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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                     
Commission File Number: 000-55775
AMERICAN HEALTHCARE REIT, INC.
(Exact name of registrant as specified in its charter)
Maryland   47-2887436
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
18191 Von Karman Avenue, Suite 300
Irvine, California
  92612
(Address of principal executive offices)   (Zip Code)
(949) 270-9200
(Registrant’s telephone number, including area code)

Griffin-American Healthcare REIT IV, Inc.
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
None None None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
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. ☒ 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐  Yes   ☒  No
As of November 12, 2021, there were 77,005,833 shares of Class T common stock and 185,578,806 shares of Class I common stock of American Healthcare REIT, Inc. outstanding.


Table of Contents

AMERICAN HEALTHCARE REIT, INC.
(A Maryland Corporation)
TABLE OF CONTENTS
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2

Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of September 30, 2021 and December 31, 2020
(Unaudited)
  September 30, 2021 December 31, 2020
ASSETS
Real estate investments, net $ 907,103,000  $ 921,580,000 
Cash and cash equivalents 16,183,000  17,411,000 
Restricted cash 986,000  714,000 
Accounts and other receivables, net 2,086,000  2,635,000 
Identified intangible assets, net 54,752,000  64,101,000 
Operating lease right-of-use assets, net 14,043,000  14,133,000 
Other assets, net 68,743,000  72,199,000 
Total assets $ 1,063,896,000  $ 1,092,773,000 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgage loans payable, net(1) $ 17,409,000  $ 17,827,000 
Line of credit and term loans(1) 488,900,000  476,900,000 
Accounts payable and accrued liabilities(1) 21,897,000  23,057,000 
Accounts payable due to affiliates(1) 324,000  1,046,000 
Identified intangible liabilities, net 1,115,000  1,295,000 
Operating lease liabilities(1) 10,021,000  9,904,000 
Security deposits, prepaid rent and other liabilities(1) 6,300,000  10,387,000 
Total liabilities 545,966,000  540,416,000 
Commitments and contingencies (Note 10)
Redeemable noncontrolling interests (Note 11) 2,592,000  2,618,000 
Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding
—  — 
Class T common stock, $0.01 par value per share; 900,000,000 shares authorized; 76,069,129 and 75,690,838 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
760,000  756,000 
Class I common stock, $0.01 par value per share; 100,000,000 shares authorized; 5,662,132 and 5,648,499 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively
57,000  57,000 
Additional paid-in capital 736,756,000  733,192,000 
Accumulated deficit (222,775,000) (185,047,000)
Total stockholders’ equity 514,798,000  548,958,000 
Noncontrolling interest (Note 12) 540,000  781,000 
Total equity 515,338,000  549,739,000 
Total liabilities, redeemable noncontrolling interests and equity $ 1,063,896,000  $ 1,092,773,000 
3





AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
As of September 30, 2021 and December 31, 2020
(Unaudited)
___________
(1)Such liabilities of American Healthcare REIT, Inc., (formerly known as Griffin-American Healthcare REIT IV, Inc.), as of September 30, 2021 and December 31, 2020 represented liabilities of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries. Griffin-American Healthcare REIT IV Holdings, LP was a variable interest entity, or VIE, and a consolidated subsidiary of American Healthcare REIT, Inc. The creditors of Griffin-American Healthcare REIT IV Holdings, LP or its consolidated subsidiaries do not have recourse against American Healthcare REIT, Inc., except for the 2018 Credit Facility, as defined in Note 7, held by Griffin-American Healthcare REIT IV Holdings, LP in the amount of $488,900,000 and $476,900,000 as of September 30, 2021 and December 31, 2020, respectively, which is guaranteed by American Healthcare REIT, Inc.

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

4


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Revenues and grant income:
Real estate revenue $ 22,120,000  $ 21,519,000  $ 66,054,000  $ 64,824,000 
Resident fees and services 15,090,000  18,948,000  46,179,000  51,863,000 
Grant income —  864,000  —  864,000 
Total revenues and grant income 37,210,000  41,331,000  112,233,000  117,551,000 
Expenses:
Rental expenses 6,389,000  5,905,000  18,542,000  17,723,000 
Property operating expenses 14,540,000  17,397,000  44,179,000  44,856,000 
General and administrative 4,304,000  3,672,000  11,710,000  11,960,000 
Business acquisition expenses 3,800,000  57,000  6,552,000  74,000 
Depreciation and amortization 10,746,000  12,669,000  33,745,000  37,919,000 
Total expenses
39,779,000  39,700,000  114,728,000  112,532,000 
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)
(4,961,000) (4,839,000) (14,556,000) (15,123,000)
Gain (loss) in fair value of derivative financial instruments 1,514,000  1,450,000  4,431,000  (2,302,000)
Impairment of real estate investments —  (3,064,000) —  (3,064,000)
Gain (loss) on disposition of real estate investments 15,000  —  (184,000) — 
Income (loss) from unconsolidated entity 70,000  (377,000) (1,027,000) 952,000 
Other income
33,000  8,000  49,000  278,000 
Total net other expense (3,329,000) (6,822,000) (11,287,000) (19,259,000)
Loss before income taxes (5,898,000) (5,191,000) (13,782,000) (14,240,000)
Income tax benefit —  39,000  —  — 
Net loss (5,898,000) (5,152,000) (13,782,000) (14,240,000)
Less: net loss attributable to noncontrolling interests 121,000  232,000  489,000  608,000 
Net loss attributable to controlling interest $ (5,777,000) $ (4,920,000) $ (13,293,000) $ (13,632,000)
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted $ (0.07) $ (0.06) $ (0.16) $ (0.17)
Weighted average number of Class T and Class I common shares outstanding — basic and diluted
81,704,261  80,788,359  81,635,053  80,498,693 

The accompanying notes are an integral part of these condensed consolidated financial statements.
5


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)
Three Months Ended September 30, 2021
Stockholders’ Equity
  Class T and Class I Common Stock    
Number
of Shares
Amount Additional
Paid-In Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Noncontrolling
Interest
Total Equity
BALANCE — June 30, 2021 81,731,261  $ 817,000  $ 736,827,000  $ (208,759,000) $ 528,885,000  $ 577,000  $ 529,462,000 
Amortization of nonvested common stock compensation —  —  21,000  —  21,000  —  21,000 
Distributions to noncontrolling interest —  —  —  —  —  (7,000) (7,000)
Adjustment to value of redeemable noncontrolling interests —  —  (92,000) —  (92,000) —  (92,000)
Distributions declared ($0.10 per share)
—  —  —  (8,239,000) (8,239,000) —  (8,239,000)
Net loss —  —  —  (5,777,000) (5,777,000) (30,000) (5,807,000) (1)
BALANCE — September 30, 2021 81,731,261  $ 817,000  $ 736,756,000  $ (222,775,000) $ 514,798,000  $ 540,000  $ 515,338,000 

Three Months Ended September 30, 2020
Stockholders’ Equity
  Class T and Class I Common Stock    
Number
of Shares
Amount Additional
Paid-In Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Noncontrolling
Interest
Total Equity
BALANCE — June 30, 2020 80,599,306  $ 805,000  $ 726,516,000  $ (159,366,000) $ 567,955,000  $ 1,047,000  $ 569,002,000 
Offering costs — common stock —  —  5,000  —  5,000  —  5,000 
Issuance of common stock under the DRIP 445,239  4,000  4,243,000  —  4,247,000  —  4,247,000 
Issuance of vested and nonvested restricted common stock 15,000  —  29,000  —  29,000  —  29,000 
Amortization of nonvested common stock compensation —  —  44,000  —  44,000  —  44,000 
Repurchase of common stock (71,551) —  (706,000) —  (706,000) —  (706,000)
Distributions to noncontrolling interest —  —  —  —  —  (22,000) (22,000)
Adjustment to value of redeemable noncontrolling interests —  —  (208,000) —  (208,000) —  (208,000)
Distributions declared ($0.10 per share)
—  —  —  (8,150,000) (8,150,000) —  (8,150,000)
Net loss —  —  —  (4,920,000) (4,920,000) (105,000) (5,025,000) (1)
BALANCE — September 30, 2020 80,987,994  $ 809,000  $ 729,923,000  $ (172,436,000) $ 558,296,000  $ 920,000  $ 559,216,000 





6


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)
For the Three and Nine Months Ended September 30, 2021 and 2020
(Unaudited)

Nine Months Ended September 30, 2021
Stockholders’ Equity
  Class T and Class I Common Stock    
Number
of Shares
Amount Additional
Paid-In Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Noncontrolling
Interest
Total Equity
BALANCE — December 31, 2020 81,339,337  $ 813,000  $ 733,192,000  $ (185,047,000) $ 548,958,000  $ 781,000  $ 549,739,000 
Offering costs — common stock
—  —  5,000  —  5,000  —  5,000 
Issuance of common stock under the DRIP
581,491  6,000  5,493,000  —  5,499,000  —  5,499,000 
Amortization of nonvested common stock compensation
—  —  105,000  —  105,000  —  105,000 
Repurchase of common stock
(189,567) (2,000) (1,872,000) —  (1,874,000) —  (1,874,000)
Distributions to noncontrolling interest
—  —  —  —  —  (62,000) (62,000)
Adjustment to value of redeemable noncontrolling interests —  —  (167,000) —  (167,000) —  (167,000)
Distributions declared ($0.30 per share)
—  —  —  (24,435,000) (24,435,000) —  (24,435,000)
Net loss —  —  —  (13,293,000) (13,293,000) (179,000) (13,472,000) (1)
BALANCE — September 30, 2021 81,731,261  $ 817,000  $ 736,756,000  $ (222,775,000) $ 514,798,000  $ 540,000  $ 515,338,000 

Nine Months Ended September 30, 2020
Stockholders’ Equity
  Class T and Class I Common Stock    
Number
of Shares
Amount Additional
Paid-In Capital
Accumulated
Deficit
Total
Stockholders’
Equity
Noncontrolling
Interest
Total Equity
BALANCE — December 31, 2019 79,899,874  $ 798,000  $ 719,894,000  $ (130,613,000) $ 590,079,000  $ —  $ 590,079,000 
Offering costs — common stock —  —  67,000  —  67,000  —  67,000 
Issuance of common stock under the DRIP 1,643,731  16,000  15,665,000  —  15,681,000  —  15,681,000 
Issuance of vested and nonvested restricted common stock 22,500  —  43,000  —  43,000  —  43,000 
Amortization of nonvested common stock compensation —  —  128,000  —  128,000  —  128,000 
Repurchase of common stock (578,111) (5,000) (5,344,000) —  (5,349,000) —  (5,349,000)
Contribution from noncontrolling interest —  —  —  —  —  1,250,000  1,250,000 
Distributions to noncontrolling interest —  —  —  —  —  (54,000) (54,000)
Adjustment to value of redeemable noncontrolling interests —  —  (530,000) —  (530,000) —  (530,000)
Distributions declared ($0.35 per share)
—  —  —  (28,191,000) (28,191,000) —  (28,191,000)
Net loss —  —  —  (13,632,000) (13,632,000) (276,000) (13,908,000) (1)
BALANCE — September 30, 2020 80,987,994  $ 809,000  $ 729,923,000  $ (172,436,000) $ 558,296,000  $ 920,000  $ 559,216,000 
___________
(1)Amount excludes $91,000 and $127,000 for the three months ended September 30, 2021 and 2020, respectively, and $310,000 and $332,000 for the nine months ended September 30, 2021 and 2020, respectively, of net loss attributable to redeemable noncontrolling interests. See Note 11, Redeemable Noncontrolling Interests, for a further discussion.

The accompanying notes are an integral part of these condensed consolidated financial statements.
7


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
Nine Months Ended September 30,
2021 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (13,782,000) $ (14,240,000)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization
33,745,000  37,919,000 
Other amortization 2,099,000  2,084,000 
Deferred rent (2,707,000) (3,440,000)
Stock based compensation 105,000  171,000 
Loss on disposition of real estate investments 184,000  — 
Loss (income) from unconsolidated entity 1,027,000  (952,000)
Change in fair value of derivative financial instruments (4,431,000) 2,302,000 
Impairment of real estate investments —  3,064,000 
Changes in operating assets and liabilities:
Accounts and other receivables 533,000  1,347,000 
Other assets (2,829,000) (1,654,000)
Accounts payable and accrued liabilities 3,805,000  3,436,000 
Accounts payable due to affiliates (921,000) 27,000 
Operating lease liabilities (309,000) (306,000)
Security deposits, prepaid rent and other liabilities 37,000  185,000 
Net cash provided by operating activities 16,556,000  29,943,000 
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate investments
(3,385,000) (68,032,000)
Proceeds from disposition of real estate investments 6,196,000  — 
Capital expenditures
(4,384,000) (6,729,000)
Net cash used in investing activities (1,573,000) (74,761,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgage loans payable
(475,000) (8,166,000)
Borrowings under the line of credit and term loans
17,000,000  140,800,000 
Payments on the line of credit and term loans
(5,000,000) (58,100,000)
Deferred financing costs
—  (43,000)
Payment of offering costs
(3,940,000) (4,876,000)
Distributions paid to common stockholders (21,700,000) (13,932,000)
Repurchase of common stock
(1,874,000) (5,349,000)
Contribution from noncontrolling interest
—  1,250,000 
Distributions to noncontrolling interest
(62,000) (54,000)
Contributions from redeemable noncontrolling interest 125,000  1,118,000 
Distributions to redeemable noncontrolling interests
(8,000) (81,000)
Security deposits
(5,000) (199,000)
Net cash (used in) provided by financing activities (15,939,000) 52,368,000 
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH (956,000) 7,550,000 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period 18,125,000  15,846,000 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period $ 17,169,000  $ 23,396,000 
8


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
For the Nine Months Ended September 30, 2021 and 2020
(Unaudited)
Nine Months Ended September 30,
2021 2020
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period:
Cash and cash equivalents
$ 17,411,000  $ 15,290,000 
Restricted cash
714,000  556,000 
Cash, cash equivalents and restricted cash
$ 18,125,000  $ 15,846,000 
End of period:
Cash and cash equivalents
$ 16,183,000  $ 22,690,000 
Restricted cash
986,000  706,000 
Cash, cash equivalents and restricted cash
$ 17,169,000  $ 23,396,000 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest $ 13,116,000  $ 13,777,000 
Income taxes $ 51,000  $ 88,000 
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Investing Activities:
Accrued capital expenditures
$ 3,720,000  $ 2,182,000 
Tenant improvement overage
$ 303,000  $ 636,000 
The following represents the increase (decrease) in certain assets and liabilities in connection with our acquisitions and disposition of real estate investments:
Other assets
$ (16,000) $ 196,000 
Accounts payable and accrued liabilities
$ (50,000) $ 201,000 
Prepaid rent $ 10,000  $ 11,000 
Financing Activities:
Issuance of common stock under the DRIP $ 5,499,000  $ 15,681,000 
Distributions declared but not paid to common stockholders $ —  $ 2,664,000 
Accrued stockholder servicing fee $ 2,157,000  $ 7,667,000 

The accompanying notes are an integral part of these condensed consolidated financial statements.
9


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three and Nine Months Ended September 30, 2021 and 2020
The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. (formerly known as Griffin-American Healthcare REIT IV, Inc.) and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where otherwise noted.
1. Organization and Description of Business
American Healthcare REIT, Inc. (formerly known as Griffin-American Healthcare REIT IV, Inc.), a Maryland corporation, invests in a diversified portfolio of healthcare real estate properties, focusing primarily on medical office buildings, skilled nursing facilities and senior housing facilities that produce current income. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). We qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.
We raised $754,118,000 through a best efforts initial public offering, or our initial offering, that commenced on February 16, 2016, and issued 75,639,681 aggregate shares of our Class T and Class I common stock. In addition, during our initial offering, we issued 3,253,535 aggregate shares of our Class T and Class I common stock pursuant to our distribution reinvestment plan, as amended, or the DRIP, for a total of $31,021,000 in distributions reinvested. Following the termination of our initial offering on February 15, 2019, we continued issuing shares of our common stock pursuant to the DRIP through a subsequent offering, or the 2019 DRIP Offering, which commenced on March 1, 2019. On March 18, 2021, our board of directors, or our board, authorized the suspension of the DRIP, effective as of April 1, 2021. As of September 30, 2021, a total of $46,970,000 in distributions were reinvested that resulted in 4,923,550 shares of our common stock being issued pursuant to the 2019 DRIP Offering. We collectively refer to the DRIP portion of our initial offering and the 2019 DRIP Offering as our DRIP Offerings. See Note 12, Equity — Distribution Reinvestment Plan, for a further discussion. On October 4, 2021, our board authorized the reinstatement of the DRIP. See Note 20, Subsequent Events — Reinstatement of the DRIP, for a further discussion.
Until October 1, 2021, we conducted substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. Through September 30, 2021, we were externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, as amended, or the Advisory Agreement, between us, our operating partnership and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one-year initial term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 11, 2021. On June 23, 2021, in anticipation of the Merger, as defined and discussed below, we entered into an amendment to the Advisory Agreement, whereby it was agreed that any acquisition fee due to our advisor is to be waived in connection with the REIT Merger, as defined and discussed below. Except as set forth in such amendment to the Advisory Agreement, the terms of the Advisory Agreement continued in full force and effect. Our advisor used its best efforts, subject to the oversight and review of our board, to, among other things, provide asset management, property management, acquisition, disposition and other advisory services on our behalf consistent with our investment policies and objectives. Our advisor performed its duties and responsibilities under the Advisory Agreement as our fiduciary. Prior to the Merger, our advisor was 75.0% owned and managed by wholly owned subsidiaries of American Healthcare Investors, LLC, or American Healthcare Investors, and 25.0% owned by a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors. American Healthcare Investors was 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Digital Bridge Group, Inc. (NYSE: DBRG) (formerly known as Colony Capital, Inc.), or Digital Bridge, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital, Inc. We were not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Digital Bridge or Mr. Flaherty; however, we were affiliated with our advisor, American Healthcare Investors and AHI Group Holdings. Please see the “Merger with Griffin-American Healthcare REIT III, Inc.” and “AHI Acquisition” sections below for a further discussion of our operations effective October 1, 2021.
We operate through four reportable business segments: medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. As of September 30, 2021, we owned 87 properties, comprising 92 buildings, or approximately 4,799,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $1,080,381,000. As of September 30, 2021, we also owned a 6.0% interest in a joint venture which owned a portfolio of integrated senior health campuses and ancillary businesses.
Due to the ongoing coronavirus, or COVID-19, pandemic in the United States and globally, since March 2020, our residents, tenants, operating partners and managers have been materially impacted, and the prolonged economic impact remains
10


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
uncertain. As the COVID-19 pandemic is still impacting the healthcare system to a degree, it continues to present challenges for us as an owner and operator of healthcare facilities. Since its outset, the impacts of the COVID-19 pandemic have been significant, rapidly and continuously evolving and may continue into the future, especially due to the emergence of the Delta variant which has caused COVID-19 cases and deaths to increase significantly in recent months, making it difficult to ascertain the long-term impact the COVID-19 pandemic will have on real estate markets in which we own and/or operate properties and our portfolio of investments. We have evaluated the impacts of the COVID-19 pandemic on our business thus far and incorporated information concerning the impact of COVID-19 into our assessments of liquidity, impairment and collectability from tenants and residents as of September 30, 2021. We will continue to monitor such impacts and will adjust our estimates and assumptions based on the best available information.
Merger with Griffin-American Healthcare REIT III, Inc.
On June 23, 2021, we, our operating partnership, our wholly owned subsidiary, Continental Merger Sub, LLC, or merger sub, Griffin-American Healthcare REIT III, Inc., or GAHR III, and American Healthcare REIT Holdings, LP (formerly known as Griffin-American Healthcare REIT III Holdings, LP), or the surviving partnership, entered into an Agreement and Plan of Merger, or the Merger Agreement. On October 1, 2021, pursuant to the Merger Agreement, (i) GAHR III merged with and into merger sub, with merger sub being the surviving company, or the REIT Merger, and (ii) our operating partnership merged with and into the surviving partnership, with the surviving partnership being the surviving entity and being renamed American Healthcare REIT Holdings, LP, or the Partnership Merger, and, together with the REIT Merger, the Merger. As a result of and at the effective time of the Merger, the separate corporate existence of GAHR III and our operating partnership ceased.
Following the Merger, our company, combined with GAHR III, or the Combined Company, was renamed “American Healthcare REIT, Inc.” The REIT Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Code.
AHI Acquisition
Also on June 23, 2021, the surviving partnership, our co-sponsors, Platform Healthcare Investor T-II, LLC, Flaherty Trust, Jeffrey T. Hanson, our former Chief Executive Officer and Chairman of the Board of Directors, Danny Prosky, our President and former Chief Operating Officer, and Mathieu B. Streiff, our former Executive Vice President, General Counsel, entered into a contribution and exchange agreement, or the Contribution Agreement, pursuant to which, among other things, the surviving partnership agreed to acquire a newly formed entity, or NewCo, which we refer to as the AHI Acquisition, that owned substantially all of the business and operations of one of our co-sponsors, American Healthcare Investors, as well as all of the equity interests in (i) Griffin-American Healthcare REIT III Advisor, LLC, or GAHR III Advisor, a subsidiary of American Healthcare Investors that served as the external advisor of GAHR III, and (ii) our advisor. On October 1, 2021, the AHI Acquisition closed immediately prior to the consummation of the Merger. Following the consummation of the Merger, the Combined Company has become a self-managed company.
The AHI Acquisition will be treated as a business combination for accounting purposes, with GAHR III as both the legal and accounting acquiror of NewCo. While we are the legal acquiror of GAHR III in the REIT Merger, GAHR III was determined to be the accounting acquiror in the REIT Merger transaction in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations, after considering the relative share ownership and the composition of the governing body of the Combined Company. As a result of the completion of the Merger and the AHI Acquisition, the historical information regarding our company’s structure, agreements and financial information presented within this Note 1 and throughout the rest of the Notes to Condensed Consolidated Financial Statements has materially changed; however, such information did apply to us as of September 30, 2021. See Note 20, Subsequent Events — Merger with Griffin-American Healthcare REIT III, Inc. and AHI Acquisition, for a further discussion about the Merger and the AHI Acquisition.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our accompanying condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership, the wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries in which we have control, as well as any VIEs in which we are the primary beneficiary. The portion of equity in any subsidiary that is not
11


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
wholly-owned by us is presented in our accompanying condensed consolidated financial statements as noncontrolling interest. We evaluate our ability to control an entity, and whether the entity is a VIE and we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance.
We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of our operating partnership, and as of both September 30, 2021 and December 31, 2020, we owned greater than a 99.99% general partnership interest therein. Our advisor was a limited partner, and as of both September 30, 2021 and December 31, 2020, owned less than a 0.01% noncontrolling limited partnership interest in our operating partnership.
Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our accompanying condensed consolidated financial statements. All intercompany accounts and transactions are eliminated in consolidation.
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the United States Securities and Exchange Commission, or the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to the SEC’s rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results that may be expected for the full year; such full year results may be less favorable.
In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2020 Annual Report on Form 10-K, as filed with the SEC on March 26, 2021.
Use of Estimates
The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the initial and recurring valuation of certain assets acquired and liabilities assumed through property acquisitions, revenues and grant income, allowance for credit losses, impairment of long-lived and intangible assets and contingencies. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.
Revenue Recognition — Resident Fees and Services Revenue
Disaggregation of Resident Fees and Services Revenue
The following tables disaggregate our resident fees and services revenue by line of business, according to whether such revenue is recognized at a point in time or over time:
Three Months Ended September 30,
2021 2020
Point in Time Over Time Total Point in Time Over Time Total
Senior housing — RIDEA $ 150,000  $ 14,940,000  $ 15,090,000  $ 174,000  $ 18,774,000  $ 18,948,000 
12


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Nine Months Ended September 30,
2021 2020
Point in Time Over Time Total Point in Time Over Time Total
Senior housing — RIDEA $ 473,000  $ 45,706,000  $ 46,179,000  $ 746,000  $ 51,117,000  $ 51,863,000 
The following tables disaggregate our resident fees and services revenue by payor class:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Private and other payors
$ 13,556,000  $ 17,300,000  $ 41,326,000  $ 46,766,000 
Medicaid
1,534,000  1,648,000  4,853,000  5,097,000 
Total resident fees and services
$ 15,090,000  $ 18,948,000  $ 46,179,000  $ 51,863,000 
Accounts Receivable, Net Resident Fees and Services
The beginning and ending balances of accounts receivable, net resident fees and services are as follows:
Medicaid Private
and
Other Payors
Total
Beginning balanceJanuary 1, 2021
$ 1,123,000  $ 358,000  $ 1,481,000 
Ending balanceSeptember 30, 2021
257,000  900,000  1,157,000 
(Decrease)/increase $ (866,000) $ 542,000  $ (324,000)
Tenant and Resident Receivables and Allowances
Resident receivables, which are related to resident fees and services, are carried net of an allowance for credit losses. An allowance is maintained for estimated losses resulting from the inability of residents and payors to meet the contractual obligations under their lease or service agreements. Substantially all of such allowances are recorded as direct reductions of resident fees and services revenue as contractual adjustments provided to third-party payors or implicit price concessions in our accompanying condensed consolidated statements of operations. Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the residents’ financial condition, security deposits, cash collection patterns by payor and by state, current economic conditions, future expectations in estimating credit losses and other relevant factors. Tenant receivables, which are related to real estate revenue, and unbilled deferred rent receivables are reduced for uncollectible amounts, which are recognized as direct reductions of real estate revenue in our accompanying condensed consolidated statements of operations.
As of September 30, 2021 and December 31, 2020, we had $2,219,000 and $2,086,000, respectively, in allowances, which were determined necessary to reduce receivables by our expected future credit losses. For the nine months ended September 30, 2021 and 2020, we increased allowances by $839,000 and $937,000, respectively, and reduced allowances for collections or adjustments by $350,000 and $126,000, respectively. For the nine months ended September 30, 2021 and 2020, $356,000 and $60,000, respectively, of our receivables were written off against the related allowances.
3. Real Estate Investments, Net
Our real estate investments, net consisted of the following as of September 30, 2021 and December 31, 2020:
  September 30,
2021
December 31,
2020
Building and improvements $ 892,743,000  $ 884,816,000 
Land 109,771,000  109,444,000 
Furniture, fixtures and equipment 9,315,000  8,599,000 
1,011,829,000  1,002,859,000 
Less: accumulated depreciation (104,726,000) (81,279,000)
Total $ 907,103,000  $ 921,580,000 
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Depreciation expense for the three months ended September 30, 2021 and 2020 was $8,181,000 and $7,966,000, respectively, and for the nine months ended September 30, 2021 and 2020 was $24,025,000 and $23,698,000, respectively. For the three and nine months ended September 30, 2021, we incurred capital expenditures of $1,959,000 and $4,875,000, respectively, for our medical office buildings, $827,000 and $1,885,000, respectively, for our senior housing — RIDEA facilities and $31,000 and $31,000, respectively, for our skilled nursing facilities. We did not incur any capital expenditures for our senior housing facilities during the three and nine months ended September 30, 2021.
On February 12, 2021, we acquired a previously unowned unit within one of our buildings at our existing Athens MOB Portfolio, originally purchased in May 2017, for a contract purchase price of $2,950,000. Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of such unit, a base acquisition fee of 2.25% of the contract purchase price paid by us, or $66,000. We acquired such unit using cash on hand and borrowed $2,000,000 under the 2018 Credit Facility, as defined in Note 7, Line of Credit and Term Loans, at the time of acquisition.
We accounted for our acquisition completed during the nine months ended September 30, 2021 as an asset acquisition. We incurred and capitalized the base acquisition fee and direct acquisition related expenses of $94,000. The following table summarizes the purchase price of the assets acquired at the time of acquisition based on their relative fair values:
2021
Acquisition
Building and improvements
$ 2,429,000 
Land 327,000 
In-place lease 288,000 
Total assets acquired
$ 3,044,000 
On April 1, 2021, we disposed of two senior housing facilities located in Fairfield and Sacramento, California for a contract sales price of $6,800,000. Such facilities were part of our existing Northern California Senior Housing Portfolio and were included within our senior housing – RIDEA reporting segment. We recognized a total net loss on such disposition of $184,000. Our advisor agreed to waive the $136,000 disposition fee and any expense reimbursements for such disposition that may otherwise have been due to our advisor pursuant to the Advisory Agreement. Our advisor did not receive any additional securities, shares of our stock or any other form of consideration or any repayment as a result of the waiver of such disposition fee and expense reimbursements.
4. Identified Intangible Assets, Net
Identified intangible assets, net consisted of the following as of September 30, 2021 and December 31, 2020:
September 30,
2021
December 31,
2020
Amortized intangible assets:
In-place leases, net of accumulated amortization of $30,663,000 and $32,134,000 as of September 30, 2021 and December 31, 2020, respectively (with a weighted average remaining life of 8.8 years as of both September 30, 2021 and December 31, 2020)
$ 52,112,000  $ 61,166,000 
Above-market leases, net of accumulated amortization of $1,252,000 and $1,009,000 as of September 30, 2021 and December 31, 2020, respectively (with a weighted average remaining life of 8.5 years and 9.1 years as of September 30, 2021 and December 31, 2020, respectively)
2,292,000  2,587,000 
Unamortized intangible assets:
Certificates of need 348,000  348,000 
Total $ 54,752,000  $ 64,101,000 
Amortization expense on identified intangible assets for the three months ended September 30, 2021 and 2020 was $2,358,000 and $4,728,000, respectively, which included $97,000 and $109,000, respectively, of amortization recorded as a decrease to real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations. Amortization expense on identified intangible assets for the nine months ended September 30, 2021 and 2020 was $9,495,000 and $14,361,000, respectively, which included $296,000 and $329,000, respectively, of amortization recorded as a decrease to real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations.
14

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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
The aggregate weighted average remaining life of the identified intangible assets was 8.8 years as of both September 30, 2021 and December 31, 2020. As of September 30, 2021, estimated amortization expense on the identified intangible assets for the three months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter was as follows:
Year Amount
2021 $ 2,396,000 
2022 8,647,000 
2023 7,390,000 
2024 6,195,000 
2025 5,017,000 
Thereafter 24,759,000 
Total $ 54,404,000 
5. Other Assets, Net
Other assets, net consisted of the following as of September 30, 2021 and December 31, 2020:
  September 30,
2021
December 31,
2020
Investment in unconsolidated entity $ 45,627,000  $ 46,653,000 
Deferred rent receivables 15,101,000  12,395,000 
Prepaid expenses, deposits and other assets 3,939,000  9,028,000 
Lease commissions, net of accumulated amortization of $687,000 and $426,000 as of September 30, 2021 and December 31, 2020, respectively
3,763,000  2,399,000 
Deferred financing costs, net of accumulated amortization of $4,808,000 and $3,397,000 as of September 30, 2021 and December 31, 2020, respectively(1)
313,000  1,724,000 
Total $ 68,743,000  $ 72,199,000 
___________
(1)Deferred financing costs only include costs related to our line of credit and term loans. Amortization expense on deferred financing costs of our line of credit and term loans for the three months ended September 30, 2021 and 2020 was $470,000 and $471,000, respectively, and for the nine months ended September 30, 2021 and 2020 was $1,411,000 and $1,410,000, respectively, which is recorded to interest expense in our accompanying condensed consolidated statements of operations. See Note 7, Line of Credit and Term Loans, for a further discussion.
Investment in unconsolidated entity represents our interest in Trilogy REIT Holdings, LLC, or Trilogy, pursuant to an amended joint venture agreement with an indirect, wholly-owned subsidiary of NorthStar Healthcare Income, Inc. and a wholly-owned subsidiary of the surviving partnership. Trilogy owns a portfolio of integrated senior health campuses and ancillary businesses. As of September 30, 2021 and December 31, 2020, we owned a 6.0% interest in such joint venture and the unamortized basis difference of our investment in Trilogy of $16,448,000 and $16,791,000, respectively, was primarily attributable to the difference between the amount for which we purchased our interest in such joint venture, including transaction costs, and the historical carrying value of the net assets of such joint venture. This difference was being amortized over the remaining useful life of the related assets and included in income or loss from unconsolidated entity in our accompanying condensed consolidated statements of operations.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
6. Mortgage Loans Payable, Net
As of September 30, 2021 and December 31, 2020, mortgage loans payable were $18,291,000 ($17,409,000, net of discount/premium and deferred financing costs) and $18,766,000 ($17,827,000, net of discount/premium and deferred financing costs), respectively. As of September 30, 2021, we had three fixed-rate mortgage loans with interest rates ranging from 3.67% to 5.25% per annum, maturity dates ranging from April 1, 2025 to February 1, 2051 and a weighted average effective interest rate of 3.91%. As of December 31, 2020, we had three fixed-rate mortgage loans with interest rates ranging from 3.67% to 5.25% per annum, maturity dates ranging from April 1, 2025 to February 1, 2051 and a weighted average effective interest rate of 3.93%.
In January 2020, we paid off a mortgage loan payable with a principal balance of $7,738,000, which had an original maturity date of April 1, 2020. We did not incur any prepayment penalties or fees in connection with such payoff. The following table reflects the changes in the carrying amount of mortgage loans payable, net for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
2021 2020
Beginning balance $ 17,827,000  $ 26,070,000 
Additions:
Amortization of deferred financing costs
20,000  33,000 
Amortization of discount/premium on mortgage loans payable
37,000  37,000 
Deductions:
Scheduled principal payments on mortgage loans payable
(475,000) (8,166,000)
Ending balance $ 17,409,000  $ 17,974,000 
As of September 30, 2021, the principal payments due on our mortgage loans payable for the three months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter were as follows:
Year Amount
2021 $ 132,000 
2022 651,000 
2023 680,000 
2024 711,000 
2025 5,878,000 
Thereafter 10,239,000 
Total $ 18,291,000 
7. Line of Credit and Term Loans
We, through our operating partnership, as borrower, entered into a credit agreement, or the 2018 Credit Agreement, as amended, with Bank of America, N.A., or Bank of America; KeyBank, National Association, or KeyBank; Citizens Bank, National Association; Merrill Lynch, Pierce, Fenner & Smith Incorporated; KeyBanc Capital Markets, Inc., or KeyBanc Capital Markets; and the lenders named therein, to obtain a credit facility with an aggregate maximum principal amount of $530,000,000, or the 2018 Credit Facility. The 2018 Credit Facility consists of a senior unsecured revolving credit facility in the amount of $235,000,000 and senior unsecured term loan facilities in the aggregate amount of $295,000,000. The maximum principal amount of the 2018 Credit Facility may be increased by up to $120,000,000, for a total principal amount of $650,000,000, subject to certain conditions. The 2018 Credit Facility matures on November 19, 2021 and we intend to extend the maturity for one 12-month period pursuant to the terms of the 2018 Credit Agreement, as amended, subject to the satisfaction of certain conditions, including payment of an extension fee.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
At our option, the 2018 Credit Facility bears interest at per annum rates equal to (a)(i) the Eurodollar Rate, as defined in the 2018 Credit Agreement, as amended, plus (ii) a margin ranging from 1.70% to 2.20% based on our Consolidated Leverage Ratio, as defined in the 2018 Credit Agreement, as amended, or (b)(i) the greater of: (1) the prime rate publicly announced by Bank of America (2) the Federal Funds Rate, as defined in the 2018 Credit Agreement, as amended, plus 0.50%, (3) the one-month Eurodollar Rate plus 1.00%, and (4) 0.00%, plus (ii) a margin ranging from 0.70% to 1.20% based on our Consolidated Leverage Ratio.
As of both September 30, 2021 and December 31, 2020, our aggregate borrowing capacity under the 2018 Credit Facility was $530,000,000. As of September 30, 2021 and December 31, 2020, borrowings outstanding totaled $488,900,000 and $476,900,000, respectively, and the weighted average interest rate on such borrowings outstanding was 2.05% and 2.12%, respectively, per annum.
On October 1, 2021, we entered into a Second Amendment to the 2018 Credit Agreement, or the Amendment. See Note 20, Subsequent Events — Lines of Credit and Term Loans — Amendment to 2018 Credit Facility, for a further discussion.
8. Derivative Financial Instruments
We use derivative financial instruments to manage interest rate risk associated with our variable-rate term loans and we record such derivative financial instruments in our accompanying condensed consolidated balance sheets as either an asset or a liability measured at fair value. The following table lists the derivative financial instruments held by us as of September 30, 2021 and December 31, 2020, which are included in security deposits, prepaid rent and other liabilities in our accompanying condensed consolidated balance sheets:
Fair Value
Instrument Notional Amount Index Interest Rate Maturity Date September 30,
2021
December 31,
2020
Swap $ 139,500,000  one month LIBOR 2.49% 11/19/21 $ (455,000) $ (2,915,000)
Swap 58,800,000  one month LIBOR 2.49% 11/19/21 (192,000) (1,229,000)
Swap 45,000,000  one month LIBOR 0.20% 11/19/21 (7,000) (27,000)
Swap 36,700,000  one month LIBOR 2.49% 11/19/21 (120,000) (766,000)
Swap 15,000,000  one month LIBOR 2.53% 11/19/21 (50,000) (318,000)
$ 295,000,000  $ (824,000) $ (5,255,000)
As of both September 30, 2021 and December 31, 2020, none of our derivative financial instruments were designated as hedges. For the three months ended September 30, 2021 and 2020, we recorded $1,514,000 and $1,450,000, respectively, and for the nine months ended September 30, 2021 and 2020, we recorded $4,431,000 and $(2,302,000), respectively, as a decrease (increase) to interest expense in our accompanying condensed consolidated statements of operations related to the change in the fair value of our derivative financial instruments.
See Note 14, Fair Value Measurements, for a further discussion of the fair value of our derivative financial instruments.
9. Identified Intangible Liabilities, Net
As of September 30, 2021 and December 31, 2020, identified intangible liabilities, net consisted of below-market leases of $1,115,000 and $1,295,000, respectively, net of accumulated amortization of $730,000 and $608,000, respectively. Amortization expense on below-market leases for the three months ended September 30, 2021 and 2020 was $59,000 and $78,000, respectively, and for the nine months ended September 30, 2021 and 2020 was $181,000 and $239,000, respectively, which was recorded as an increase to real estate revenue in our accompanying condensed consolidated statements of operations.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
The weighted average remaining life of below-market leases was 12.0 years and 11.6 years as of September 30, 2021 and December 31, 2020, respectively. As of September 30, 2021, estimated amortization expense on below-market leases for the three months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter was as follows:
Year Amount
2021 $ 55,000 
2022 217,000 
2023 207,000 
2024 161,000 
2025 123,000 
Thereafter 352,000 
Total $ 1,115,000 
10. Commitments and Contingencies
Litigation
We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Environmental Matters
We follow a policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.
Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, which include calls/puts to sell/acquire properties. In our view, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.
11. Redeemable Noncontrolling Interests
As of both September 30, 2021 and December 31, 2020, our advisor owned all of the 208 limited partnership units outstanding in our operating partnership. As of both September 30, 2021 and December 31, 2020, we owned greater than a 99.99% general partnership interest in our operating partnership, and our advisor owned less than a 0.01% limited partnership interest in our operating partnership. Our advisor was entitled to special redemption rights of its limited partnership units. The noncontrolling interest of our advisor in our operating partnership, which had redemption features outside of our control, was accounted for as a redeemable noncontrolling interest and was presented outside of permanent equity in our accompanying condensed consolidated balance sheets as of both September 30, 2021 and December 31, 2020. In connection with the AHI Acquisition, on October 1, 2021, GAHR III redeemed all 208 limited partnership units in our operating partnership owned by our advisor for approximately $2,000.
In connection with our acquisitions of Central Florida Senior Housing Portfolio, Pinnacle Beaumont ALF and Pinnacle Warrenton ALF, we own approximately 98.0% of the joint ventures with an affiliate of Meridian Senior Living, LLC, or Meridian. In connection with our acquisitions of Catalina West Haven ALF and Catalina Madera ALF, we own approximately 90.0% of the joint venture with Avalon Health Care, Inc., or Avalon. The noncontrolling interests held by Meridian and Avalon have redemption features outside of our control and are accounted for as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets.
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We record the carrying amount of redeemable noncontrolling interests at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions; or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interests consisted of the following for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30,
2021 2020
Beginning balance $ 2,618,000  $ 1,462,000 
Additions 125,000  1,118,000 
Distributions (8,000) (81,000)
Adjustment to redemption value 167,000  530,000 
Net loss attributable to redeemable noncontrolling interests (310,000) (332,000)
Ending balance $ 2,592,000  $ 2,697,000 
12. Equity
Preferred Stock
As of September 30, 2021, pursuant to our Third Articles of Amendment and Restatement, as supplemented, or our charter, we were authorized to issue 200,000,000 shares of our preferred stock, par value $0.01 per share. As of both September 30, 2021 and December 31, 2020, no shares of our preferred stock were issued and outstanding.
Common Stock
As of September 30, 2021, our charter authorized us to issue 1,000,000,000 shares of our common stock, par value $0.01 per share, whereby 900,000,000 shares were classified as Class T common stock and 100,000,000 shares were classified as Class I common stock. See Note 20, Subsequent Events — Amendments to Articles of Incorporation, for a discussion of an amendment to our charter filed on October 1, 2021. Each share of our common stock, regardless of class, will be entitled to one vote per share on matters presented to the common stockholders for approval; provided, however, that stockholders of one share class shall have exclusive voting rights on any amendment to our charter that would alter only the contract rights of that share class, and no stockholders of another share class shall be entitled to vote thereon. As of both September 30, 2021 and December 31, 2020, our advisor owned 20,833 shares of our Class T common stock. In connection with the AHI Acquisition, on October 1, 2021, GAHR III redeemed all 20,833 shares of our Class T common stock owned by our advisor for approximately $192,000.
On February 15, 2019, we terminated our initial offering and we continued to offer shares of our common stock pursuant to the 2019 DRIP Offering. On March 18, 2021, our board authorized the suspension of the DRIP effective with distributions declared for the month of April 2021; however, on October 4, 2021, our board reinstated the DRIP. See the “Distribution Reinvestment Plan” section below for a further discussion. Through September 30, 2021, we had issued 75,639,681 aggregate shares of our Class T and Class I common stock in connection with the primary portion of our initial offering and 8,177,085 aggregate shares of our Class T and Class I common stock pursuant to our DRIP Offerings. We also granted an aggregate of 105,000 shares of our restricted Class T common stock to our independent directors and repurchased 2,211,338 shares of our common stock under our share repurchase plan through September 30, 2021. As of September 30, 2021 and December 31, 2020, we had 81,731,261 and 81,339,337 aggregate shares of our Class T and Class I common stock, respectively, issued and outstanding.
Distribution Reinvestment Plan
We had registered and reserved $150,000,000 in shares of our common stock for sale pursuant to the DRIP in our initial offering. The DRIP allowed stockholders to purchase additional Class T shares and Class I shares of our common stock through the reinvestment of distributions during our initial offering. Pursuant to the DRIP, distributions with respect to Class T shares were reinvested in Class T shares and distributions with respect to Class I shares were reinvested in Class I shares. On February 15, 2019, we terminated our initial offering and continued to offer up to $100,000,000 in shares of our common stock pursuant to the 2019 DRIP Offering. In connection with our special committee’s strategic alternative review process and in order to facilitate a strategic transaction, on March 18, 2021, our board authorized the suspension of the DRIP, effective as of April 1, 2021. As a consequence of the suspension of the DRIP, beginning with the April 2021 distributions, which were paid in May 2021, there were no further issuances of shares pursuant to the DRIP, and stockholders who are participants in the DRIP received or will receive cash distributions instead. On October 4, 2021, our board authorized the reinstatement of the DRIP. See Note 20, Subsequent Events — Reinstatement of the DRIP, for a further discussion.
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Since April 6, 2018, our board has approved and established an estimated per share net asset value, or NAV, on at least an annual basis. Commencing with the distribution payment to stockholders paid in the month following such board approval, shares of our common stock issued pursuant the DRIP were or will be issued at the current estimated per share NAV until such time as our board determines an updated estimated per share NAV.
For the three months ended September 30, 2021, there were no distributions reinvested or shares issued due to the suspension of the DRIP. For the three months ended September 30, 2020, $4,247,000 in distributions were reinvested and 445,239 shares of our common stock were issued pursuant to our DRIP Offerings. For the nine months ended September 30, 2021 and 2020, $5,499,000 and $15,681,000, respectively, in distributions were reinvested, and 581,491 and 1,643,731 shares of our common stock, respectively, were issued pursuant to our DRIP Offerings. As of September 30, 2021 and December 31, 2020, a total of $77,991,000 and $72,492,000, respectively, in distributions were cumulatively reinvested that resulted in 8,177,085 and 7,595,594 shares of our common stock, respectively, being issued pursuant to our DRIP Offerings.
Share Repurchase Plan
Due to the impact the COVID-19 pandemic has had on the United States and globally, and the ongoing uncertainty of the severity and duration of the COVID-19 pandemic and its effects, beginning in March 2020, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects. As a result, on March 31, 2020, our board suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders, beginning with share repurchase requests submitted for repurchase during the second quarter of 2020. Repurchase requests resulting from the death or qualifying disability of stockholders were not suspended, but remained subject to all terms and conditions of our share repurchase plan, including our board’s discretion to determine whether we have sufficient funds available to repurchase any shares. In connection with our special committee’s strategic alternative review process and in order to facilitate a strategic transaction, on March 18, 2021, our board approved the suspension of our share repurchase plan with respect to all repurchase requests received by us after February 28, 2021, including repurchases resulting from the death or qualifying disability of stockholders. On October 4, 2021, our board authorized the partial reinstatement of our share repurchase plan. See Note 20, Subsequent Events — Amendments to and Partial Reinstatement of Share Repurchase Plan, for a further discussion.
Our share repurchase plan allows for repurchases of shares of our common stock by us when certain criteria are met. Share repurchases will be made at the sole discretion of our board. Subject to the availability of the funds for share repurchases, we will limit the number of shares of our common stock repurchased during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year; provided, however, that shares subject to a repurchase requested upon the death of a stockholder are not subject to this cap. Funds for the repurchase of shares of our common stock come exclusively from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to our DRIP Offerings.
During our initial offering and with respect to shares repurchased for the quarter ended March 31, 2019, the repurchase amount for shares repurchased under our share repurchase plan was equal to the lesser of (i) the amount per share that a stockholder paid for their shares of our common stock, or (ii) the per share offering price in our initial offering. Commencing with shares repurchased for the quarter ended June 30, 2019, the repurchase amount for shares repurchased under our share repurchase plan is the lesser of (i) the amount per share the stockholder paid for their shares of our common stock, or (ii) the most recent estimated value of one share of the applicable class of common stock as determined by our board. However, if shares of our common stock were repurchased in connection with a stockholder’s death or qualifying disability, the repurchase price was no less than 100% of the price paid to acquire the shares of our common stock from us. On October 4, 2021, we amended and restated our share repurchase plan to change the repurchase price with respect to repurchases resulting from the death or qualifying disability of stockholders. See Note 20, Subsequent Events — Amendments to and Partial Reinstatement of Share Repurchase Plan, for a further discussion.
For the three months ended September 30, 2021, we did not repurchase any shares of our common stock due to the suspension of our share repurchase plan. For the three months ended September 30, 2020, we repurchased 71,551 shares of our common stock for an aggregate of $706,000 at an average repurchase price of $9.87 per share. For the nine months ended September 30, 2021 and 2020, we repurchased 189,567 and 578,111 shares of our common stock, respectively, for an aggregate of $1,874,000 and $5,349,000, respectively, at an average repurchase price of $9.88 and $9.25 per share, respectively. As of September 30, 2021 and December 31, 2020, we cumulatively repurchased 2,211,338 and 2,021,771 shares of our common stock, respectively, for an aggregate of $20,744,000 and $18,870,000, respectively, at an average repurchase price of $9.38 and $9.33 per share, respectively. All shares were repurchased using the cumulative proceeds we received from the sale of shares of our common stock pursuant to our DRIP Offerings.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Noncontrolling Interest
In connection with our acquisition of Louisiana Senior Housing Portfolio on January 3, 2020, as of both September 30, 2021 and December 31, 2020, we owned an approximate 90.0% interest in our consolidated joint venture that owns such properties. As such, 10.0% of the net earnings of the joint venture were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations for the three and nine months ended September 30, 2021 and for the period from January 3, 2020 through September 30, 2020, and the carrying amount of such noncontrolling interest is presented in total equity in our accompanying condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.
13. Related Party Transactions
Fees and Expenses Paid to Affiliates
As of September 30, 2021, all of our executive officers and one of our non-independent directors were also executive officers and employees and/or holders of a direct or indirect interest in our advisor, one of our co-sponsors or other affiliated entities. We were affiliated with our advisor, American Healthcare Investors and AHI Group Holdings; however, we were not affiliated with Griffin Capital, our dealer manager, Digital Bridge or Mr. Flaherty. We entered into the Advisory Agreement, as amended, which entitled our advisor and its affiliates to specified compensation for certain services, as well as reimbursement of certain expenses. Our board, including a majority of our independent directors, reviewed the material transactions between our affiliates and us during the nine months ended September 30, 2021. We believe that we have executed all of the transactions set forth below on terms that are fair and reasonable to us and on terms no less favorable to us than those available from unaffiliated third parties.
Fees and expenses to our affiliates incurred for the three and nine months ended September 30, 2021 and 2020 were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
  2021 2020 2021 2020
Asset management fees(1) $ 2,454,000  $ 2,446,000  $ 7,359,000  $ 7,292,000 
Property management fees(2) 383,000  376,000  1,124,000  1,100,000 
Lease fees(3) 211,000  117,000  632,000  254,000 
Construction management fees(4) 36,000  12,000  98,000  76,000 
Operating expenses(5) 24,000  37,000  103,000  122,000 
Development fees(6) 19,000  22,000  74,000  24,000 
Base acquisition fees and reimbursement of acquisition expenses(7) 2,000  35,000  184,000  1,476,000 
Total
$ 3,129,000  $ 3,045,000  $ 9,574,000  $ 10,344,000 
__________
(1)Asset management fees were included in general and administrative in our accompanying condensed consolidated statements of operations.
(2)Property management fees were included in rental expenses or general and administrative expenses in our accompanying condensed consolidated statements of operations, depending on the property type from which the fee was incurred.
(3)Lease fees were capitalized as costs of entering into new leases and included in other assets, net in our accompanying condensed consolidated balance sheets, and amortized over the term of the lease.
(4)Construction management fees were capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets.
(5)We reimbursed our advisor or its affiliates for operating expenses incurred in rendering services to us, subject to certain limitations. For the 12 months ended September 30, 2021 and 2020, our operating expenses did not exceed such
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
limitations. Operating expenses were generally included in general and administrative in our accompanying condensed consolidated statements of operations.
(6)Development fees were expensed as incurred and included in business acquisition expenses in our accompanying condensed consolidated statements of operations.
(7)Such amounts were capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets or were expensed as incurred and included in business acquisition expenses in our accompanying condensed consolidated statements of operations, as applicable.
Accounts Payable Due to Affiliates
The following amounts were outstanding to our affiliates as of September 30, 2021 and December 31, 2020:
Fee September 30,
2021
December 31,
2020
Lease commissions $ 210,000  $ 8,000 
Operating expenses 34,000  10,000 
Property management fees 32,000  117,000 
Construction management fees 31,000  33,000 
Development fees 16,000  64,000 
Asset management fees 1,000  814,000 
Total $ 324,000  $ 1,046,000 
14. Fair Value Measurements
Assets and Liabilities Reported at Fair Value
The table below presents our assets and liabilities measured at fair value on a recurring basis as of September 30, 2021, aggregated by the level in the fair value hierarchy within which those measurements fall:
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Liabilities:
Derivative financial instruments $ —  $ 824,000  $ —  $ 824,000 
The table below presents our assets and liabilities measured at fair value on a recurring basis as of December 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall:
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Total
Liabilities:
Derivative financial instruments $ —  $ 5,255,000  $ —  $ 5,255,000 
There were no transfers into or out of fair value measurement levels during the nine months ended September 30, 2021 and 2020.
We use interest rate swaps to manage interest rate risk associated with variable-rate debt. The valuation of these instruments is determined using widely accepted valuation techniques including 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, and uses observable market-based inputs, including interest rate curves, as well as option volatility. The fair values of interest rate swaps are determined by netting the discounted future fixed cash payments and the discounted expected variable
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cash receipts. The variable cash receipts are based on an expectation of future interest rates derived from observable market interest rate curves.
We incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.
Although we have determined that the majority of the inputs used to value our derivative financial instruments fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with these instruments utilize Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparty. However, as of September 30, 2021, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
Financial Instruments Disclosed at Fair Value
Our accompanying condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and accrued liabilities, accounts payable due to affiliates, mortgage loans payable and borrowings under the 2018 Credit Facility.
We consider the carrying values of cash and cash equivalents, restricted cash, accounts and other receivables and accounts payable and accrued liabilities to approximate the fair values for these financial instruments based upon the short period of time between origination of the instruments and their expected realization. The fair value of accounts payable due to affiliates is not determinable due to the related party nature of the accounts payable. These financial assets and liabilities are measured at fair value on a recurring basis based on quoted prices in active markets for identical assets and liabilities, and therefore are classified as Level 1 in the fair value hierarchy.
The fair values of our mortgage loans payable and the 2018 Credit Facility are estimated using discounted cash flow analyses using borrowing rates available to us for debt instruments with similar terms and maturities. We have determined that our mortgage loans payable and the 2018 Credit Facility are classified in Level 2 within the fair value hierarchy as reliance is placed on inputs other than quoted prices that are observable, such as interest rates and yield curves. The carrying amounts and estimated fair values of such financial instruments as of September 30, 2021 and December 31, 2020 were as follows:
September 30, 2021 December 31, 2020
  Carrying
Amount(1)
Fair
Value
Carrying
Amount(1)
Fair
Value
Financial Liabilities:
Mortgage loans payable $ 17,409,000  $ 20,891,000  $ 17,827,000  $ 22,052,000 
Line of credit and term loans $ 488,587,000  $ 488,995,000  $ 475,176,000  $ 477,651,000 
___________
(1)Carrying amount is net of any discount/premium and deferred financing costs.
15. Income Taxes
As a REIT, we generally will not be subject to federal income tax on taxable income that we distribute to our stockholders. We have elected to treat certain of our consolidated subsidiaries as taxable REIT subsidiaries, or TRS, pursuant to the Code. TRS may participate in services that would otherwise be considered impermissible for REITs and are subject to federal and state income tax at regular corporate tax rates.
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
The components of income tax benefit or expense for the three and nine months ended September 30, 2021 and 2020 were as follows:
Three Months Ended September 30, Nine Months Ended September 30,
2021 2020 2021 2020
Federal deferred $ (914,000) $ (863,000) $ (2,717,000) $ (2,134,000)
State deferred (232,000) (327,000) (791,000) (721,000)
Federal current —  (37,000) —  — 
State current —  (2,000) —  — 
Valuation allowance 1,146,000  1,190,000  3,508,000  2,855,000 
Total income tax benefit $ —  $ (39,000) $ —  $ — 
Current Income Tax
Federal and state income taxes are generally a function of the level of income recognized by our TRS.
Deferred Taxes
Deferred income tax is generally a function of the period’s temporary differences (primarily basis differences between tax and financial reporting for real estate assets and equity investments) and generation of tax net operating losses that may be realized in future periods depending on sufficient taxable income.
We recognize the financial statement effects of an uncertain tax position when it is more likely than not, based on the technical merits of the tax position, that such a position will be sustained upon examination by the relevant tax authorities. If the tax benefit meets the “more likely than not” threshold, the measurement of the tax benefit will be based on our estimate of the ultimate tax benefit to be sustained if audited by the taxing authority. As of both September 30, 2021 and December 31, 2020, we did not have any tax benefits or liabilities for uncertain tax positions that we believe should be recognized in our accompanying condensed consolidated financial statements.
We assess the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A valuation allowance is established if we believe it is more likely than not that all or a portion of the deferred tax assets are not realizable. As of both September 30, 2021 and December 31, 2020, our valuation allowance fully reserves the net deferred tax asset due to inherent uncertainty of future income. We will continue to monitor industry and economic conditions, and our ability to generate taxable income based on our business plan and available tax planning strategies, which would allow us to utilize the tax benefits of the net deferred tax assets and thereby allow us to reverse all, or a portion of, our valuation allowance in the future.
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
16. Leases
Lessor
We have operating leases with tenants that expire at various dates through 2040. For the three months ended September 30, 2021 and 2020, we recognized $22,120,000 and $21,519,000 of real estate revenue, respectively, related to operating lease payments, of which $5,013,000 and $4,592,000, respectively, was for variable lease payments. For the nine months ended September 30, 2021 and 2020, we recognized $66,054,000 and $64,824,000 of real estate revenue, respectively, related to operating lease payments, of which $14,817,000 and $13,861,000, respectively, was for variable lease payments. As of September 30, 2021, the following table sets forth the undiscounted cash flows for future minimum base rents due under operating leases for the three months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter for the properties that we wholly own:
Year Amount
2021 $ 16,361,000 
2022 64,121,000 
2023 60,213,000 
2024 54,662,000 
2025 49,138,000 
Thereafter 283,142,000 
Total $ 527,637,000 
Lessee
We have ground lease obligations that generally require fixed annual rental payments and may also include escalation clauses and renewal options. These leases expire at various dates through 2107, excluding extension options. Certain of our lease agreements include rental payments that are adjusted periodically based on the United States Bureau of Labor Statistics’ Consumer Price Index, and may include other variable lease costs (i.e., common area maintenance, property taxes and insurance). Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
For the three months ended September 30, 2021 and 2020, operating lease costs were $226,000 and $206,000, respectively, and for the nine months ended September 30, 2021 and 2020, operating lease costs were $644,000 and $643,000, respectively, which are included in rental expenses in our accompanying condensed consolidated statements of operations. Such costs also include variable lease costs, which are immaterial. Additional information related to our operating leases for the periods presented below was as follows:
September 30,
 2021
December 31,
2020
Weighted average remaining lease term (in years) 78.7 79.5
Weighted average discount rate 5.74  % 5.74  %
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
As of September 30, 2021, the following table sets forth the undiscounted cash flows of our scheduled obligations for future minimum payments for the three months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter, as well as the reconciliation of those cash flows to operating lease liabilities on our accompanying condensed consolidated balance sheet:
Year Amount
2021 $ 213,000 
2022 526,000 
2023 530,000 
2024 534,000 
2025 538,000 
Thereafter 46,565,000 
Total undiscounted operating lease payments 48,906,000 
Less: interest 38,885,000 
Present value of operating lease liabilities $ 10,021,000 
17. Segment Reporting
As of September 30, 2021, we evaluated our business and made resource allocations based on four reportable business segments — medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. Our medical office buildings are typically leased to multiple tenants under separate leases, thus requiring active management and responsibility for many of the associated operating expenses (much of which are, or can effectively be, passed through to the tenants). Our senior housing and skilled nursing facilities are primarily single-tenant properties for which we lease the facilities to unaffiliated tenants under triple-net and generally master leases that transfer the obligation for all facility operating costs (including maintenance, repairs, taxes, insurance and capital expenditures) to the tenant. Our senior housing — RIDEA properties include senior housing facilities that are owned and operated utilizing a RIDEA structure.
While we believe that net income (loss), as defined by GAAP, is the most appropriate earnings measurement, we evaluate our segments’ performance based upon segment net operating income, or NOI. We define segment NOI as total revenues and grant income, less rental expenses and property operating expenses, which excludes depreciation and amortization, general and administrative expenses, business acquisition expenses, interest expense, gain or loss on disposition of real estate investments, income or loss from unconsolidated entity, other income and income tax expense for each segment. We believe that segment NOI serves as an appropriate supplemental performance measure to net income (loss) because it allows investors and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies and between periods on a consistent basis.
Interest expense, depreciation and amortization and other expenses not attributable to individual properties are not allocated to individual segments for purposes of assessing segment performance. Non-segment assets primarily consist of corporate assets including our joint venture investment in an unconsolidated entity, cash and cash equivalents, other receivables and other assets not attributable to individual properties.
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Summary information for the reportable segments during the three and nine months ended September 30, 2021 and 2020 was as follows:
Medical
Office
Buildings
Senior
Housing —
RIDEA
Skilled
Nursing
Facilities
Senior
Housing
Three Months
Ended
September 30, 2021
Revenues:
Real estate revenue $ 16,921,000  $ —  $ 2,996,000  $ 2,203,000  $ 22,120,000 
Resident fees and services —  15,090,000  —  —  15,090,000 
Total revenues 16,921,000  15,090,000  2,996,000  2,203,000  37,210,000 
Expenses:
Rental expenses 6,072,000  —  145,000  172,000  6,389,000 
Property operating expenses —  14,540,000  —  —  14,540,000 
Segment net operating income $ 10,849,000  $ 550,000  $ 2,851,000  $ 2,031,000  $ 16,281,000 
Expenses:
General and administrative $ 4,304,000 
Business acquisition expenses 3,800,000 
Depreciation and amortization 10,746,000 
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium) (4,961,000)
Gain in fair value of derivative financial instruments 1,514,000 
Gain on disposition of real estate investments 15,000 
Income from unconsolidated entity 70,000 
Other income 33,000 
Total net other expense (3,329,000)
Net loss $ (5,898,000)
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Medical
Office
Buildings
Senior
Housing —
RIDEA
Skilled
Nursing
Facilities
Senior
Housing
Three Months
Ended
September 30, 2020
Revenues and grant income:
Real estate revenue $ 16,338,000  $ —  $ 2,979,000  $ 2,202,000  $ 21,519,000 
Resident fees and services —  18,948,000  —  —  18,948,000 
Grant income —  864,000  —  —  864,000 
Total revenues and grant income 16,338,000  19,812,000  2,979,000  2,202,000  41,331,000 
Expenses:
Rental expenses 5,607,000  —  125,000  173,000  5,905,000 
Property operating expenses —  17,397,000  —  —  17,397,000 
Segment net operating income $ 10,731,000  $ 2,415,000  $ 2,854,000  $ 2,029,000  $ 18,029,000 
Expenses:
General and administrative $ 3,672,000 
Business acquisition expenses 57,000 
Depreciation and amortization 12,669,000 
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium) (4,839,000)
Gain in fair value of derivative financial instruments 1,450,000 
Impairment of real estate investments (3,064,000)
Loss from unconsolidated entity (377,000)
Other income 8,000 
Total net other expense (6,822,000)
Loss before income taxes (5,191,000)
Income tax benefit 39,000 
Net loss $ (5,152,000)
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Medical
Office
Buildings
Senior
Housing —
RIDEA
Skilled
Nursing
Facilities
Senior
Housing
Nine Months
Ended
September 30, 2021
Revenues:
Real estate revenue $ 50,478,000  $ —  $ 8,987,000  $ 6,589,000  $ 66,054,000 
Resident fees and services —  46,179,000  —  —  46,179,000 
Total revenues 50,478,000  46,179,000  8,987,000  6,589,000  112,233,000 
Expenses:
Rental expenses 17,503,000  —  470,000  569,000  18,542,000 
Property operating expenses —  44,179,000  —  —  44,179,000 
Segment net operating income $ 32,975,000  $ 2,000,000  $ 8,517,000  $ 6,020,000  $ 49,512,000 
Expenses:
General and administrative $ 11,710,000 
Business acquisition expenses 6,552,000 
Depreciation and amortization 33,745,000 
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium) (14,556,000)
Gain in fair value of derivative financial instruments 4,431,000 
Loss on disposition of real estate investments (184,000)
Loss from unconsolidated entity (1,027,000)
Other income 49,000 
Total net other expense (11,287,000)
Net loss $ (13,782,000)
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Medical
Office
Buildings
Senior
Housing —
RIDEA
Skilled
Nursing
Facilities
Senior
Housing
Nine Months
Ended
September 30, 2020
Revenues and grant income:
Real estate revenue $ 49,184,000  $ —  $ 8,984,000  $ 6,656,000  $ 64,824,000 
Resident fees and services —  51,863,000  —  —  51,863,000 
Grant income —  864,000  —  —  864,000 
Total revenues and grant income 49,184,000  52,727,000  8,984,000  6,656,000  117,551,000 
Expenses:
Rental expenses 16,616,000  —  459,000  648,000  17,723,000 
Property operating expenses —  44,856,000  —  —  44,856,000 
Segment net operating income $ 32,568,000  $ 7,871,000  $ 8,525,000  $ 6,008,000  $ 54,972,000 
Expenses:
General and administrative
$ 11,960,000 
Business acquisition expenses 74,000 
Depreciation and amortization
37,919,000 
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs and debt discount/premium)
(15,123,000)
Loss in fair value of derivative financial instruments
(2,302,000)
Impairment of real estate investments (3,064,000)
Income from unconsolidated entity
952,000 
Other income 278,000 
Total net other expense (19,259,000)
Net loss $ (14,240,000)
Assets by reportable segment as of September 30, 2021 and December 31, 2020 were as follows:
  September 30,
2021
December 31,
2020
Medical office buildings $ 570,415,000  $ 583,131,000 
Senior housing — RIDEA 227,978,000  238,910,000 
Skilled nursing facilities 115,565,000  119,247,000 
Senior housing 97,243,000  100,370,000 
Other 52,695,000  51,115,000 
Total assets
$ 1,063,896,000  $ 1,092,773,000 
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
18. Concentration of Credit Risk
Financial instruments that potentially subject us to a concentration of credit risk are primarily cash and cash equivalents, restricted cash and accounts and other receivables. Cash and cash equivalents are generally invested in investment-grade, short-term instruments with a maturity of three months or less when purchased. We have cash and cash equivalents in financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. As of September 30, 2021 and December 31, 2020, we had cash and cash equivalents in excess of FDIC insured limits. We believe this risk is not significant. Concentration of credit risk with respect to accounts receivable from tenants is limited. In general, we perform credit evaluations of prospective tenants and security deposits are obtained at the time of property acquisition and upon lease execution.
Based on leases in effect as of September 30, 2021, two states in the United States accounted for 10.0% or more of our total property portfolio’s annualized base rent or annualized NOI. Our properties located in Missouri and Michigan accounted for approximately 12.4% and 10.6%, respectively, of our total property portfolio’s annualized base rent or annualized NOI. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.
Based on leases in effect as of September 30, 2021, our four reportable business segments, medical office buildings, skilled nursing facilities, senior housing and senior housing — RIDEA, accounted for 68.9%, 14.9%, 10.7% and 5.5%, respectively, of our total property portfolio’s annualized base rent or annualized NOI.
As of September 30, 2021, we had one tenant that accounted for 10.0% or more of our total property portfolio’s annualized base rent or annualized NOI, as follows:
Tenant Annualized
Base Rent/
NOI(1)
Percentage of
Annualized
Base Rent/NOI
Real Estate Investment Reportable
Segment
GLA
(Sq Ft)
Lease Expiration
Date
RC Tier Properties, LLC $ 7,937,000  11.3% Missouri SNF Portfolio Skilled Nursing 385,000 09/30/33
___________
(1)Amount is based on contractual base rent from leases in effect as of September 30, 2021 for our non–RIDEA properties and annualized NOI for our senior housing — RIDEA facilities. The loss of this tenant or its inability to pay rent could have a material adverse effect on our business and results of operations.
19. Per Share Data
Basic earnings (loss) per share for all periods presented are computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of our common stock outstanding during the period. Net income (loss) applicable to common stock is calculated as net income (loss) attributable to controlling interest less distributions allocated to participating securities of $3,000 and $4,000, respectively, for the three months ended September 30, 2021 and 2020 and $12,000 and $15,000, respectively, for the nine months ended September 30, 2021 and 2020. Diluted earnings (loss) per share are computed based on the weighted average number of shares of our common stock and all potentially dilutive securities, if any. Nonvested shares of our restricted common stock and redeemable limited partnership units of our operating partnership are participating securities and give rise to potentially dilutive shares of our common stock. As of September 30, 2021 and 2020, there were 27,000 and 45,000 nonvested shares, respectively, of our restricted common stock outstanding, but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during these periods. As of both September 30, 2021 and 2020, there were 208 redeemable limited partnership units of our operating partnership outstanding, but such units were excluded from the computation of diluted earnings per share because such units were anti-dilutive during these periods.
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
20. Subsequent Events
Merger with Griffin-American Healthcare REIT III, Inc. and AHI Acquisition
As discussed in Note 1, Organization and Description of Business, on October 1, 2021, we completed the REIT Merger pursuant to the Merger Agreement with GAHR III. At the effective time of the REIT Merger, each issued and outstanding share of GAHR III’s common stock, $0.01 par value per share, converted into the right to receive 0.9266 shares of our Class I common stock, $0.01 par value per share. Further, at the effective time of the Partnership Merger, (i) each unit of limited partnership interest in the surviving partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive 0.9266 of a Partnership Class I Unit, as defined in the agreement of limited partnership, as amended, of the surviving partnership and (ii) each unit of limited partnership interest in our operating partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive one unit of limited partnership interest of the surviving partnership of like class.
Also on October 1, 2021, the AHI Acquisition closed immediately prior to the consummation of the Merger and pursuant to the Contribution Agreement, American Healthcare Investors contributed substantially all of its business and operations to the surviving partnership, including its interest in GAHR III Advisor and our advisor, and Griffin Capital contributed its current ownership interest in GAHR III Advisor and our advisor to the surviving partnership. In exchange for these contributions, the surviving partnership issued limited partnership units, or Surviving Partnership OP Units. Subject to working capital and other customary adjustments, the total approximate value of these Surviving Partnership OP Units at the time of consummation of the transactions contemplated by the Contribution Agreement was approximately $131,674,000, with a reference value for purposes thereof of $8.71 per unit, such that the surviving partnership issued 15,117,529 Surviving Partnership OP Units as consideration, or the Closing Date Consideration. The Combined Company following the Merger has become self-managed and was named “American Healthcare REIT, Inc.”
In addition to the Closing Date Consideration, we may in the future pay cash “earnout” consideration to American Healthcare Investors based on the fees that we may earn from our potential sponsorship of, and investment advisory services rendered to, American Healthcare RE Fund, L.P., a healthcare-related, real-estate-focused, private investment fund currently under consideration by American Healthcare Investors, or the Earnout Consideration. The Earnout Consideration is uncapped in amount and, if ever payable by us to American Healthcare Investors, will be due on the seventh anniversary of the closing of the AHI Acquisition (subject to acceleration in certain events, including if we achieve certain fee-generation milestones from our sponsorship of the private investment fund). American Healthcare Investors’ ability to receive the Earnout Consideration is also subject to vesting conditions relating to the private investment fund’s deployed equity capital and the continuous employment of at least two of its principals throughout the vesting period.
Amendments to Articles of Incorporation
On October 1, 2021, we filed the Fourth Articles of Amendment and Restatement to our charter, or the Charter Amendment, with the State Department of Assessments and Taxation of Maryland, and the Charter Amendment became effective upon filing. The changes to the Charter Amendment include, among other things, the following: (i) the removal of certain limitations relating to (a) suitability of stockholders and (b) collection of an internalization fee; (ii) the removal or revision of certain limitations required by the North American Securities Administrators Association and making other conforming and ministerial changes; (iii) revisions in order to bring our charter more in line with those of publicly-listed companies; and (iv) the change in common stock we are authorized to issue from 900,000,000 shares classified as Class T common stock and 100,000,000 shares classified as Class I common stock to 200,000,000 shares classified as Class T common stock and 800,000,000 shares classified as Class I common stock.
Second Amended and Restated Agreement of Limited Partnership
On October 1, 2021, in connection with the Partnership Merger, merger sub entered into the Second Amended and Restated Agreement of Limited Partnership of American Healthcare REIT, Inc., which amends and supersedes the Amended and Restated Agreement of Limited Partnership of the surviving partnership, or the Operating Partnership Agreement. The Operating Partnership Agreement reflects, among other things, the following: (i) the change of the surviving partnership’s name to “American Healthcare REIT Holdings, LP,” (ii) the change of the general partner of the surviving partnership to merger sub, (iii) the conversion of units of partnership interest in the surviving partnership outstanding as of immediately prior to the effective time of the Partnership Merger into “Partnership Class I Units” pursuant to the Partnership Merger, (iv) the conversion of units of partnership interest in our operating partnership outstanding as of immediately prior to the effective time of the Partnership Merger into units of limited partnership interest of the surviving partnership of like class, and (v) to make other updates to reflect the effects of the mergers consummated pursuant to the Merger Agreement.
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Lines of Credit and Term Loans
Amendment to 2018 Credit Facility
On October 1, 2021, we entered into the Amendment, which provide for, among other things, the following: (i) revisions to financial covenant calculations to exclude the assets, liabilities and operating performance of Trilogy or any subsidiary thereof; (ii) our operating partnership to pledge the equity interests in each direct and indirect subsidiary that owns an unencumbered asset; (iii) updates regarding restrictions and limitations on certain investments during the remainder of the term of the 2018 Credit Facility; and (iv) updates to the certain financial covenants to reflect the Combined Company subsequent to the Merger.
Assumption of Obligations Under GAHR III 2019 Corporate Line of Credit
On October 1, 2021, upon consummation of the Merger, we assumed GAHR III’s obligations, through the surviving partnership, under the credit agreement, as amended, or the 2019 Corporate Credit Agreement, with Bank of America, KeyBank, Citizens Bank, and a syndicate of other banks, as lenders, with respect to a credit facility with a maximum principal amount of $480,000,000, or the 2019 Corporate Line of Credit. The 2019 Corporate Line of Credit consists of a senior unsecured term loan facility in an amount of $480,000,000. The maximum principal amount of term loans under the 2019 Corporate Line of Credit may be increased by up to $370,000,000, for a total principal amount of $850,000,000, subject to certain conditions. The 2019 Corporate Line of Credit matures on January 25, 2022 and may be extended for one 12-month period during the term of the 2019 Corporate Credit Agreement, subject to satisfaction of certain conditions, including payment of an extension fee. Upon consummation of the Merger, a previously available $150,000,000 senior unsecured revolving credit facility was cancelled, and a ratable amendment to certain financial covenants to account for the Combined Company was made.
At our option, the 2019 Corporate Line of Credit bears interest at per annum rates equal to (a) (i) the Eurodollar Rate, as defined in the 2019 Corporate Credit Agreement, plus (ii) a margin ranging from 1.85% to 2.80% based on the Consolidated Leverage Ratio, as defined in the 2019 Corporate Credit Agreement, or (b) (i) the greater of: (1) the prime rate publicly announced by Bank of America, (2) the Federal Funds Rate, as defined in the 2019 Corporate Credit Agreement, plus 0.50%, (3) the one-month Eurodollar Rate plus 1.00%, and (4) 0.00%, plus (ii) a margin ranging from 0.85% to 1.80% based on the Consolidated Leverage Ratio. Accrued interest on the 2019 Corporate Line of Credit is payable monthly. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions.
Assumption of GAHR III Obligations Under 2019 Trilogy Credit Facility
On October 1, 2021, upon consummation of the Merger, we assumed GAHR III’s obligations under the amended and restated loan agreement, or the 2019 Trilogy Credit Agreement, with KeyBank; CIT Bank, N.A.; Regions Bank; KeyBanc Capital Markets; Regions Capital Markets; Bank of America; The Huntington National Bank; and a syndicate of other banks, as lenders named therein, regarding a senior secured revolving credit facility with an aggregate maximum principal amount of $360,000,000, consisting of: (i) a $325,000,000 secured revolver supported by real estate assets and ancillary business cash flow and (ii) a $35,000,000 accounts receivable revolving credit facility supported by eligible accounts receivable, or the 2019 Trilogy Credit Facility. We may obtain up to $35,000,000 in the form of swing line loans and up to $15,000,000 in the form of standby letters of credit under the 2019 Trilogy Credit Facility. The proceeds of the 2019 Trilogy Credit Facility may be used for acquisitions, debt repayment and general corporate purposes. The maximum principal amount of the 2019 Trilogy Credit Facility may be increased by up to $140,000,000, for a total principal amount of $500,000,000, subject to certain conditions. The 2019 Trilogy Credit Facility matures on September 5, 2023 and may be extended for one 12-month period during the term of the 2019 Trilogy Credit Agreement, subject to the satisfaction of certain conditions, including payment of an extension fee.
At our option, the 2019 Trilogy Credit Facility bears interest at per annum rates equal to (a) the London Inter-Bank Offer Rate, or LIBOR, plus 2.75% for LIBOR Rate Loans, as defined in the 2019 Trilogy Credit Agreement, and (b) for Base Rate Loans, as defined in the 2019 Trilogy Credit Agreement, 1.75% plus the greater of: (i) the fluctuating annual rate of interest announced from time to time by KeyBank as its prime rate, (ii) 0.50% above the Federal Funds Effective Rate, as defined in the 2019 Trilogy Credit Agreement, and (iii) 1.00% above the one-month LIBOR. Accrued interest on the 2019 Trilogy Credit Facility is payable monthly. The 2019 Trilogy Credit Facility may be repaid in whole or in part without prepayment fees or penalty, subject to certain conditions. We are required to pay fees on the unused portion of the lenders’ commitments under the 2019 Trilogy Credit Facility, with respect to any day during a calendar quarter, at a per annum rate equal to (a) 0.15% if the sum of the Aggregate Real Estate Revolving Credit Obligations, as defined in the 2019 Trilogy Credit Agreement, outstanding on such day is greater than 50.00% of the commitments or 0.20% if the sum of the Aggregate Real Estate Revolving Credit Obligations on such day is less than or equal to 50.00% of the commitments, and (b) 0.15% if the sum of the Aggregate A/R Revolving Credit Obligations, as defined in the 2019 Trilogy Credit Agreement, outstanding on such day is greater than 50.00% of the commitments or 0.20% if the sum of the Aggregate A/R Revolving Credit Obligations on such day is less than or equal to 50.00% of the commitments, which fees shall be measured and payable on a quarterly basis.
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Reinstatement of the DRIP
On October 4, 2021, our board reinstated the DRIP and as a result, beginning with the October 2021 distribution, which was paid in November 2021, stockholders who previously enrolled as participants in the DRIP (including former GAHR III stockholders who participated in the GAHR III distribution reinvestment plan) received or will receive distributions in shares of our common stock pursuant to the terms of the DRIP, instead of cash distributions.
Amendments to and Partial Reinstatement of Share Repurchase Plan
On October 4, 2021, our board authorized our amended and restated share repurchase plan that included the change in the repurchase price with respect to repurchases resulting from the death or qualifying disability (as such term is defined in the share repurchase plan) of stockholders from 100% of the price paid by the stockholder to acquire shares of our Class T common stock or Class I common stock, as applicable, to the most recently published estimated NAV per share. In addition, on October 4, 2021, our board authorized the partial reinstatement of our share repurchase plan with respect to requests to repurchase shares resulting from the death or qualifying disability of stockholders, effective with respect to qualifying repurchases for the fiscal quarter ending December 31, 2021, which will be paid on or about January 1, 2022. All share repurchase requests other than those requests resulting from the death or qualifying disability of stockholders, shall be rejected.
Distributions Declared
Our board authorized a daily distribution to our Class T and Class I stockholders of record as of the close of business on October 27, 2021. This distribution for the month of October 2021 was equal to $0.033333333 per share of our common stock, which is equal to an annualized distribution rate of $0.40 per share. The distribution was paid in cash or shares of our common stock pursuant to the DRIP. The distribution was paid in November 2021, only from legally available funds.
Director Appointments and Resignation
On October 1, 2021, immediately following the effective time of the REIT Merger, our board was increased from five members to nine members. Our board appointed Harold H. Greene, J. Grayson Sanders and Gerald W. Robinson to our board as independent directors. Messrs. Greene, Sanders and Robinson were independent directors on GAHR III’s board of directors immediately prior to the effective time of the REIT Merger. Our board also appointed Mr. Prosky and Mr. Streiff as directors. On October 1, 2021, Richard S. Welch resigned from our board and no longer serves as our director.
Messrs. Greene, Sanders and Robinson satisfy the independent director standards applicable to us and, as independent directors, are entitled to receive the same compensation and reimbursement of expenses that we pay to each of our independent directors; Messrs. Prosky and Streiff also serve as our executive officers and therefore will not receive compensation for services rendered as directors. We also issued 5,000 shares of restricted Class T common stock to each of Messrs. Greene, Sanders and Robinson in connection with their appointment to our board.
Officer Transitions and Appointments
Effective October 1, 2021, Jeffrey T. Hanson was appointed as our Executive Chairman of the Board of Directors and thereby no longer serves as our Chief Executive Officer. In addition, effective October 1, 2021, Danny Prosky was appointed Chief Executive Officer and thereby no longer serves as our Chief Operating Officer but continues in the role of President, and Mathieu B. Streiff was appointed as our Chief Operating Officer and thereby no longer serves as our Executive Vice President, General Counsel. Also effective October 1, 2021, Gabriel M. Willhite was appointed as our Executive Vice President, General Counsel, filling the vacancy created by Mr. Streiff’s resignation from such position.
Employment Agreements
On October 1, 2021, immediately prior to the closing of the AHI Acquisition, GAHR III (through a wholly owned subsidiary) entered into offer letters with each of Mr. Hanson, Mr. Prosky, Mr. Streiff and Brian S. Peay, GAHR III’s chief financial officer, relating to their employment with GAHR III following the closing of the AHI Acquisition and relating to their employment with us following the consummation of the REIT Merger. Upon the closing of the REIT Merger, we indirectly assumed (by virtue of the REIT Merger and our acquisition of GAHR III’s wholly owned subsidiary that is party to the offer letters) GAHR III’s obligations under these offer letters.
Issuance of Restricted Stock Awards to Key Executives and Employees 
As a result of the REIT Merger, under our incentive plan, as amended, or our 2015 Incentive Plan, certain of our key executives received initial grants of 477,901 time-based restricted stock and 159,301 performance-based restricted units representing the right to receive shares of our Class T common stock upon vesting. The time-based restricted stock vest in three equal annual installments on October 1, 2022, October 1, 2023 and October 1, 2024 (subject to continuous employment through
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
each vesting date). The performance-based restricted stock will cliff vest in the first quarter of 2025 (subject to continuous employment through that vesting date) with the amount vesting depending on meeting certain key performance criteria as further described in the 2015 Incentive Plan.
Also in connection with the Merger, on October 4, 2021, certain of our key employees were granted 319,149 of restricted Class T common stock under our 2015 Incentive Plan, which will cliff vest on October 4, 2024 (subject to continuous employment through that vesting date).
Registration Rights Agreement
On October 1, 2021, at the consummation of the AHI Acquisition, GAHR III and the surviving partnership entered into a registration rights agreement, or the Registration Rights Agreement, with Griffin-American Strategic Holdings, LLC, or HoldCo, pursuant to which, subject to certain limitations therein, as promptly as practicable following the later of the expiration of (i) the period commencing on the closing of the AHI Acquisition and ending upon the earliest to occur of (a) the second anniversary date of the issuance of the Surviving Partnership OP Units issued in connection with the AHI Acquisition, (b) a change of control of Merger Sub, and (c) the listing of shares of our common stock on a national securities exchange, or the Lock-Up Period; and (ii) the date on which we are eligible to file a registration statement (but in any event no later than 180 days after such date), we, as the indirect parent company of the surviving partnership, are required to file a shelf registration statement with the SEC under the Securities Act of 1933, as amended, covering the resale of the shares of our Class I common stock issued or issuable in redemption of the Surviving Partnership OP Units that the surviving partnership issued as consideration in the AHI Acquisition. The Registration Rights Agreement also grants HoldCo (or any successor holder of such shares) demand rights to request additional registration statement filings as well as “piggyback” registration rights, in each case on or after the expiration of the Lock-Up Period. In connection with the Merger, we assumed from GAHR III the Registration Rights Agreement and GAHR III’s obligations thereunder in their entirety.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. (formerly known as Griffin-American Healthcare REIT IV, Inc.) and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where otherwise noted. Capitalized terms related to the merger with Griffin-American Healthcare REIT III, Inc., or GAHR III, are defined and further discussed below in the “Overview and Background” section.
The following discussion should be read in conjunction with our accompanying condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and in our 2020 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on March 26, 2021. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of September 30, 2021 and December 31, 2020, together with our results of operations for the three and nine months ended September 30, 2021 and 2020 and cash flows for the nine months ended September 30, 2021 and 2020.
Forward-Looking Statements
Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking. Actual results may differ materially from those included in the forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “expect,” “project,” “may,” “will,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “opinion,” “predict,” “potential,” “seek” and any other comparable and derivative terms or the negatives thereof. Our ability to predict results or the actual effect of future plans and strategies is inherently uncertain. Factors which could have a material adverse effect on our operations on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; the effects of the coronavirus, or COVID-19, pandemic, including its effects on the healthcare industry, senior housing and skilled nursing facilities and the economy in general; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs; the availability of capital; changes in interest rates; risks related to disruption of management’s attention from the ongoing business operations due to the Merger; uncertainty from the expected discontinuance of the London Inter-bank Offered Rate, or LIBOR, and the transition to any other interest rate benchmark; competition in the real estate industry; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the success of our investment strategy; and the availability of financing. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements in this Quarterly Report on Form 10-Q speak only as of the date on which such statements are made, and undue reliance should not be placed on such statements. We undertake no obligation to update any such statements that may become untrue because of subsequent events. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.
Overview and Background
American Healthcare REIT, Inc. (formerly known as Griffin-American Healthcare REIT IV, Inc.), a Maryland corporation, invests in a diversified portfolio of healthcare real estate properties, focusing primarily on medical office buildings, skilled nursing facilities and senior housing facilities that produce current income. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). We qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to qualify to be taxed as a REIT.
We raised $754,118,000 through a best efforts initial public offering, or our initial offering, that commenced on February 16, 2016, and issued 75,639,681 aggregate shares of our Class T and Class I common stock. In addition, during our initial offering, we issued 3,253,535 aggregate shares of our Class T and Class I common stock pursuant to our distribution reinvestment plan, as amended, or the DRIP, for a total of $31,021,000 in distributions reinvested. Following the termination of our initial offering on February 15, 2019, we continued issuing shares of our common stock pursuant to the DRIP through a subsequent offering, or the 2019 DRIP Offering, which commenced on March 1, 2019. On March 18, 2021, our board of directors, or our board, authorized the suspension of the DRIP, effective as of April 1, 2021. As of September 30, 2021, a total of $46,970,000 in distributions were reinvested that resulted in 4,923,550 shares of our common stock being issued pursuant to the 2019 DRIP Offering. We collectively refer to the DRIP portion of our initial offering and the 2019 DRIP Offering as our DRIP Offerings. See Note 20, Subsequent Events — Reinstatement of the DRIP, to our accompanying condensed consolidated financial statements.
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Until October 2021, we conducted substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. Through September 30, 2021, we were externally advised by Griffin-American Healthcare REIT IV Advisor, LLC, or our advisor, pursuant to an advisory agreement, as amended, or the Advisory Agreement, between us, our operating partnership and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one-year initial term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 11, 2021. On June 23, 2021, in anticipation of the Merger, as defined and discussed below, we entered into an amendment to the Advisory Agreement, whereby it was agreed that any acquisition fee due to our advisor is to be waived in connection with the REIT Merger, as defined and discussed below. Except as set forth in such amendment to the Advisory Agreement, the terms of the Advisory Agreement continued in full force and effect. Our advisor used its best efforts, subject to the oversight and review of our board, to, among other things, provide asset management, property management, acquisition, disposition and other advisory services on our behalf consistent with our investment policies and objectives. Our advisor performed its duties and responsibilities under the Advisory Agreement as our fiduciary. Prior to the Merger, our advisor was 75.0% owned and managed by wholly owned subsidiaries of American Healthcare Investors, LLC, or American Healthcare Investors, and 25.0% owned by a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors. American Healthcare Investors was 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Digital Bridge Group, Inc. (NYSE: DBRG) (formerly known as Colony Capital, Inc.), or Digital Bridge, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital, Inc. We were not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Digital Bridge or Mr. Flaherty; however, we were affiliated with our advisor, American Healthcare Investors and AHI Group Holdings. Please see the “Merger with Griffin-American Healthcare REIT III, Inc.” and “AHI Acquisition” sections below for a further discussion of our operations effective October 1, 2021.
We operate through four reportable business segments: medical office buildings, senior housing, senior housing — RIDEA and skilled nursing facilities. As of September 30, 2021, we owned 87 properties, comprising 92 buildings, or approximately 4,799,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $1,080,381,000. As of September 30, 2021, we also owned a 6.0% interest in a joint venture which owned a portfolio of integrated senior health campuses and ancillary businesses.
On March 18, 2021, our board, at the recommendation of the audit committee of our board, comprised solely of independent directors, unanimously approved and established an updated estimated per share net asset value, or NAV, of our common stock of $9.22 calculated as of September 30, 2020. We provide this updated estimated per share NAV to assist broker-dealers in connection with their obligations under Financial Industry Regulatory Authority, or FINRA, Rule 2231 with respect to customer account statements. The updated estimated per share NAV is based on the estimated value of our assets less the estimated value of our liabilities, divided by the number of shares of Class T and Class I common stock outstanding on a fully diluted basis. The valuation was performed in accordance with the methodology provided in Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, or the Practice Guideline, issued by the Institute for Portfolio Alternatives, or the IPA, in April 2013, in addition to guidance from the SEC. On April 2, 2020, the board previously determined an estimated per share NAV of our common stock of $9.54 calculated as of December 31, 2019. See our Current Report on Form 8-K filed with the SEC on March 19, 2021 for more information on the methodologies and assumptions used to determine, and the limitations and risks of, our updated estimated per share NAV.
Merger with Griffin-American Healthcare REIT III, Inc.
On June 23, 2021, we, our operating partnership, our wholly owned subsidiary, Continental Merger Sub, LLC, or merger sub, Griffin-American Healthcare REIT III, Inc., or GAHR III, and American Healthcare REIT Holdings, LP (formerly known as Griffin-American Healthcare REIT III Holdings, LP), or the surviving partnership, entered into an Agreement and Plan of Merger, or the Merger Agreement. On October 1, 2021, pursuant to the Merger Agreement, (i) GAHR III merged with and into merger sub, with merger sub being the surviving company, or the REIT Merger, and (ii) our operating partnership merged with and into the surviving partnership, with the surviving partnership being the surviving entity and being renamed American Healthcare REIT Holdings, LP, or the Partnership Merger, and, together with the REIT Merger, the Merger. As a result of and at the effective time of the Merger, the separate corporate existence of GAHR III and our operating partnership ceased.
At the effective time of the REIT Merger, each issued and outstanding share of GAHR III’s common stock, $0.01 par value per share, converted into the right to receive 0.9266 shares of our Class I common stock, $0.01 par value per share. Further, at the effective time of the Partnership Merger, (i) each unit of limited partnership interest in the surviving partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive 0.9266 of a Partnership Class I Unit, as defined in the agreement of limited partnership, as amended, of the surviving partnership and (ii) each unit of limited partnership interest in our operating partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive one unit of limited partnership interest of the surviving partnership of like class.
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Following the Merger, our company, combined with GAHR III, or the Combined Company, was renamed “American Healthcare REIT, Inc.” The REIT Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Code. Based on data as of September 30, 2021, the Combined Company has a healthcare real estate portfolio consisting of 311 buildings and campuses in 36 states (as well as the United Kingdom & Isle of Man). On a pro forma basis, the Combined Company portfolio would have a leased percentage rate as of September 30, 2021 of approximately 94.1% for its leased, non-RIDEA assets, 78.1% for its senior housing-RIDEA assets and 77.8% for its integrated senior health campuses.
AHI Acquisition
Also on June 23, 2021, the surviving partnership, our co-sponsors, Platform Healthcare Investor T-II, LLC, Flaherty Trust, Jeffrey T. Hanson, our former Chief Executive Officer and Chairman of the Board of Directors, Danny Prosky, our President and former Chief Operating Officer, and Mathieu B. Streiff, our former Executive Vice President, General Counsel, entered into a contribution and exchange agreement, or the Contribution Agreement, pursuant to which, among other things, the surviving partnership agreed to acquire a newly formed entity, or NewCo, which we refer to as the AHI Acquisition, that owned substantially all of the business and operations of one of our co-sponsors, American Healthcare Investors, as well as all of the equity interests in (i) Griffin-American Healthcare REIT III Advisor, LLC, or GAHR III Advisor, a subsidiary of American Healthcare Investors that served as the external advisor of GAHR III, and (ii) our advisor. On October 1, 2021, the AHI Acquisition closed immediately prior to the consummation of the Merger. Following the consummation of the Merger, the Combined Company has become a self-managed company.
The AHI Acquisition will be treated as a business combination for accounting purposes, with GAHR III as both the legal and accounting acquiror of NewCo. While we are the legal acquiror of GAHR III in the REIT Merger, GAHR III was determined to be the accounting acquiror in the REIT Merger transaction in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations, after considering the relative share ownership and the composition of the governing body of the Combined Company. As a result of the completion of the Merger and the AHI Acquisition, the historical information regarding our company’s structure, agreements and financial information presented within this Item 2 has materially changed; however, such information did apply to us as of September 30, 2021. See Note 20, Subsequent Events — Merger with Griffin-American Healthcare REIT III, Inc. and AHI Acquisition, to our accompanying condensed consolidated financial statements and our Current Report on Form 8-K filed with the SEC on October 1, 2021, for additional information regarding the Merger and the AHI Acquisition.
Critical Accounting Policies
The complete listing of our Critical Accounting Policies was previously disclosed in our 2020 Annual Report on Form 10-K, as filed with the SEC on March 26, 2021, and there have been no material changes to our Critical Accounting Policies as disclosed therein, except as included within Note 2, Summary of Significant Accounting Policies, to our accompanying condensed consolidated financial statements.
Interim Unaudited Financial Data
For a discussion of interim unaudited financial data, see Note 2, Summary of Significant Accounting Policies — Interim Unaudited Financial Data, to our accompanying condensed consolidated financial statements. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2020 Annual Report on Form 10-K, as filed with the SEC on March 26, 2021.
Acquisition and Disposition in 2021
For a discussion of our acquisition and disposition in 2021, See Note 3, Real Estate Investments, Net, to our accompanying condensed consolidated financial statements.
Factors Which May Influence Results of Operations
Other than the effects of the COVID-19 pandemic discussed below, as well as other national economic conditions affecting real estate generally, we are not aware of any material trends or uncertainties that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, disposition, management and operation of our properties. In addition, see Part II, Item 1A, Risk Factors, of this Quarterly Report on Form 10-Q and those Risk Factors previously disclosed in our 2020 Annual Report on Form 10-K, as filed with the SEC on March 26, 2021.
Ongoing Impact of the COVID-19 Pandemic
Due to the ongoing COVID-19 pandemic in the United States and globally, since March 2020, our residents, tenants, operating partners and managers have been materially impacted, and the prolonged economic impact remains uncertain. As the COVID-19 pandemic is still impacting the healthcare system to a degree, it continues to present challenges for us as an owner and operator of healthcare facilities. Since its outset, the impacts of the COVID-19 pandemic have been significant, rapidly and continuously evolving and may continue into the future, especially due to the emergence of the Delta variant which has caused
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COVID-19 cases and deaths to increase significantly in the third quarter of 2021, making it difficult to ascertain the long-term impact the COVID-19 pandemic will have on real estate markets in which we own and/or operate properties and our portfolio of investments. COVID-19 is particularly dangerous among the senior population and results in heightened risk to our senior housing and skilled nursing facilities, and we continue to work diligently to implement and maintain aggressive protocols at such facilities as well as actively collaborate with our tenants, operating partners and managers to respond and take action to mitigate the impact of the COVID-19 pandemic. We have evaluated the impacts of the COVID-19 pandemic on our business thus far and incorporated information concerning the impact of COVID-19 into our assessments of liquidity, impairment and collectability from tenants and residents as of September 30, 2021. We will continue to monitor such impacts and will adjust our estimates and assumptions based on the best available information.
Since March 2020, we have taken actions to strengthen our balance sheet and preserve liquidity in response to the COVID-19 pandemic, including reducing the stockholder distribution rate and temporarily suspending our share repurchase plan. We believe that the long-term stability of our portfolio of investments will return once the virus has been controlled. Each type of real estate asset we own has been impacted by the COVID-19 pandemic to varying degrees.
In the early months of the pandemic, the businesses of our medical office tenants were negatively impacted when many of the states had implemented “stay at home” orders, thereby creating unprecedented revenue pressure on such tenants and their ability to pay rent on a timely basis. Substantially all of our physician practices and other medical service providers of non-essential and elective services in our medical office buildings are now open and as a result, our medical office building segment rebounded quickly from the initial shock of the pandemic and has demonstrated remarkable resilience. This trend has continued despite the emergence of the Delta variant.
The COVID-19 pandemic has resulted in a significant decline in the resident occupancies of our senior housing and skilled nursing facilities and an increase in COVID-19 related operating expenses, especially in our skilled nursing segment where personal protective equipment, or PPE, costs and the shortage of healthcare personnel resulting in more costly short-term hires, present ongoing challenges. Therefore, our immediate focus at such properties continues to be on resident occupancy recovery and operating expense management. While we experienced steady recovery in early 2021, the emergence of the Delta variant has slowed the recovery in our senior housing and skilled nursing segments as we are seeing case counts reach levels not seen since January 2021. In addition, since the fourth quarter of 2020, COVID-19 vaccines have become available to certain parts of the population, which we believe will be important to a rebound in our resident occupancy levels over time. As of November 1, 2021, based on information provided by our operators, the majority of our residents have been fully vaccinated.
The information in this Quarterly Report on Form 10-Q is based on data currently available to us and will likely change as the COVID-19 pandemic progresses. Despite improving macroeconomic conditions and the emergence of vaccines, surges in COVID-19 cases, including variants of the strain, such as those experienced in Europe and the U.S., could slow down the recovery of the U.S. and the global economy. We continue to closely monitor COVID-19 developments and are continuously assessing the implications to our business, residents, tenants, operating partners, managers and our portfolio of investments. We believe that the government-imposed or self-imposed lockdowns and restrictions have created pent-up demand for doctors’ visits and move-ins into senior housing facilities; however, we cannot predict with reasonable certainty when such demand will return to pre-COVID-19 pandemic levels. The medical community understands COVID-19 far better today than it did at the onset of the pandemic, and we are now equipped with greater therapeutics and other treatments to mitigate its impact. Likewise, we are optimistic about the favorable reports regarding the efficacy of vaccines. The COVID-19 pandemic has had, and may continue to have, an adverse effect on the operations of our business, and therefore, we are unable to predict the full extent or nature of the future impact to our financial condition and results of operations at this time. We expect the trends discussed above with respect to the impact of the COVID-19 pandemic to continue. Thus, the lasting impact of the COVID-19 pandemic over the next 12 months could be significant and will largely depend on future developments, including the duration of the crisis and the success of efforts to contain or treat COVID-19 and its variants, such as the use of effective vaccines and availability of vaccine boosters, which cannot be predicted with confidence at this time. See the “Results of Operations” and “Liquidity and Capital Resources” sections below for a further discussion.
Scheduled Lease Expirations
Excluding our senior housing — RIDEA facilities, as of September 30, 2021, our properties were 95.7% leased and during the remainder of 2021, 1.5% of the leased GLA is scheduled to expire. Our leasing strategy focuses on negotiating renewals for leases scheduled to expire during the next 12 months. In the future, if we are unable to negotiate renewals, we will try to identify new tenants or collaborate with existing tenants who are seeking additional space to occupy. As of September 30, 2021, our remaining weighted average lease term was 7.8 years, excluding our senior housing — RIDEA facilities.
For the three and nine months ended September 30, 2021, our senior housing — RIDEA facilities were 71.1% and 69.7% leased, respectively. Substantially all of our leases with residents at such properties are for a term of one year or less.
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Results of Operations
Comparison of the Three and Nine Months Ended September 30, 2021 and 2020
Our operating results are primarily comprised of income derived from our portfolio of properties and expenses in connection with the acquisition and operation of