TABLE OF CONTENTS

 

 

QUESTIONS AND ANSWERS ABOUT THIS OFFERING

Set forth below are some of the more frequently asked questions and answers relating to our structure, our management, our business and an offering of this type.

Q:    What is a real estate investment trust, or REIT?

Q:    What is Griffin-American Healthcare REIT IV, Inc.?

fund a majority of our initial years of distributions and that such distributions will represent a return of capital. We may also be required to sell assets or issue new securities for cash in order to pay distributions. Any such actions could reduce the amount of capital we ultimately invest in assets and negatively impact the amount of income available for future distributions.

Q:    What is an “UPREIT”?

Q:    What will you do with the money raised in this offering?

For this purpose, net worth does not include your home, home furnishings or personal automobiles. However, these minimum levels are higher in certain states, so you should carefully read the more detailed description under “Suitability Standards” beginning on page i of this prospectus.

For example, because depreciation expense reduces taxable income but does not reduce cash available for distribution, if our distributions exceed our current and accumulated earnings and profits, the portion of such distributions to you exceeding our current and accumulated earnings and profits (to the extent of your positive basis in your shares of our common stock) will be considered a return of capital to you for tax purposes. These amounts will not be subject to income tax immediately but will instead reduce the tax basis of your investment, in effect, deferring a portion of your income tax until you sell your shares of our common stock or we liquidate, assuming we do not pay any future distributions in excess of our current and accumulated earnings and profits at a time that your tax basis in your shares of our common stock is zero. If you are a tax-exempt entity, distributions from us generally will not constitute UBTI, unless you have borrowed to acquire or carry your stock or have used the shares of our common stock in a trade or business. There are exceptions to this rule for certain types of tax-exempt entities. Because each investor’s tax considerations are different, especially the treatment of tax-exempt entities, we suggest that you consult with your tax advisor. See the “Federal Income Tax Considerations — Taxation of Taxable U.S. Stockholders,” the “Federal Income Tax Considerations — Taxation of Tax-Exempt Stockholders” and the “Distribution Reinvestment Plan” sections of this prospectus.

Griffin Capital Securities, LLC

18191 Von Karman Avenue, Suite 300

Irvine, California 92612

Telephone: (949) 270-9300

•	There is no public market for the shares of our common stock. Shares of our common stock cannot be readily sold and there are significant restrictions on the ownership, transferability and repurchase of shares of our common stock. If you are able to sell your shares of our common stock, you likely would have to sell them at a substantial discount.

•	We have no operating history or established financing sources. Therefore, you may not be able to adequately evaluate our ability to achieve our investment objectives.

•	This is a “blind pool” offering because we have not identified any real estate or real estate-related investments to acquire with the net proceeds from this offering. As a result, you will not be able to evaluate the economic merits of our investments prior to their purchase. We may be unable to invest the net proceeds from this offering on acceptable terms to investors, or at all.

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Until we generate operating cash flows sufficient to pay distributions to you, we may pay distributions from the net proceeds of this offering or from borrowings in anticipation of future cash flows. We may also be required to sell assets or issue new securities for cash in order to pay distributions. We have not established any limit on the amount of offering proceeds or borrowings that may be used to fund distributions other than those limits imposed by our organizational documents and Maryland law, and it is likely that we will use offering proceeds to fund a majority of our initial years of distributions and that such distributions will represent a return of capital. We may also be required to sell assets or issue new securities for cash in order to pay distributions. Any such actions could reduce the amount of capital we ultimately invest in assets and negatively impact the amount of income available for future distributions.

•	We may incur substantial debt, which could hinder our ability to pay distributions to you or could decrease the value of your investment if the income from, or the value of, the property securing our debt falls.

•	This is a “best efforts” offering. If we raise substantially less than the maximum offering, we may not be able to invest in a diverse portfolio of real estate and real estate-related investments, and the value of your investment may fluctuate more widely with the performance of specific investments.

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We will rely on our advisor and its affiliates for our day-to-day operations and the selection of our investments. We will pay substantial fees to our advisor and its affiliates for these services, and the agreements governing these fees were not all negotiated at arm’s-length. In addition, fees payable to our dealer manager and our advisor in our organizational stage will be based upon the gross offering proceeds and not on our properties’ performance. Such agreements may require us to pay more than we would if we were only using unaffiliated third parties and may not solely reflect your interests as a stockholder of our company.

•	Our advisor may be entitled to receive significant compensation in the event of our liquidation or in connection with a termination of the advisory agreement, even if such termination is the result of poor performance by our advisor.

•	Many of our officers also are managing directors, officers and/or employees of one of our co-sponsors and other affiliated entities. As a result, our officers will face conflicts of interest, including significant conflicts in allocating time and investment opportunities among us and similar programs sponsored by one of our co-sponsors or its affiliates.

•	If we do not qualify as a REIT, we would be subject to federal income tax at regular corporate rates, which would adversely affect our operations and our ability to pay distributions to you.

•	The amount of distributions we may pay, if any, is uncertain. Due to the risks involved in the ownership of real estate and real estate-related investments, there is no guarantee of any return on your investment in us and you may lose money.

•	This is a fixed price offering. The fixed offering price was arbitrarily determined by our board of directors and may not accurately represent the current value of our assets at any particular time.

•	We are not obligated, through our charter or otherwise, to effectuate a liquidity event, and we may not effect a liquidity event within our targeted time frame of five years after the completion of our offering stage, or at all. If we do not effect a liquidity event, you may have to hold your investment in shares of our common stock for an indefinite period of time.

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

•	Our board of directors may change our investment objectives without seeking your approval.

		Minimum Offering(1)							Maximum Offering(1)
		Amount				Percent			Amount				Percent
Gross Offering Proceeds		$	2,000,000			100	%		$	3,000,000,000			100	%
Less Public Offering Expenses:
Selling Commissions(2)		60,000				3.0			90,000,000				3.0
Dealer Manager Fee(2)		60,000				3.0			90,000,000				3.0
Advisor Funding of Dealer Manager Fee(2)		(40,000		)		(2.0	)		(60,000,000		)		(2.0	)
Other Organizational and Offering Expenses(3)		20,000				1.0			30,000,000				1.0
Advisor Funding of Other Organizational and Offering Expenses(3)		(20,000		)		(1.0	)		(30,000,000		)		(1.0)
Amount Available for Investment		$	1,920,000			96.0	%		$	2,880,000,000			96.0	%
Less Acquisition Costs:
Acquisition Fees(4)		$	83,000			4.1	%		$	124,019,000			4.1	%
Initial Working Capital Reserve		—				—			—				—
Amount Invested in Assets		$	1,837,000			91.9	%		$	2,755,981,000			91.9	%

(1)	We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the DRIP, and among classes of stock if we elect to offer additional classes in the future.

(2)

We will pay selling commissions in the amount of 3.0% of the gross offering proceeds in the primary offering. Our dealer manager will receive a dealer manager fee in the amount of 3.0% of the gross offering proceeds for sales of shares, of which 2.0% of the gross offering proceeds will be funded by our advisor and the remaining 1.0% of the gross offering proceeds will be funded by us. We will also pay a quarterly stockholder servicing fee for the shares that will accrue daily in the amount of 1/365th of 1.0% of the purchase price per share of shares sold in our primary offering. We have excluded the stockholder servicing fee from this table. We have assumed for purposes of this table that all sales of shares will be made with the 3.0% selling commissions and 3.0% dealer manager fee taken at the time of sale. If the maximum selling commissions, dealer manager fees and stockholder servicing fees are paid, the total of such underwriting compensation would be 10.0% of the gross offering proceeds in the primary offering.

(3)	Our advisor will fund all of our other organizational and offering expenses, which we anticipate will not exceed 1.0% of the gross offering proceeds from the sale of all share classes.

(4)

Acquisition fees may be paid by any party to any person in connection with the purchase, development or construction of real properties, or the making of or investing in loans or other real estate-related investments. Acquisition fees do not include acquisition expenses, which may be paid from offering proceeds. We will pay our advisor or one of its affiliates acquisition fees up to 4.50% of the contract purchase price, including any contingent or earn-out payments that may be paid, of each property we acquire or, with respect to any real estate-related investment we originate or acquire, up 4.25% of the origination or acquisition price, including any contingent or earn-out payments that may be paid. The 4.50% and 4.25% acquisition fees consist of a 2.25% or 2.00% base acquisition fee for real estate and real estate-related investments, respectively, and an additional 2.25% contingent advisor payment, or the Contingent Advisor Payment. For purposes of this table, the 4.50% acquisition fees are applied against the amount invested in assets shown in the table. However, the percentages that appear in this table are stated as a percentage of the gross offering proceeds shown in the table. As a result, the acquisition fees stated in the table represent approximately 4.1% of the gross offering proceeds shown in the table.

•	our advisor and its affiliates must determine how to allocate investment opportunities between us and other real estate programs managed by our co-sponsors, their affiliates and subsidiaries;

•	our advisor may compete with other American Healthcare Investors, Griffin Capital and NSAM programs for the same tenants in negotiating leases or in selling similar properties at the same time; and

•	our advisor and its affiliates will receive fees in connection with transactions involving the purchase, management and sale of our properties regardless of the quality or performance of the investments acquired or the services provided to us.

Type of Compensation (Recipient)		Description and Method of Computation		Estimated Dollar Amount for Minimum Offering		Estimated Dollar Amount for Maximum Offering
Offering Stage
Selling Commissions         (our dealer manager)		Generally, up to 3.0% of gross offering proceeds from the sale of shares of our common stock sold pursuant to our primary offering (all or a portion of which may be reallowed by our dealer manager to participating broker-dealers). No selling commissions are payable on shares of our common stock sold pursuant to the DRIP.		$60,000		$90,000,000
Dealer Manager Fee      (our dealer manager)		Generally, up to 3.0% of gross offering proceeds from the sale of shares of our common stock sold pursuant to the primary offering (all or a portion of which may be reallowed by our dealer manager to participating broker-dealers). No dealer manager fee is payable on shares of our common stock sold pursuant to the DRIP.		$20,000		$30,000,000
Other Organizational and Offering Expenses		Our advisor will fund all of our other organizational and offering expenses. Based on the experience of our co-sponsors and their affiliates, we anticipate that the other organizational and offering expenses will not exceed 1.0% of the gross offering proceeds for shares of our common stock sold pursuant to our primary offering. No other organizational and offering expenses will be paid with respect to shares of our common stock sold pursuant to the DRIP.		$—		$—
Acquisition and Development Stage
Stockholder Servicing Fee (our dealer manager)		A quarterly fee that will accrue daily in an amount equal to 1/365 th  of 1.0% of the purchase price per share (or, once reported, the amount of our estimated NAV per share) of shares sold in our primary offering up to a maximum of 4.0% in the aggregate. We will cease paying the stockholder servicing fee with respect to the shares sold in this offering at the earliest of (i) the date at which the aggregate underwriting compensation from all sources equals 10.0% of the gross proceeds from the sale of shares		$80,000		$120,000,000

Type of Compensation (Recipient)		Description and Method of Computation		Estimated Dollar Amount for Minimum Offering		Estimated Dollar Amount for Maximum Offering
Construction Management Fee (our advisor or its affiliates)		In the event that our advisor or its affiliates assist with planning and coordinating the construction of any capital or tenant improvements, the respective party may be paid up to 5.0% of the cost of such improvements.		Actual amount is not determinable.		Actual amount is not determinable.
Liquidity Stage
Disposition Fees (our advisor or its affiliates)		Up to the lesser of 2.0% of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, in each case as determined by our board of directors (including a majority of our independent directors), upon the provision of a substantial amount of the services in the sales effort. The amount of disposition fees paid, when added to the real estate commissions paid to unaffiliated parties, will not exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price.		Actual amount depends upon the sale price of properties, and, therefore, cannot be determined at this time.		Actual amount depends upon the sale price of properties, and, therefore, cannot be determined at this time.
Subordinated Participation Interest in Healthcare REIT IV OP (our advisor)
•  Subordinated Distribution of Net Sales Proceeds (payable only if we liquidate our portfolio while Griffin-American Advisor is serving as our advisor)		After distributions to our stockholders, in the aggregate, of a full return of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) plus an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock, as adjusted for distributions of net sale proceeds, the distribution will be equal to 15.0% of the remaining net proceeds from the sales of properties.		Actual amount depends upon the sale price of properties, and, therefore, cannot be determined at this time.		Actual amount depends upon the sale price of properties, and, therefore, cannot be determined at this time.
•  Subordinated Distribution in Redemption of Limited Partnership Units Upon Listing (payable only if the shares of our common stock are listed on a national securities exchange while Griffin-American Advisor is serving as our advisor)		Upon the listing of the shares of our common stock on a national securities exchange, in redemption of our advisor’s limited partnership units, a distribution equal to 15.0% of the amount by which (1) the market value of our outstanding common stock at listing plus distributions paid prior to listing exceeds (2) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the amount of cash equal to an annual 6.0% cumulative, non-compounded return to stockholders on the gross proceeds from the sale of shares of our common stock through the date of listing.		Actual amount depends upon the market value of our common stock at the time of listing, among other factors, and, therefore, cannot be determined at this time.		Actual amount depends upon the market value of our common stock at the time of listing, among other factors, and, therefore, cannot be determined at this time.

Material Adverse Business Developments — Griffin Capital

As the commercial real estate industry has been affected by the recent economic crisis, certain Griffin Capital sponsored investment programs that substantially completed their primary equity offerings at or prior to the end of 2007 were adversely affected by the subsequent disruptions to the economy generally and the real estate market in particular. These economic conditions have adversely affected the financial condition of many of these programs’ tenants and lease guarantors, resulting in tenant defaults or bankruptcies. Further, lowered asset values, as a result of declining occupancies, reduced rental rates, and greater tenant concessions and leasing costs, have reduced investor returns in these investment programs because these factors not only reduce current returns to investors but also negatively impact the ability of these investment programs to refinance or sell their assets and to realize gains thereon.

In response to these economic stresses, several Griffin Capital sponsored investment programs have altered their overall strategies to focus on capital conservation, debt extensions and restructurings, reduction of operating expenses, management of lease renewals and re-tenanting, declining occupancies and rental rates, and increases in tenant concessions and leasing costs. These programs include Griffin Capital (Puente Hills) Investors, LLC, which purchased a car dealership that was shut down by its parent company, resulting in a cessation of distributions to investors and the sale of the property at a loss pursuant to a court order. The arbitration and litigation actions originally filed in this matter have been settled with the program investors, and the named parties in the litigation have been dismissed with prejudice, although the appraiser of the property remains a party to the lawsuit and has the right to bring the named parties back into the litigation. In addition, the tenants on the properties acquired by Griffin Capital (ARG) Investors, DST and Griffin Capital (Westmont) Investors, LLC declared bankruptcy, resulting in the cessation of distributions to investors in those programs. Subsequently, the tenant’s lease on the property acquired by Griffin Capital (Westmont) Investors, LLC was affirmed in the tenant’s bankruptcy action and a lease amendment was executed that required the landlord to pay the tenant’s letter of credit fee. With regard to the property acquired by Griffin Capital (ARG) Investors, DST, the loan encumbering the properties was subsequently worked out and the assets sold off. Furthermore, certain other privately-offered programs sponsored by Griffin Capital have experienced tenant vacancies due to bankruptcies, merger or lease expirations or other similar adverse developments, which has caused certain investments to perform below expectations. For additional information regarding the material adverse business developments experienced by some of the prior investment programs sponsored by our co-sponsors, see the “Prior Performance Summary — Programs Sponsored by

•	for stockholders who have continuously held their shares of our common stock for at least one year, 92.5% of the Repurchase Amount (as described below);

•	for stockholders who have continuously held their shares of our common stock for at least two years, 95.0% of the Repurchase Amount;

•	for stockholders who have continuously held their shares of our common stock for at least three years, 97.5% of the Repurchase Amount; and

•	for stockholders who have continuously held their shares of our common stock for at least four years, 100% of the Repurchase Amount.

•	pursuant to Section 3(a)(1)(A), it is, or holds itself out as being, engaged primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities; or

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pursuant to Section 3(a)(1)(C), it is engaged, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire “investment securities” having a value exceeding 40.0% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. “Investment securities” excludes U.S. government securities and securities of majority owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company under Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.