, LLC (the successor business to AR Capital, LLC, "AR Global"), the parent of our sponsor. As a result, certain of our executive officers and directors, our Advisor and its affiliates face conflicts of interest, including significant conflicts created by our Advisor's compensation arrangements with us and other investment programs advised by affiliates of AR Global and conflicts in allocating time among these investment programs and us. These conflicts could result in unanticipated actions that adversely affect us.

•

Because investment opportunities that are suitable for us may also be suitable for other investment programs advised by affiliates of AR Global, our Advisor and its affiliates face conflicts of interest relating to the purchase of properties and other investments and such conflicts may not be resolved in our favor, meaning that we could invest in less attractive assets, which could reduce the investment return to our stockholders.


•	Although we intend to seek a listing of our shares of common stock on a national stock exchange when we believe market conditions are favorable to do so, there is no assurance that our shares of common stock will be listed. No public market currently exists, or may ever exist, for shares of our common stock and our shares are, and may continue to be, illiquid.


•	We focus on acquiring and owning a diversified portfolio of healthcare-related assets located in the United States and are subject to risks inherent in concentrating investments in the healthcare industry.


•	If our Advisor loses or is unable to obtain qualified personnel, our ability to continue to achieve our investment strategies could be delayed or hindered.


•	The healthcare industry is heavily regulated, and new laws or regulations, changes to existing laws or regulations, loss of licensure or failure to obtain licensure could result in the inability of tenants to make lease payments to us.


•	We are depending on our Advisor to select investments and conduct our operations. Adverse changes in the financial condition of our Advisor and its affiliates or our relationship with our Advisor could adversely affect us.


•	We are obligated to pay fees, which may be substantial, to our Advisor and its affiliates.


•	We depend on tenants for our revenue and, accordingly, our revenue is dependent upon the success and economic viability of our tenants.


•	We may not be able to achieve our rental rate objectives on new and renewal leases and our expenses could be greater, which may impact our results of operations.


•	Increases in interest rates could increase the amount of our debt payments and limit our ability to pay distributions.


•	We have not generated, and in the future may not generate, operating cash flows sufficient to fund all of the distributions we pay to our stockholders, and, as such, we may be forced to fund distributions from other sources, including borrowings, which may not be available on favorable terms, or at all.

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•	There can be no assurance we will continue to pay distributions at our current level.


•	Any distributions, especially those not covered by our cash flows from operations, may reduce the amount of capital available for other purposes included investment in properties and other permitted investments and may negatively impact the value of our stockholders' investment.


•	We are subject to risks associated with any dislocations or liquidity disruptions that may exist or occur in the credit markets of the United States from time to time.


•	We are subject to risks associated with changes in general economic, business and political conditions including the possibility of intensified international hostilities, acts of terrorism, and changes in conditions of United States or international lending, capital and financing markets.


•	We may fail to continue to qualify to be treated as a real estate investment trust for U.S. federal income tax purposes ("REIT"), which would result in higher taxes, may adversely affect our operations and would reduce the value of an investment in our common stock and the cash available for distributions.

•

The offering price and repurchase price for our shares under our distribution reinvestment plan ("DRIP") and our share repurchase program (as amended, the "SRP") may not, among other things, accurately reflect the value of our assets and may not represent what a stockholder may receive on a sale of the shares, what they may receive upon a liquidation of our assets and distribution of the net proceeds or what a third party may pay to acquire the Company.

Overview

We invest in healthcare real estate, focusing on seniors housing and medical office buildings ("MOB"), located in the United States. As of March 31, 2018, we owned 190 properties located in 30 states and comprised of 9.1 million rentable square feet.

We were incorporated on October 15, 2012 as a Maryland corporation that elected and qualified to be taxed as a REIT beginning with our taxable year ended December 31, 2013. Substantially all of our business is conducted through our OP.

On March 29, 2018, our board of directors (the "Board") approved a new estimate of per share net asset value ("Estimated Per-Share NAV") equal to $20.25 as of December 31, 2017. Our previous Estimated Per-Share NAV was equal to $21.45 as of December 31, 2016. We intend to publish Estimated Per-Share NAV periodically at the discretion of the Board, provided that such estimates will be made at least once annually.

We have no employees. The Advisor has been retained by us to manage our affairs on a day-to-day basis. We have retained Healthcare Trust Properties, LLC (the "Property Manager") to serve as our property manager. The Advisor and Property Manager are under common control with AR Global, the parent of our sponsor, as a result of which they are related parties, and each have received or will receive compensation, fees and expense reimbursements for services related to managing of our business. The Advisor, Healthcare Trust Special Limited Partnership, LLC and the Property Manager also have received or will receive compensation, fees and expense reimbursements from us related to the investment and management of our assets.

On December 22, 2017, we purchased all of the membership interests in indirect subsidiaries of American Realty Capital Healthcare Trust III, Inc. (“HT III”) that own the 19 properties that comprised substantially all of HT III’s assets (the “Asset Purchase”), pursuant to a purchase agreement (the “Purchase Agreement”), dated as of June 16, 2017. HT III is sponsored and advised by an affiliate of our Advisor.

Significant Accounting Estimates and Critical Accounting Policies

Our Annual Report on Form 10-K for the year ended December 31, 2017 contains a discussion of our significant accounting estimates and critical accounting policies. There have been no significant changes in our significant accounting estimates and critical accounting policies since December 31, 2017. See also Note 2 — Summary of Significant Accounting Policies to our unaudited consolidated financial statements in this Quarterly Report on Form 10-Q for further discussion.

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Properties

The following table presents certain additional information about the properties we owned as of March 31, 2018:



Portfolio	Number of Properties	Rentable Square Feet	Percentage Leased ⁽¹⁾	Weighted Average Remaining Lease Term in Years ⁽²⁾	Gross Asset Value ⁽⁴⁾
					(In thousands)
Medical Office Buildings	104	3,699,030	90.2%	4.5	$	1,017,080
Triple-Net Leased Healthcare Facilities ⁽³⁾:
Seniors Housing — Triple-Net Leased	4	102,753	100.0%	12.8	55,000
Hospitals	4	428,620	88.8%	5.0	87,167
Post-Acute / Skilled Nursing	17	721,844	100.0%	5.6	177,389
Total Triple-Net Leased Healthcare Facilities	25	1,253,217	96.2%	6.3	319,556
Seniors Housing — Operating Properties	58	4,152,207	87.7%	N/A	1,100,721
Land	2	N/A	N/A	N/A	3,665
Construction in Progress	1	N/A	N/A	N/A	84,926
Portfolio, March 31, 2018	190	9,104,454			$	2,525,948

_______________


⁽¹⁾	Inclusive of leases signed but not yet commenced as of March 31, 2018.


⁽²⁾	Based on annualized rental income calculated on a straight-line basis.


⁽³⁾	Revenues for our triple-net leased healthcare facilities generally consist of fixed rental amounts (subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms and do not vary based on the underlying operating performance of the properties.


⁽⁴⁾	Gross Asset Value represents the total real estate investments, at cost, assets held for sale at carrying value, net of gross market lease intangible liabilities.


N/A	Not applicable.

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Results of Operations

As of March 31, 2018, we operated in three reportable business segments for management and internal financial reporting purposes: MOBs, triple-net leased healthcare facilities, and seniors housing — operating properties ("SHOPs"). In our MOB operating segment, we own, manage and lease, through our Property Manager or third party property managers, single and multi-tenant MOBs where tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. In our triple-net leased healthcare facilities operating segment, we own, manage and lease seniors housing communities, hospitals, post-acute care and skilled nursing facilities throughout the United States under long-term triple-net leases, which tenants are generally directly responsible for all operating costs of the respective properties. In our SHOP operating segment, we invest in seniors housing communities under a structure permitted by the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA"). Under RIDEA, a REIT may lease qualified healthcare properties on an arm's length basis to a taxable REIT subsidiary ("TRS") if the property is operated on behalf of such subsidiary by an entity who qualifies as an eligible independent contractor. As of March 31, 2018, we had 17 eligible independent contractors operating 58 SHOP properties. All of our properties across all three business segments are located throughout the United States.

Net operating income ("NOI") is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate portfolio. NOI is equal to total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense. NOI excludes all other financial statement amounts included in net income (loss). We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. See “Non-GAAP Financial Measures” included elsewhere in this Quarterly Report on Form 10-Q for additional disclosures regarding NOI and a reconciliation to our net loss attributable to stockholders, as computed in accordance with GAAP.

As of March 31, 2018, we owned 190 properties. There were 162 properties (our "Same Store" properties) owned for the entire three months ended March 31, 2018 and 2017, including two vacant land parcels and one property under development. During period ended March 31, 2018, we acquired 28 properties (our "Acquisitions") and disposed of one property (our "Disposition"). As described in more detail below, our Same Store properties include 12 properties and six properties that were transitioned from our triple-net leased healthcare facilities segment to our SHOP segment during the year ended December 31, 2017 and the three months ended March 31, 2018, respectively. For purposes of the segment reporting below, these properties were treated as "Acquisitions" in the SHOP segment and "Dispositions" in the triple-net leased healthcare facilities segment.

The following table presents a roll-forward of our properties owned from January 1, 2017 to March 31, 2018:



	Number of Properties
Number of properties, January 1, 2017	163
Acquisition activity during the year ended December 31, 2017	23
Disposition activity during the year ended December 31, 2017	(1	)
Number of properties, December 31, 2017	185
Acquisition activity during the three months ended March 31, 2018	5
Number of properties, March 31, 2018	190

Number of Same Store Properties	162

On June 8, 2017, our TRS acquired 12 operating entities that leased 12 healthcare facilities included in our triple-net leased healthcare facilities segment. Concurrently with the acquisition of the 12 operating entities, we transitioned the management of the healthcare facilities to a third-party management company that manages other healthcare facilities in our SHOP segment. As a part of the transition, our subsidiary property companies executed leases with the acquired operating entities and the acquired operating entities executed management agreements with the management company under the RIDEA structure. As a part of the transition of operations, we now control the operating entities that hold the operating licenses for these healthcare facilities. The results of operations of these properties are included in the Dispositions under our triple-net leased healthcare facilities segment through June 7, 2017 and results of operations since June 8, 2017 are included in Acquisitions under our SHOP segment.

On January 1, 2018, we transitioned six properties in our triple-net leased healthcare facilities segment to operating properties under a structure permitted by the RIDEA structure. The properties consist of two assisted living facilities located in Burlington and Cudahy, Wisconsin, two assisted living facilities located in Dixon and Rockford, Illinois, an assisted living facility located in Richmond, Kentucky and a skilled nursing facility located in Lutz, Florida. The prior tenants of the six properties transferred the operations of the properties to our newly-formed subsidiaries and third-party managers engaged by those subsidiaries pursuant to market operations transfer agreements. Our subsidiaries simultaneously entered into new management agreements with the third-party managers, who will operate and manage the facilities on behalf of our subsidiaries.

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We may in the future, through similar transactions, transition other triple-net leased facilities to third-party managed facilities under a structure permitted by RIDEA, in connection with which they would also transition from our triple-net leased healthcare facilities segment to our SHOP operating segment.

Comparison of the Three Months Ended March 31, 2018 to the Three Months Ended March 31, 2017

Information based on Same Store, Acquisitions and Dispositions allows us to evaluate the performance of our portfolio based on a consistent population of properties. Net loss attributable to stockholders was $6.0 million and $6.1 million for the three months ended March 31, 2018 and 2017, respectively. The following table shows our results of operations for the three months ended March 31, 2018 and 2017 and the period to period change by line item of the consolidated statements of operations:



	Three Months Ended March 31,						Increase (Decrease)
	2018			2017			$			%
Revenues:
Rental income	$	25,286		$	24,022		$	1,264		5.3	%
Operating expense reimbursements	4,971			4,104			867			21.1	%
Resident services and fee income	59,181			46,489			12,692			27.3	%
Total revenues	89,438			74,615			14,823			19.9	%

Operating expenses:
Property operating and maintenance	53,106			42,611			10,495			24.6	%
Impairment charges	733			35			698			NM
Operating fees to related parties	5,727			5,301			426			8.0	%
Acquisition and transaction related	173			2,845			(2,672		)	NM
General and administrative	3,652			4,157			(505		)	(12.1	)%
Depreciation and amortization	20,769			20,483			286			1.4	%
Total expenses	84,160			75,432			8,728			11.6	%
Operating gain (loss)	5,278			(817		)	6,095			NM
Other income (expense):
Interest expense	(11,157		)	(5,482		)	(5,675		)	(103.5	)%
Interest and other income	3			1			2			NM
Gain (loss) on non-designated derivatives	178			(64		)	242			NM
Total other expenses	(10,976		)	(5,545		)	(5,431		)	(97.9	)%
Loss before income taxes	(5,698		)	(6,362		)	664			10.4	%
Income tax (expense) benefit	(309		)	195			(504		)	NM
Net loss	(6,007		)	(6,167		)	160			2.6	%
Net income attributable to non-controlling interests	16			28			(12		)	(42.9	)%
Net loss attributable to stockholders	$	(5,991	)	$	(6,139	)	$	148		2.4	%

_______________

NM — Not Meaningful

Segment Results — Medical Office Buildings

Rental income is primarily related to contractual rent received from tenants in our MOBs. Generally, operating expense reimbursements increase in proportion with the increase in property operating expenses in our MOB segment. Pursuant to many of our lease agreements in our MOBs, tenants are required to pay their pro rata share of property operating expenses, which may be subject to expense exclusions and floors, in addition to base rent. Property operating and maintenance relates to the costs associated with our properties, including real estate taxes, utilities, repairs, maintenance, bad debt expense and unaffiliated third party property management fees.

During the quarter ended March 31, 2018, rental income increased at the Same Store properties in our MOB segment as compared to the quarter ended March 31, 2017, which was mainly attributable to the decrease in free rent during the three months ended March 31, 2018 compared to the three months ended March 31, 2017.

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Our Same Store property operating and maintenance expenses increased $0.4 million during the quarter ended March 31, 2018 due to increased property operating and maintenance expenses that are reimbursable by our tenants.

The following table presents the revenue and property operating and maintenance expense and the period to period change within our MOB segment for the three months ended March 31, 2018 and 2017:



	Same Store ⁽¹⁾									Acquisitions ⁽²⁾							Dispositions ⁽³⁾								Segment Total ⁽⁴⁾
	Three Months Ended March 31,				Increase (Decrease)					Three Months Ended March 31,				Increase (Decrease)			Three Months Ended March 31,				Increase (Decrease)				Three Months Ended March 31,				Increase (Decrease)
(In thousands)	2018		2017		$			%		2018		2017		$		%	2018		2017		$			%	2018		2017		$		%
Revenues:
Rental income	$	16,525	$	16,324	$	201		1.2	%	$	2,830	$	—	$	2,830	NM	$	—	$	24	$	(24	)	NM	$	19,355	$	16,348	$	3,007	18.4	%
Operating expense reimbursements	3,915		3,785		130			3.4	%	719		—		719		NM	—				—			NM	4,634		3,785		849		22.4	%
Total revenues	20,440		20,109		331			1.6	%	3,549		—		3,549		NM	—		24		(24		)	NM	23,989		20,133		3,856		19.2	%
Property operating and maintenance	6,133		5,715		418			7.3	%	1,083		—		1,083		NM	—		20		(20		)	NM	7,216		5,735		1,481		25.8	%
NOI	$	14,307	$	14,394	$	(87	)	(0.6	)%	$	2,466	$	—	$	2,466	NM	$	—	$	4	$	(4	)	NM	$	16,773	$	14,398	$	2,375	16.5	%

_______________


⁽¹⁾	Our MOB segment consisted of 79 Same Store properties.


⁽²⁾	Our MOB segment included 25 Acquisition properties.


⁽³⁾	Our MOB segment includes one Disposition property.


⁽⁴⁾	Our MOB segment included 104 properties as of March 31, 2018.

NM — Not Meaningful

The following table presents the number of Same Store MOBs, average occupancy and annualized straight line rental income per rented square foot for single- and multi-tenant MOBs in our MOB segment for the periods presented:



	Number of Same Store Properties	Average Occupancy for the Three Months Ended March 31,				Annualized Straight Line Rental Income Per Rented Square Foot as of March 31,
Type of Same Store MOB	Number of Same Store Properties	2018		2017		2018		2017
Single-tenant MOBs	27	96.6	%	100.0	%	$	22.07	$	22.07
Multi-tenant MOBs	52	96.1	%	88.9	%	26.77		23.35
Total/Weighted-Average	79	96.3	%	92.4	%	$	25.25	$	22.91

Segment Results — Triple-Net Leased Healthcare Facilities

Rental income is related to contractual rent received from tenants in our triple-net leased healthcare facilities. Operating expense reimbursements in our triple-net leased healthcare facilities segment generally includes reimbursement for property operating expenses that we pay on behalf of tenants in this segment. Pursuant to many of our lease agreements in our triple-net leased healthcare facilities, tenants are generally directly responsible for all operating costs of the respective properties in addition to base rent. Property operating and maintenance should typically include minimal activity in our triple-net leased healthcare facilities segment, as such expenses are typically paid directly by the tenants; however, real estate taxes and insurance may be included. Such expenses are normally reimbursed by the tenants in this segment. Bad debt expense is also reflected in our property operating and maintenance expenses.

During the three months ended March 31, 2018, rental income in our triple-net leased healthcare facilities segment decreased $1.7 million compared to the three months ended March 31, 2017. This decrease primarily relates to Dispositions comprising our six triple-net leased healthcare facilities that transitioned to our SHOP operating segment on January 1, 2018 and our twelve triple-net leased healthcare facilities that transitioned to our SHOP operating segment on June 8, 2017.

Operating expense reimbursements during the three months ended March 31, 2018 reflect adjustments to operating expense reimbursements related to real estate taxes, which was also reflected in our property operating and maintenance expenses.

Property operating and maintenance in our Same Store properties decreased $2.3 million compared to the three months ended March 31, 2017. This decrease primarily relates to Dispositions, comprising our six triple-net leased healthcare facilities that transitioned to our SHOP operating segment on January 1, 2018 and 12 triple-net leased healthcare facilities that transitioned to our SHOP operating segment on June 8, 2017. Additionally, we incurred a $1.1 million benefit from winding down operations of a court ordered receiver which had previously been under the possession and control of six skilled nursing facilities prior to being terminated on November 1, 2017.

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Revenues for our triple-net leased healthcare facilities generally consist of fixed rental amounts (subject to annual contractual escalations) received from our tenants in accordance with the applicable lease terms and do not vary based on the underlying operating performance of the properties.

The following table presents the revenue and property operating and maintenance expense and the period to period change within our triple net leased healthcare facilities segment for the three months ended March 31, 2018 and 2017:



	Same Store ⁽¹⁾								Dispositions ⁽²⁾									Segment Total
	Three Months Ended March 31,				Increase (Decrease)				Three Months Ended March 31,					Increase (Decrease)				Three Months Ended March 31,				Increase (Decrease)
(In thousands)	2018		2017		$		%		2018		2017			$			%	2018		2017		$			%
Revenues:
Rental income	$	5,928	$	5,223	705		13.5	%	$	—	$	2,448		$	(2,448	)	NM	$	5,928	$	7,671	$	(1,743	)	(22.7	)%
Operating expense reimbursements	337		319		18		NM		—		—			—			NM	337		319		18			5.6	%
Total revenues	6,265		5,542		723		13.0	%	—		2,448			(2,448		)	NM	6,265		7,990		(1,725		)	(21.6	)%
Property operating and maintenance	2,426		2,312		114		4.9	%	—		2,454			(2,454		)	NM	2,426		4,766		(2,340		)	(49.1	)%
NOI	$	3,839	$	3,230	$	609	18.9	%	$	—	$	(6	)	$	6		NM	$	3,839	$	3,224	$	615		19.1	%

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⁽¹⁾	Our triple-net leased healthcare facilities segment consisted of 26 Same Store properties.


⁽²⁾	Includes eighteen properties that are deemed Dispositions as they were transitioned to our SHOP operating segment.

NM — Not Meaningful

Segment Results — Seniors Housing - Operating Properties

Resident services and fee income is generated in connection with rent and services offered to residents in our SHOPs depending on the level of care required, as well as fees associated with other ancillary services. Property operating and maintenance relates to the costs associated with staffing to provide care for the residents in our SHOPs, as well as food, marketing, real estate taxes, management fees paid to our third party operators and costs associated with maintaining the physical site.

During the three months ended March 31, 2018, resident services and fee income and rental income increased by $12.7 million in our SHOP segment as compared to the three months ended March 31, 2017. Acquisitions, primarily comprising our six triple-net leased healthcare facilities that transitioned to our SHOP operating segment on January 1, 2018 and 12 triple-net leased healthcare facilities that transitioned to our SHOP operating segment on June 8, 2017 contributed to an increase of $12.9 million, offset by a $0.2 million decrease in revenues in our Same Store properties. The decrease in Same Store resident services and fee income was primarily due to lower occupancies in a portfolio of SHOPs located in Georgia throughout the three months ended March 31, 2018.

The following table presents the revenue and property operating and maintenance expense and the period to period change within our SHOP segment for the three months ended March 31, 2018 and 2017:



	Same Store ⁽¹⁾									Acquisitions ⁽²⁾							Segment Total ⁽³⁾
	Three Months Ended March 31,				Increase (Decrease)					Three Months Ended March 31,				Increase (Decrease)			Three Months Ended March 31,				Increase (Decrease)
(In thousands)	2018		2017		$			%		2018		2017		$		%	2018		2017		$		%
Revenues:
Resident services and fee income	$	46,329	$	46,489	$	(160	)	(0.3	)%	$	12,852	$	—	$	12,852	NM	$	59,181	$	46,489	$	12,692	27.3	%
Rental income	3		3		—			NM		—		—		—		NM	3		3		—		NM
Total revenues	46,332		46,492		(160		)	(0.3	)%	12,852		—		12,852		NM	59,184		46,492		12,692		27.3	%
Property operating and maintenance	32,332		32,110		222			0.7	%	11,132		—		11,132		NM	43,464		32,110		11,354		35.4	%
NOI	$	14,000	$	14,382	$	(382	)	(2.7	)%	$	1,720	$	—	$	1,720	NM	$	15,720	$	14,382	$	1,338	9.3	%

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⁽¹⁾	Our SHOP segment consisted of 40 Same Store properties.


⁽²⁾	Our SHOP segment included 20 Acquisition properties, includes 18 properties that are deemed Acquisitions as they were transitioned from our triple-net leased healthcare facilities operating segment.


⁽³⁾	Our SHOP segment consisted of 60 properties as of March 31, 2018, including 58 operating properties and two land parcels.

NM — Not Meaningful

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Other Results of Operations

Impairment Charges

We incurred $0.7 million of impairment charges for the three months ended March 31, 2018. Impairment loss on sale of real estate investments for the three months ended March 31, 2017 of approximately $35,000 related to one real estate investment classified as held for sale as of March 31, 2017 with an accepted sale price less than the carrying value.

Operating Fees to Related Parties

Operating fees to related parties increased $0.4 million to $5.7 million for the three months ended March 31, 2018 from $5.3 million for the three months ended March 31, 2017.

Our Advisor and Property Manager are paid for asset management and property management services for managing our properties on a day-to-day basis. Effective February 17, 2017, we pay a base management fee equal to $1.6 million per month, while the variable portion of the base management fee is equal, per month, to one twelfth per month of 1.25% of the cumulative net proceeds of any equity raised subsequent to February 17, 2017. During the period preceding the February 17, 2017 amendment, our asset management fee was based on a percentage of the lesser of (a) cost of assets and (b) fair value of assets. Asset management fees increased $0.3 million to $4.9 million for the three months ended March 31, 2018 from $4.6 million for the three months ended March 31, 2017.

Property management fees increased $0.2 million to $0.9 million for the three months ended March 31, 2018 from $0.7 million for the three months ended March 31, 2017. Property management fees increase or decrease in direct correlation with gross revenues of the properties managed.

See Note 9 - Related Party Transactions and Arrangements to our consolidated financial statements which provides detail on our fees and expense reimbursements.

Acquisition and Transaction Related Expenses

Acquisition and transaction related expenses generally increase in direct correlation with the number and contract purchase price of properties acquired or sold during the period and the level of activity surrounding any contemplated transaction or strategic process. Acquisition and transaction related expenses were $0.2 million for the three months ended March 31, 2018 compared to $2.8 million for the three months ended March 31, 2017, primarily related to costs associated with our agreement to sell eight of our skilled nursing facility properties incurred during the first quarter of 2017.

General and Administrative Expenses

General and administrative expenses decreased $0.5 million to $3.7 million for the three months ended March 31, 2018 compared to $4.2 million for the three months ended March 31, 2017, which includes $2.2 million and $1.6 million incurred in expense reimbursements and distributions on partnership units of the OP designated as "Class B Units" ("Class B Units") to related parties. General and administrative expenses primarily relate to professional fees for audit, transfer agent and legal services as well as certain expenses reimbursed to related parties.

Depreciation and Amortization Expenses

Depreciation and amortization expense increased $0.3 million to $20.8 million for the three months ended March 31, 2018 from $20.5 million for the three months ended March 31, 2017. Our acquisitions contributed $1.4 million to the increase. Same Store depreciation and amortization decreased $1.1 million primarily due to the expiration of the estimated useful lives of in-place leases recorded at acquisition.

Interest Expense

Interest expense increased $5.7 million to $11.2 million for the three months ended March 31, 2018 from $5.5 million for the three months ended March 31, 2017. The increase in interest expense is related to higher overall outstanding debt including new borrowings under our master credit facilities related to Fannie Mae's Multifamily MBS program (the "Fannie Mae Master Credit Facilities"). This increase in outstanding debt under the Fannie Mae Master Credit Facilities was offset by paydowns of our multi-property mortgage loan with Capital One, National Association (the "Bridge Loan") entered into in December 2017.

Our interest expense in future periods will vary based on our level of future borrowings, the cost of borrowings and the opportunity to acquire real estate assets which meet our investment objectives.

Interest and Other Income

Interest and other income increased to approximately $3,000 for the three months ended March 31, 2018 from approximately $1,000 for the three months ended March 31, 2017. Interest and other income includes income from our investment securities and interest income earned on cash and cash equivalents held during the period.

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Gain (Loss) on Non-Designated Derivatives

Gain (loss) on non-designated derivative instruments for the three months ended March 31, 2018 and 2017 related to interest rate caps that are designed to protect us from adverse interest rate changes in connection with our Fannie Mae Master Credit Facilities, which have floating interest rates.

Income Tax (Expense) Benefit

Income tax (expense) benefit of approximately $(0.3) million and $0.2 million for the three months ended March 31, 2018 and 2017 primarily related to deferred tax assets generated by temporary differences and current period net operating income associated with our TRS. These deferred tax assets are partially offset by other income tax expenses incurred during the same period. Income taxes generally relate to our SHOPs, which are leased by our TRS.

Net Income Attributable to Non-Controlling Interests

Net income attributable to non-controlling interests was approximately $16,000 and $28,000 for the three months ended March 31, 2018 and 2017, respectively, which represents the portion or our net income that is related to limited partner interests in the OP ("OP Units") and non-controlling interest holders.

Cash Flows from Operating Activities

During the quarter ended March 31, 2018, net cash provided by operating activities was $16.9 million. The level of cash flows provided by operating activities is affected by, among other things, the number of properties owned, the performance of those properties, the timing of interest payments and the amount of borrowings outstanding during the period, as well as the receipt of scheduled rent payments and the level of operating expenses. Cash inflows include non-cash items of $20.5 million (net loss of $6.0 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, share based compensation, gain on non-designated derivatives and impairment charges), an increase in accounts payable and accrued expenses of $1.3 million related to higher accrued real estate taxes, property operating expenses and professional and legal fees, and an increase of $2.0 million in deferred rent. These cash inflows were partially offset by a net increase in prepaid and other assets of $4.6 million and a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $2.1 million.

During the three months ended March 31, 2017, net cash provided by operating activities was $19.1 million. Cash inflows related to a net loss adjusted for non-cash items of $18.9 million (net loss of $6.2 million adjusted for non-cash items including depreciation and amortization of tangible and identifiable intangible real estate assets, deferred financing costs and mortgage premiums and discounts, bad debt expense, share based compensation, loss on non-designated derivative instruments and impairment charges), an increase in accounts payable and accrued expenses of $1.9 million primarily related to an increase in tenant deposits, accrued professional fees, real estate taxes and property operating expenses for our MOBs and SHOPs, as well as accrued related party fees and reimbursements and an increase of $1.3 million in deferred rent. These cash inflows were partially offset by a net increase in prepaid and other assets of $1.6 million due to rent, other receivables and prepaid real estate taxes and insurance and a net increase in unbilled receivables recorded in accordance with straight-line basis accounting of $1.4 million.

Cash Flows from Investing Activities

Net cash used in investing activities during the quarter ended March 31, 2018 was $21.5 million. The cash used in investing activities included $20.3 million for the acquisition of five MOBs during the period and to fund the ongoing development property in Jupiter, Florida as well as $1.2 million in capital expenditures.

Net cash used in investing activities during the three months ended March 31, 2017 was $4.6 million. The cash used in investing activities included $2.8 million to fund the ongoing development property in Jupiter, Florida as well as $1.1 million of capital expenditures and a deposit for a real estate acquisition of $0.6 million.

Cash Flows from Financing Activities

Net cash used in financing activities of $27.0 million during the quarter ended March 31, 2018 related to mortgage principal repayments of $62.1 million, distributions to stockholders of $19.1 million, common stock repurchases of $8.0 million, payments of deferred financing costs of $1.6 million, and distributions to non-controlling interest holders of $0.1 million. These cash outflows were partially offset by proceeds from our Fannie Mae Master Credit Facilities of $64.2 million.

Net cash provided by financing activities of $48.4 million during the three months ended March 31, 2017 related to proceeds from our senior secured revolving credit facility (the "Revolving Credit Facility") and Fannie Mae Master Credit Facilities of $99.4 million. This cash inflow was partially offset by common stock repurchases of $27.5 million, distributions to stockholders of $20.2 million, payments of deferred financing costs of $2.5 million, mortgage principal repayments of $0.6 million, distributions to non-controlling interest holders of $0.2 million and payments for non-designated derivative instruments of $0.1 million.

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Liquidity and Capital Resources

As of March 31, 2018, we had $61.3 million of cash and cash equivalents. Following an amendment to the Revolving Credit Facility in October 2017, we are subject to a covenant that the aggregate amount of all our unrestricted cash and cash equivalents must be equal to at least $30.0 million at all times. Our principal demands for cash will be for a funding our ongoing development project, acquisitions and capital expenditures, the payment of our operating and administrative expenses, debt service obligations (including principal repayment), share repurchases and distributions to our stockholders.

We expect to fund our future short-term operating liquidity requirements, including distributions, through a combination of current cash on hand, proceeds from DRIP, net cash provided by our property operations and proceeds from the Revolving Credit Facility, the Fannie Credit Facilities and other secured financings. Other potential future sources of capital include proceeds from secured and unsecured financings from banks or other lenders, proceeds from public and private offerings, proceeds from the sale of properties and undistributed funds from operations, if any.

Tender Offer

On March 13, 2018, the Company announced a tender offer (the "Tender Offer") to purchase up to 2.0 million shares of the Company’s common stock for cash at a purchase price equal to $13.15 per share with the proration period and withdrawal rights expiring on April 12, 2018. The Company made the Tender Offer in response to an unsolicited offer to stockholders commenced on February 27, 2018. On April 4, 2018 and April 16, 2018 the Tender offer was amended to reduce the number of shares the Company was offering to purchase to 230,000 shares and extend the expiration date to May 1, 2018. The Tender Offer expired in accordance with its terms on May 1, 2018. In accordance with the terms of the Tender Offer, we accepted for purchase 229,999 shares for a total cost of approximately $3.0 million. See Note 17 — Subsequent Events for further discussion on the Tender Offer.

Financings

As of March 31, 2018, our total debt leverage ratio (total debt divided by total assets, net) was approximately 40.6% and we had total borrowings of $952.3 million, at a weighted average interest rate of 4.10%. As of December 31, 2017 we had total borrowings of $950.2 million, at a weighted average interest rate of 3.93%. We expect to increase our leverage over time and utilize proceeds from our Revolving Credit Facility and our Fannie Mae Master Credit Facilities as well as other new and current secured financings to complete future property acquisitions. Such actions may require us to pledge some or all of our unencumbered properties as security for that debt. The gross carrying value of unencumbered assets as of March 31, 2018 was $480.0 million. We may borrow if we need funds to satisfy the REIT tax qualifications requirement that we generally distribute annually to our stockholders at least 90% of our REIT taxable income (which does not equal net income, as calculated in accordance with GAAP, determined without regard to the deduction for dividends paid and excluding net capital gain). We also may borrow if we otherwise deem it necessary or advisable to assure that we maintain our qualification as a REIT.

Mortgage Notes Payable

As of March 31, 2018, we had $345.2 million in mortgage notes payable outstanding, including the Bridge Loan Agreement with Capital One as administrative agent and lender. See Note 4 - Mortgages Payable for additional information. Future scheduled principal payments on our mortgage notes payable for the remainder of 2018 and the year ended December 31, 2019 are $21.4 million and $18.1 million, respectively.

On December 28, 2017, we entered into the Bridge Loan Agreement with Capital One as administrative agent and lender. See Note 4 — Mortgage Notes Payable for additional information.

On April 10, 2018, we entered into a $118.7 million loan agreement (the "KeyBank MOB Loan Agreement") with KeyBank. The KeyBank MOB Loan Agreement has a fixed interest rate of 4.541% and a maturity date of May 1, 2028. The KeyBank MOB Loan requires monthly interest-only payments, with the principal balance due on the maturity date. The KeyBank MOB Loan is secured by, among other things, mortgages on 20 medical office buildings in 12 states. The KeyBank MOB Loan Agreement permits KeyBank to securitize the KeyBank MOB Loan or any portion thereof.

Revolving Credit Facility

As of March 31, 2018, $239.7 million was outstanding under the Revolving Credit Facility and the unused borrowing capacity under the Revolving Credit Facility was $33.7 million. Availability of borrowings is based on a pool of eligible otherwise unencumbered real estate assets comprising the borrowing base thereunder. The equity interests and related rights in the Company’s wholly owned subsidiaries that directly own or lease the eligible unencumbered real estate assets comprising the borrowing base

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of the Revolving Credit Facility are pledged for the benefit of the lenders thereunder. The Revolving Credit Facility also contains a subfacility for letters of credit of up to $25.0 million. The Revolving Credit Facility matures on March 21, 2019.

The Revolving Credit Facility requires us to meet certain financial covenants on a quarterly basis. The Advisor has elected to, without any interest accrual, defer cash payment of $1.7 million in certain fees and reimbursements due to the Advisor as of December 31, 2017. The Advisor’s deferral enabled us to comply with such covenants as of December 31, 2017. These deferred fees and reimbursements are due to the Advisor upon demand within two business days' written notice and no later than June 30, 2018. These 2017 Advisor fee deferral amounts were fully paid in April 2018. As of December 31, 2017, we were in compliance with the financial covenants under the Revolving Credit Facility. There can be no assurance that the Advisor will agree to defer future fees or reimbursements, including deferrals required to meet financial covenants per the Revolving Credit Facility.

Fannie Mae Master Credit Facilities

As of March 31, 2018, $359.3 million was outstanding under the Fannie Mae Master Credit Facilities. We may request future advances under the Fannie Mae Master Credit Facilities by adding eligible properties to the collateral pool or by borrowing-up against the increased value of the collateral pool, subject to customary conditions, including satisfaction of minimum debt service coverage and maximum loan-to-value tests. Future advances based on the increased value of the collateral pool may only occur during the first five years of the term and not more than one annually for each of the Fannie Mae Master Credit Facilities. The Fannie Mae Master Credit Facilities mature on November 1, 2026.

On March 2, 2018, we incurred approximately $64.2 million in aggregate additional indebtedness under the Fannie Mae Master Credit Facilities. All of the $61.7 million of the net proceeds, after closing costs, of this advance were used to prepay a portion of mortgage notes payable.

Acquisitions

On March 5, 2018, we, through a wholly-owned subsidiary of our OP, completed an acquisition of a multi-tenant, triple-net leased MOB for a contract purchase price of $6.7 million. The property is located in Houston, TX and comprises approximately 24,000 square feet. We accounted for the purchase as an asset acquisition.

On March 29, 2018, we, through a wholly-owned subsidiary of our OP, completed an acquisition of four single-tenant, triple-net leased MOBs for a contracted purchase price of $10.1 million. Three of the properties are located in Tampa, FL and one in Wesley Chapel, FL and comprise approximately 33,000 square feet. We accounted for the purchase as an asset acquisition.

All 2018 acquisitions were funded with cash on hand.

Assets Held for Sale

In January 2017, we entered into a purchase and sale agreement to sell eight of our skilled nursing facility properties in Missouri (the "Missouri SNF Properties") to affiliates of the tenant-operators of the facilities for $42 million. Pursuant to their rights under the initial purchase and sale agreement, the contract purchasers had seven options to adjourn the closing date for the sale through December 31, 2018, with each adjournment conditioned on the purchasers' deposit of additional earnest money.

In December 2017, we entered into an amendment to the purchase and sale agreement in which we agreed to reduce the contract purchase price from $42.0 million to $40.0 million and finance $7.5 million of the reduced contract purchase price. In addition, the closing date was amended to occur on or before the sixtieth day following the date on which all of the tenants have received a permanent license to operate the Missouri SNF Properties, but in no event later than September 30, 2018. During 2017, the tenant operators have been engaged in litigation with the state regulator over a potential revocation of their licenses to operate the Missouri SNF Properties and have not yet received permanent licenses to operate. The tenants’ failure to obtain permanent licenses could adversely affect the purchaser’s ability to obtain financing to consummate the purchase of the Missouri SNF Properties. If the purchasers fail to close by the September 30, 2018 outside closing date, our sole remedy under the purchase and sale agreement will be to terminate the purchase and sale agreement and receive the earnest money in the amount of $1.4 million. Further, if the tenants fail to obtain permanent licenses, they may not be able to fulfill their rental obligations under their leases with us.

Development Project Funding

In August 2015, we entered into an asset purchase agreement and development agreement to acquire land and construction in progress, and subsequently fund the remaining construction, of a development property in Jupiter, Florida for $82.0 million. As of March 31, 2018, we had funded $84.9 million, including $10.0 million for the land and $74.9 million for construction in progress. As a result, we believe that we have satisfied our funding commitments for the construction. As of March 31, 2018, we had funded $2.9 million in excess of its $72.0 million funding commitment for the construction. We have and may continue, at our election, to provide additional funding to ensure completion of the construction. To the extent we fund additional monies for the completion of the development, Palm Health Partners, LLC ("Palm"), the developer of the facility, is responsible for reimbursing us for any amounts so funded. Entities related to Palm are, however, in default to us under leases at other properties in our portfolio and there can be no assurance that Palm will reimburse us for construction overruns.

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Palm is responsible for completing the development and obtaining a final certificate of occupancy for the facility (the "CO"). However, Palm is in default of the development agreement and has provided notice that it will cease providing services under the development agreement, which may result in additional delays in obtaining the CO. Until the CO is obtained we will not receive income from the property. There is no assurance as to when and if Palm will comply with its obligations. We are currently working to obtain the CO.

Share Repurchase Program

Our Board has adopted the SRP, which enables our stockholders to sell their shares to us under limited circumstances. At the time a stockholder requests a repurchase, we may, subject to certain conditions, repurchase the shares presented for repurchase for cash. There are limits on the number of shares we may repurchase under this program during any calendar year. We are only authorized to repurchase shares using the proceeds secured from our DRIP in any given period, although the Board has the power, in its sole discretion, to determine the number of shares repurchased during any period as well as the amount of funds to be used for that purpose.

On June 14, 2017, we announced that our Board approved and adopted an amended and restated SRP that superseded and replaced the existing SRP, effective as of July 14, 2017. Under the amended and restated SRP, subject to certain conditions, only repurchase requests made following the death or qualifying disability of stockholders that purchased shares of our common stock or received their shares from us (directly or indirectly) through one or more non-cash transactions would be considered for repurchase. Other terms and provisions of the amended and restated SRP remained consistent with the existing SRP.

The following table reflects the number of shares repurchased cumulatively through March 31, 2018:



	Number of Shares Repurchased	Average Price per Share
Cumulative repurchases as of December 31, 2017 ⁽¹⁾	2,529,798	$	22.43
Three months ended March 31, 2018 ⁽²⁾	373,967	$	21.45
Cumulative repurchases as of March 31, 2018	2,903,765	$	22.30

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

Non-GAAP Financial Measures

This section includes non-GAAP financial measures including Funds from Operations ("FFO"), Modified Funds from Operations ("MFFO") and Net Operating Income ("NOI"). A description of these non-GAAP financial measures and reconciliations to the most directly comparable GAAP measure, which is net income, are provided below:

Funds from Operations and Modified Funds from Operations

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings, improvements, and straight-line amortization of intangibles, which implies that the value of a real estate asset diminishes predictably over time. We believe that, because real estate values historically rise and fall with market conditions, including, but not limited to, inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using the historical accounting convention for depreciation and certain other items may be less informative.

Because of these factors, the National Association of Real Estate Investment Trusts ("NAREIT"), an industry trade group, has published a standardized measure of performance known as FFO, which is used in the REIT industry as a supplemental performance measure. We believe FFO, which excludes certain items such as real estate-related depreciation and amortization, is an appropriate supplemental measure of a REIT's operating performance. FFO is not equivalent to our net income or loss as determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards set forth in the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (the "White Paper"). The White Paper defines FFO as net income or loss computed in accordance with GAAP, but excluding gains or losses from sales of property and real estate related impairments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures, if any, are calculated to reflect FFO on the same basis.

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We believe that the use of FFO provides a more complete understanding of our performance to investors and to management, and reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income.

Changes in the accounting and reporting promulgations under GAAP that were put into effect in 2009 subsequent to the establishment of NAREIT's definition of FFO, such as the change to expense as incurred rather than capitalize and depreciate acquisition fees and expenses incurred for business combinations, have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses, as items that are expensed under GAAP across all industries. These changes had a particularly significant impact on publicly registered, non-listed REITs, which typically have a significant amount of acquisition activity in the early part of their existence, particularly during the period when they are raising capital through ongoing initial public offerings.

Because of these factors, the Investment Program Association ("IPA"), an industry trade group, has published a standardized measure of performance known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered, non-listed REITs. MFFO is designed to be reflective of the ongoing operating performance of publicly registered, non-listed REITs by adjusting for those costs that are more reflective of acquisitions and investment activity, along with other items the IPA believes are not indicative of the ongoing operating performance of a publicly registered, non-listed REIT, such as straight-lining of rents as required by GAAP. We believe it is appropriate to use MFFO as a supplemental measure of operating performance because we believe that, when compared year-over-year, both before and after we have deployed all of our offering proceeds and are no longer incurring a significant amount of acquisition fees or other related costs, it reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. MFFO is not equivalent to our net income or loss as determined under GAAP.

We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the "Practice Guideline") issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for acquisition fees and expenses and other items. In calculating MFFO, we follow the Practice Guideline and exclude acquisition fees and expenses, amortization of above and below market and other intangible lease assets and liabilities, amounts relating to straight-line rent adjustments (in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the lease and rental payments), contingent purchase price consideration, accretion of discounts and amortization of premiums on debt investments, mark-to-market adjustments included in net income, gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and adjustments for unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. We also exclude other non-operating items in calculating MFFO, such as transaction-related fees and expenses (which include costs associated with a strategic review we conducted during the year ended December 31, 2016) and capitalized interest.

We believe that, because MFFO excludes costs that we consider more reflective of acquisition activities and other non-operating items, MFFO can provide, on a going-forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance once our portfolio is stabilized. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry and allows for an evaluation of our performance against other publicly registered, non-listed REITs.

Not all REITs, including publicly registered, non-listed REITs, calculate FFO and MFFO the same way. Accordingly, comparisons with other REITs, including publicly registered, non-listed REITs, may not be meaningful. Furthermore, FFO and MFFO are not indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as determined under GAAP as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. The methods utilized to evaluate the performance of a publicly registered, non-listed REIT under GAAP should be construed as more relevant measures of operational performance and considered more prominently than the non-GAAP measures, FFO and MFFO, and the adjustments to GAAP in calculating FFO and MFFO.

Neither the SEC, NAREIT, the IPA nor any other regulatory body or industry trade group has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, NAREIT, the IPA or another industry trade group may publish updates to the White Paper or the Practice Guideline or the SEC or another regulatory body could standardize the allowable adjustments across the publicly registered, non-listed REIT industry and we would have to adjust our calculation and characterization of FFO or MFFO accordingly.

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The table below reflects the items deducted from or added to net loss attributable to stockholders in our calculation of FFO and MFFO for the periods indicated. In calculating our FFO and MFFO, we exclude the impact of amounts attributable to our non-controlling interests.



	Three Months Ended
(In thousands)	March 31, 2018
Net loss attributable to stockholders (in accordance with GAAP)	$	(5,991	)
Depreciation and amortization ⁽¹⁾	20,458
Impairment charges	733
Adjustments for non-controlling interests ⁽²⁾	(103		)
FFO attributable to stockholders	15,097
Acquisition and transaction related	173
Amortization of market lease and other intangibles, net	86
Straight-line rent adjustments, net of related bad debt expense of $1,468	(628		)
Amortization of mortgage premiums and discounts, net	(69		)
Gain on non-designated derivatives	(178		)
Capitalized construction interest costs	(670		)
Adjustments for non-controlling interests ⁽²⁾	6
MFFO attributable to stockholders	$	13,817

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⁽¹⁾	Net of non-real estate depreciation and amortization.


⁽²⁾	Represents the portion of the adjustments allocable to non-controlling interest.



	Three Months Ended
(In thousands)	March 31, 2017
Net loss attributable to stockholders (in accordance with GAAP)	$	(6,139	)
Depreciation and amortization ⁽¹⁾	20,240
Impairment charges	35
Adjustments for non-controlling interests ⁽²⁾	(99		)
FFO attributable to stockholders	14,037
Acquisition and transaction-related	2,845
Amortization of market lease and other lease intangibles, net	119
Straight-line rent adjustments, net of related bad debt expense of $334	(1,052		)
Amortization of mortgage premiums and discounts, net	(440		)
Loss on non-designated derivative instruments	64
Capitalized construction interest costs	(418		)
Adjustments for non-controlling interests ⁽²⁾	(5		)
MFFO attributable to stockholders	$	15,150

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⁽¹⁾	Net of non-real estate depreciation and amortization.


⁽²⁾	Represents the portion of the adjustments allocable to non-controlling interests.

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Net Operating Income

NOI is a non-GAAP financial measure used by us to evaluate the operating performance of our real estate. NOI is equal to total revenues, excluding contingent purchase price consideration, less property operating and maintenance expense. NOI excludes all other items of expense and income included in the financial statements in calculating net income (loss).

We believe NOI provides useful and relevant information because it reflects only those income and expense items that are incurred at the property level and presents such items on an unlevered basis. We use NOI to assess and compare property level performance and to make decisions concerning the operation of the properties. Further, we believe NOI is useful to investors as a performance measure because, when compared across periods, NOI reflects the impact on operations from trends in occupancy rates, rental rates, operating expenses and acquisition activity on an unleveraged basis, providing perspective not immediately apparent from net income (loss).

NOI excludes certain components from net income (loss) in order to provide results that are more closely related to a property's results of operations. For example, interest expense is not necessarily linked to the operating performance of a real estate asset and is often incurred at the corporate level. In addition, depreciation and amortization, because of historical cost accounting and useful life estimates, may distort operating performance at the property level. NOI presented by us may not be comparable to NOI reported by other REITs that define NOI differently. We believe that in order to facilitate a clear understanding of our operating results, NOI should be examined in conjunction with net income (loss) as presented in our consolidated financial statements. NOI should not be considered as an alternative to net income (loss) as an indication of our performance or to cash flows as a measure of our liquidity or ability to make distributions.

The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Acquisitions NOI for the three months ended March 31, 2018:



(In thousands)	Same Store			Acquisitions		Dispositions		Non-Property Specific			Total
Net income (loss) attributable to stockholders (in accordance with GAAP)	$	13,968		$	665	$	—	$	(20,624	)	$	(5,991	)
Impairment charges	733			—		—		—			733
Operating fees to related parties	—			—		—		5,727			5,727
Acquisition and transaction related	1			61		—		111			173
General and administrative	—			—		—		3,652			3,652
Depreciation and amortization	17,241			3,395		—		133			20,769
Interest expense	205			61		—		10,891			11,157
Interest and other income	(3		)	—		—		—			(3		)
Gain on sale of real estate investments	—			—		—		—			—
Loss on non-designated derivative instruments	—			—		—		(178		)	(178		)
Income tax benefit (expense)	—			—				309			309
Net income (loss) attributable to non-controlling interests	1			4		—		(21		)	(16		)
NOI	$	32,146		$	4,186	$	—	$	—		$	36,332

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The following table reflects the items deducted from or added to net income (loss) attributable to stockholders in our calculation of Same Store and Dispositions NOI for the three months ended March 31, 2017:



(In thousands)	Same Store			Acquisitions		Dispositions		Non-Property Specific			Total
Net income (loss) attributable to stockholders (in accordance with GAAP)	$	7,835		$	—	$	2	$	(13,976	)	$	(6,139	)
Impairment charges	—			—		—		35			35
Operating fees to related parties	—			—		—		5,301			5,301
Acquisition and transaction related	2,801			—		—		44			2,845
General and administrative	1			—		—		4,156			4,157
Depreciation and amortization	20,350			—		—		133			20,483
Interest expense	1,255			—		—		4,227			5,482
Interest and other income	(1		)	—		—		—			(1		)
Loss on non-designated derivative instruments	—			—		—		64			64
Income tax benefit (expense)	(242		)	—				47			(195		)
Net income (loss) attributable to non-controlling interests	3			—		—		(31		)	(28		)
NOI	$	32,002		$	—	$	2	$	—		$	32,004

Refer to Note 15 — Segment Reporting for a reconciliation of NOI to net loss attributable to stockholders by reportable segment.

Distributions

In May 2013, we began paying distributions on a monthly basis at a rate equivalent to $1.70 per annum, per share of common stock. In March 2017, the Board authorized a decrease in the rate at which we pay monthly distributions to stockholders, effective as of April 1, 2017, to a rate equivalent to $1.45 per annum, per share of common stock. On February 20, 2018, the Board authorized a further decrease in the rate at which we pay monthly distributions to stockholders, effective as of March 1, 2018, to a rate equivalent to $0.85 per annum per share of common stock. Distributions are payable by the 5th day following each month end to stockholders of record at the close of business each day during the prior month.

The amount of distributions payable to our stockholders is determined by the Board and is dependent on a number of factors, including funds available for distribution, our financial condition, capital expenditure requirements, as applicable, requirements of Maryland law and annual distribution requirements needed to maintain our status as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). Distribution payments are dependent on the availability of funds. The Board may further reduce the amount of distributions paid or suspend distribution payments at any time and therefore distribution payments are not assured.

During the quarter ended March 31, 2018, distributions paid to common stockholders and OP Unit holders totaled $32.6 million, including $13.4 million which was reinvested into additional shares of common stock through our DRIP. For the quarter ended March 31, 2018, cash flows provided by operations were $16.9 million.

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The following table shows the sources for the payment of distributions to common stockholders, including distributions on unvested restricted stock and OP Units, but excluding distributions related to Class B Units as these distributions are recorded as an expense in our consolidated statement of operations and comprehensive loss, for the periods indicated:



	Three Months Ended
	March 31, 2018
(In thousands)				Percentage of Distributions
Distributions:
Distributions to stockholders not reinvested in common stock issued under the DRIP	$	19,126
Distributions reinvested in common stock issued under the DRIP	13,355
Distributions on OP Units	145
Total distributions⁽¹⁾	$	32,626

Source of distribution coverage:
Cash flows provided by operations	$	16,918		51.9	%
Proceeds received from common stock issued under the DRIP ⁽²⁾	13,355			40.9	%
Available cash on hand ⁽³⁾	2,353			7.2	%
Total source of distribution coverage	$	32,626		100.0	%

Cash flows provided by operations (in accordance with GAAP)	$	16,918
Net loss attributable to stockholders (in accordance with GAAP)	$	(5,991	)

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⁽¹⁾	Excludes distributions related to Class B Units and distributions to non-controlling interest holders other than those paid on our OP ^Units.


⁽²⁾	Net of share repurchases during the period.


⁽³⁾	Includes proceeds received from credit facilities and mortgage notes payable.

For the quarter ended March 31, 2018, cash flows provided by operations were $16.9 million. As shown in the table above, we funded distributions with cash flows provided by operations as well as proceeds received from common stock issued under our DRIP, the sale of investment securities, the sale of real estate investments and financings. To the extent we pay distributions in excess of cash flows provided by operations, our stockholders' investment may be adversely impacted. Distributions paid from sources other than our cash flows from operations will result in us having fewer funds available for other needs such as property acquisitions and other real estate-related investments.

We have historically not generated sufficient cash flow from operations to fund distributions. The amount of cash available for distributions is affected by many factors, such as rental income from acquired properties and our operating expense levels, as well as many other variables. Actual cash available for distributions may vary substantially from estimates. We cannot give any assurance that future acquisitions of real properties, if any, will increase our cash available for distributions to stockholders. Our actual results may differ significantly from the assumptions used by the Board in establishing a distribution rate to stockholders.

If we do not generate sufficient cash flows from our operations to fund distributions, we may have to further reduce or suspend distributions. We have funded a portion of our distributions from, among other things, DRIP proceeds, borrowings and proceeds from the sale of real estate investments. A decrease in the level of stockholder participation in our DRIP could have an adverse impact on our ability to continue to use DRIP proceeds. Borrowings required to fund distributions may not be available at favorable rates, or at all, and could restrict the amount we can borrow for investments and other purposes. Likewise, the proceeds from any property sale may not be available to fund distributions. Distributions paid from sources other than our cash flows from operations also reduce the funds available for other needs such as property acquisitions, capital expenditures and other real estate-related investments.

We may not have sufficient cash from operations to make a distribution required to maintain our REIT status, which may materially adversely affect an investment in our common stock. Moreover, the Board may change our distribution policy, in its sole discretion, at any time.

Further, paying distributions from sources other than operating cash flow is not sustainable particularly where limited by the terms of instruments governing borrowings. For example, our Revolving Credit Facility imposes limitations on our ability to pay distributions to stockholders and repurchase shares of common stock. Distributions to stockholders are limited, with certain exceptions, to a percentage of Modified FFO (as defined in the Revolving Credit Facility (which is different from MFFO as discussed in this Quarterly Report on Form 10-Q) during the applicable period as follows: (i) for the six months ending March 31,

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2018, 130% of Modified FFO; (ii) for the nine months ending June 30, 2018, 120% of Modified FFO; (iii) for the 12 months ending September 30, 2018, 115% of Modified FFO; and (iv) for the 12 months ending December 31, 2018 and for each period of four fiscal quarters ending after that period, 110% of Modified FFO. This covenant was amended twice during 2017 to permit us to pay a certain level of distributions, but there is no assurance that our lenders will agree to future amendments if needed, or if Modified FFO is not sufficient.

Loan Obligations

The payment terms of our mortgage notes payable generally require principal and interest amounts payable monthly with all unpaid principal and interest due at maturity. The payment terms of our Revolving Credit Facility require interest only amounts payable monthly with all unpaid principal and interest due at maturity. The payment terms of our Fannie Mae Master Credit Facilities require interest only payments through November 2021 and principal and interest payments thereafter. Our loan agreements require us to comply with specific reporting covenants. As of March 31, 2018, we were in compliance with the financial and reporting covenants under our loan agreements.

Contractual Obligations

There were no material changes in the Company's contractual obligations at March 31, 2018, as compared to those reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2017.

Election as a REIT

We elected and qualified to be taxed as a REIT under Sections 856 through 860 of the Code, effective for our taxable year ended December 31, 2013. Commencing with such taxable year, we were organized and operated in a manner so that we qualify for taxation as a REIT under the Code. We intend to continue to operate in such a manner but no assurance can be given that we will operate in a manner so as to remain qualified for taxation as a REIT. In order to continue to qualify for taxation as a REIT, we must, among other things, distribute annually at least 90% of our REIT taxable income (which does not equal net income as calculated in accordance with GAAP) determined without regard to the deduction for dividends paid and excluding net capital gains, and must comply with a number of other organizational and operational requirements. If we continue to qualify for taxation as a REIT, we generally will not be subject to federal corporate income tax on that portion of our REIT taxable income that we distribute to our stockholders. Even if we continue to qualify for taxation as a REIT, we may be subject to certain state and local taxes on our income and properties as well as federal income and excise taxes on our undistributed income.

Inflation

We may be adversely impacted by inflation on any leases that do not contain indexed escalation provisions. In addition, we may be required to pay costs for maintenance and operation of properties, which may adversely impact our results of operations due to potential increases in costs and operating expenses resulting from inflation.

Related-Party Transactions and Agreements

Please see Note 9 — Related Party Transactions and Arrangements of the accompanying Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There has been no material change in our exposure to market risk during the three months ended March 31, 2018. For a discussion of our exposure to market risk, refer to Item 7A, "Quantitative and Qualitative Disclosures about Market Risk," contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

In accordance with Rules 13a-15(b) and 15d-15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, carried out an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q and determined that our disclosure controls and procedures are effective.

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Changes in Internal Control Over Financial Reporting

No change occurred in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the three months ended March 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

We are not a party to, and none of our properties are subject to, any material pending legal proceedings.

Item 1A. Risk Factors.

There have been no material changes to the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2017.

Item 2. Unregistered Sales of Equity Securities.

Unregistered Sales of Equity Securities

There were no unregistered sales of equity securities during the three months ended March 31, 2018.

Issuer Purchases of Equity Securities

The following table reflects the number of shares repurchased under the SRP cumulatively through March 31, 2018:



	Number of Shares Repurchased	Average Price per Share
Cumulative repurchases as of December 31, 2017⁽¹⁾	2,529,798	$	22.43
Three months ended March 31, 2018 ⁽²⁾	373,967	$	21.45
Cumulative repurchases as of March 31, 2018	2,903,765	$	22.30

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

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

The exhibits listed on the Exhibit Index (following the signatures section of this report) are included, or incorporated by reference, in this Quarterly Report on Form 10-Q.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	HEALTHCARE TRUST, INC.
	By:	/s/ W. Todd Jensen
		W. Todd Jensen
		Chief Executive Officer and President (Principal Executive Officer)

	By:	/s/ Katie P. Kurtz
		Katie P. Kurtz
		Chief Financial Officer, Secretary and Treasurer (Principal Financial Officer and Principal Accounting Officer)

Dated: May 9, 2018

EXHIBITS INDEX

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 (and are numbered in accordance with Item 601 of Regulation S-K):



Exhibit No.		Description
3.1 ⁽¹⁾		Amended and Restated Bylaws of Healthcare Trust, Inc.
10.1 ⁽¹⁾		Third Amendment to Master Credit Facility, dated March 2, 2018, by among the borrowers party thereto and Capital One Multifamily Finance, LLC
31.1 *		Certification of the Principal Executive Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certification of the Principal Financial Officer of the Company pursuant to Securities Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32 *		Written statements of the Principal Executive Officer and Principal Financial Officer of the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101 *		XBRL (eXtensible Business Reporting Language). The following materials from Healthcare Trust, Inc.'s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2018, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations and Comprehensive Loss, (iii) the Consolidated Statements of Changes in Equity, (iv) the Consolidated Statements of Cash Flows and (v) the Notes to the Consolidated Financial Statements.

____________________


*	Filed herewith.

(1) Filed as an exhibit to the Company's Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on March 20, 2018.