Griffin-American Healthcare REIT IV, Inc. (Form: 10-Q, Received: 08/09/2017 14:40:54)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 000-55775

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

(Exact name of registrant as specified in its charter)



Maryland		47-2887436
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

18191 Von Karman Avenue, Suite 300, Irvine, California		92612
(Address of principal executive offices)		(Zip Code)

(949) 270-9200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

___________________________________________________

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

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



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller reporting company	o
		Emerging growth company	x

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

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

As of August 4, 2017 , there were 30,196,109 shares of Class T common stock and 1,665,501 shares of Class I common stock of Griffin-American Healthcare REIT IV, Inc. outstanding.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

(A Maryland Corporation)

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	Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)	3
Condensed Consolidated Balance Sheets as of June 30, 2017 and December 31, 2016	3
Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2017 and 2016	5
Condensed Consolidated Statements of Equity for the Six Months Ended June 30, 2017 and 2016	6
Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2017 and 2016	7
Notes to Condensed Consolidated Financial Statements	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3. Quantitative and Qualitative Disclosures About Market Risk	48
Item 4. Controls and Procedures	48

PART II — OTHER INFORMATION

Item 1. Legal Proceedings	50
Item 1A. Risk Factors	50
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 3. Defaults Upon Senior Securities	57
Item 4. Mine Safety Disclosures	57
Item 5. Other Information	57
Item 6. Exhibits	57
Signatures	58

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of June 30, 2017 and December 31, 2016

(Unaudited)



	June 30, 2017			December 31, 2016
ASSETS
Real estate investments, net	$	306,518,000		$	117,942,000
Cash and cash equivalents	3,247,000			2,237,000
Accounts and other receivables, net	1,224,000			1,299,000
Restricted cash	16,000			—
Real estate deposits	21,000			200,000
Identified intangible assets, net	36,114,000			19,673,000
Other assets, net	2,334,000			1,407,000
Total assets	$	349,474,000		$	142,758,000

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Liabilities:
Mortgage loans payable, net(1)	$	11,691,000		$	3,965,000
Line of Credit(1)	71,100,000			33,900,000
Accounts payable and accrued liabilities(1)	14,160,000			5,426,000
Accounts payable due to affiliates(1)	8,024,000			5,531,000
Identified intangible liabilities, net	1,406,000			1,063,000
Security deposits and prepaid rent(1)	1,026,000			616,000
Total liabilities	107,407,000			50,501,000

Commitments and contingencies (Note 9)

Redeemable noncontrolling interest (Note 10)	2,000			2,000

Stockholders’ equity:
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding	—			—
Class T common stock, $0.01 par value per share; 900,000,000 shares authorized; 27,185,036 and 11,000,433 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	271,000			110,000
Class I common stock, $0.01 par value per share; 100,000,000 shares authorized; 1,476,775 and 377,006 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	15,000			4,000
Additional paid-in capital	254,364,000			99,492,000
Accumulated deficit	(12,585,000		)	(7,351,000		)
Total stockholders’ equity	242,065,000			92,255,000
Total liabilities, redeemable noncontrolling interest and stockholders’ equity	$	349,474,000		$	142,758,000

___________

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)

As of June 30, 2017 and December 31, 2016

(Unaudited)

(1)

Such liabilities of Griffin-American Healthcare REIT IV, Inc. as of June 30, 2017 and December 31, 2016 represented liabilities of Griffin-American Healthcare REIT IV Holdings, LP, a variable interest entity and consolidated subsidiary of Griffin-American Healthcare REIT IV, Inc. The creditors of Griffin-American Healthcare REIT IV Holdings, LP do not have recourse against Griffin-American Healthcare REIT IV, Inc., except for the Line of Credit, as defined in Note 7, held by Griffin-American Healthcare REIT IV Holdings, LP in the amount of $71,100,000 and $33,900,000 as of June 30, 2017 and December 31, 2016, respectively, which is guaranteed by Griffin-American Healthcare REIT IV, Inc.

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

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2017 and 2016

(Unaudited)



	Three Months Ended June 30,						Six Months Ended June 30,
	2017			2016			2017			2016
Revenue:
Real estate revenue	$	6,198,000		$	26,000		$	10,250,000		$	26,000
Expenses:
Rental expenses	1,611,000			23,000			2,798,000			23,000
General and administrative	952,000			246,000			1,700,000			396,000
Acquisition related expenses	140,000			370,000			213,000			370,000
Depreciation and amortization	2,466,000			—			4,177,000			—
Total expenses	5,169,000			639,000			8,888,000			789,000
Income (loss) from operations	1,029,000			(613,000		)	1,362,000			(763,000		)
Other income (expense):
Interest expense (including amortization of deferred financing costs and debt premium)	(409,000		)	—			(827,000		)	—
Interest income	1,000			—			1,000			—
Net income (loss)	621,000			(613,000		)	536,000			(763,000		)
Less: net income (loss) attributable to redeemable noncontrolling interest	—			—			—			—
Net income (loss) attributable to controlling interest	$	621,000		$	(613,000	)	$	536,000		$	(763,000	)
Net income (loss) per Class T and Class I common share attributable to controlling interest — basic and diluted	$	0.03		$	(0.96	)	$	0.03		$	(2.32	)
Weighted average number of Class T and Class I common shares outstanding — basic and diluted	24,035,973			635,808			19,371,454			328,321
Distributions declared per Class T and Class I common share	$	0.15		$	0.10		$	0.30		$	0.10

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

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Six Months Ended June 30, 2017 and 2016

(Unaudited)



	Class T and Class I Common Stock
	Number of Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity
BALANCE — December 31, 2016	11,377,439		$	114,000	$	99,492,000		$	(7,351,000	)	$	92,255,000
Issuance of common stock	16,978,248		169,000		168,724,000			—			168,893,000
Offering costs — common stock	—		—		(16,693,000		)	—			(16,693,000		)
Issuance of common stock under the DRIP	305,798		3,000		2,871,000			—			2,874,000
Issuance of vested and nonvested restricted common stock	7,500		—		15,000			—			15,000
Amortization of nonvested common stock compensation	—		—		24,000			—			24,000
Repurchase of common stock	(7,174	)	—		(69,000		)	—			(69,000		)
Distributions declared	—		—		—			(5,770,000		)	(5,770,000		)
Net income	—		—		—			536,000			536,000
BALANCE — June 30, 2017	28,661,811		$	286,000	$	254,364,000		$	(12,585,000	)	$	242,065,000



	Stockholders’ Equity
	Class T Common Stock
	Number of Shares	Amount		Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Equity			Noncontrolling Interest			Total Equity
BALANCE — December 31, 2015	20,833	$	—	$	200,000		$	—		$	200,000		$	2,000		$	202,000
Issuance of common stock	1,633,069	17,000		16,242,000			—			16,259,000			—			16,259,000
Offering costs — common stock	—	—		(3,766,000		)	—			(3,766,000		)	—			(3,766,000		)
Issuance of common stock under the DRIP	2,003	—		19,000			—			19,000			—			19,000
Issuance of vested and nonvested restricted common stock	15,000	—		30,000			—			30,000			—			30,000
Amortization of nonvested common stock compensation	—	—		22,000			—			22,000			—			22,000
Reclassification of noncontrolling interest to mezzanine equity	—	—		—			—			—			(2,000		)	(2,000		)
Distributions declared	—	—		—			(88,000		)	(88,000		)	—			(88,000		)
Net loss	—	—		—			(763,000		)	(763,000		)	—			(763,000		)
BALANCE — June 30, 2016	1,670,905	$	17,000	$	12,747,000		$	(851,000	)	$	11,913,000		$	—		$	11,913,000

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

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2017 and 2016

(Unaudited)



	Six Months Ended June 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	536,000		$	(763,000	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	4,177,000			—
Other amortization (including deferred financing costs, above/below-market leases, leasehold interests, above-market leasehold interests and debt premium)	157,000			—
Deferred rent	(556,000		)	—
Stock based compensation	39,000			52,000
Share discounts	3,000			40,000
Bad debt expense	69,000			—
Changes in operating assets and liabilities:
Accounts and other receivables	(103,000		)	(21,000		)
Other assets	(326,000		)	(152,000		)
Accounts payable and accrued liabilities	963,000			126,000
Accounts payable due to affiliates	123,000			14,000
Prepaid rent	(109,000		)	(5,000		)
Net cash provided by (used in) operating activities	4,973,000			(709,000		)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of real estate investments	(199,164,000		)	(5,404,000		)
Capital expenditures	(33,000		)	—
Restricted cash	(16,000		)	—
Real estate deposits	179,000			(150,000		)
Net cash used in investing activities	(199,034,000		)	(5,554,000		)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on mortgage loan payable	(125,000		)	—
Borrowings under the Line of Credit	172,100,000			—
Payments on the Line of Credit	(134,900,000		)	—
Proceeds from issuance of common stock	169,003,000			15,644,000
Deferred financing costs	(164,000		)	—
Repurchase of common stock	(69,000		)	—
Payment of offering costs	(8,697,000		)	(519,000		)
Distributions paid	(2,077,000		)	(12,000		)
Net cash provided by financing activities	195,071,000			15,113,000
NET CHANGE IN CASH AND CASH EQUIVALENTS	1,010,000			8,850,000
CASH AND CASH EQUIVALENTS — Beginning of period	2,237,000			202,000
CASH AND CASH EQUIVALENTS — End of period	$	3,247,000		$	9,052,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	672,000		$	—
Income taxes	$	7,000		$	—
SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
Investing Activities:
Accrued capital expenditures	$	719,000		$	—

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Six Months Ended June 30, 2017 and 2016

(Unaudited)



	Six Months Ended June 30,
	2017		2016
The following represents the increase in certain assets and liabilities in connection with our acquisitions of real estate investments:
Other assets	$	122,000	$	21,000
Mortgage loan payable	$	8,000,000	$	—
Accounts payable and accrued liabilities	$	743,000	$	4,000
Security deposits and prepaid rent	$	519,000	$	5,000
Financing Activities:
Issuance of common stock under the DRIP	$	2,874,000	$	19,000
Distributions declared but not paid	$	1,351,000	$	57,000
Accrued Contingent Advisor Payment	$	7,774,000	$	2,717,000
Accrued stockholder servicing fee	$	9,603,000	$	507,000
Reclassification of noncontrolling interest to mezzanine equity	$	—	$	2,000
Accrued deferred financing costs	$	11,000	$	—
Receivable from transfer agent	$	906,000	$	552,000

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

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Six Months Ended June 30, 2017 and 2016

The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT IV, Inc. and its subsidiaries, including Griffin-American Healthcare REIT IV Holdings, LP, except where the context otherwise requires.

1. Organization and Description of Business

Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, was incorporated on January 23, 2015 and therefore we consider that our date of inception. We were initially capitalized on February 6, 2015 . We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, hospitals, skilled nursing facilities, senior housing and other healthcare-related facilities. We may also originate and acquire secured loans and real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income. We believe we currently qualify, and intend to elect to be treated, as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the Code, for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to be taxed as a REIT.

On February 16, 2016, we commenced our initial public offering, or our offering, in which we were offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock at a price of $10.00 per share in our primary offering and up to $150,000,000 in shares of our Class T common stock for $9.50 per share pursuant to our distribution reinvestment plan, as amended, or the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of Class T common stock being offered and began offering shares of Class I common stock, such that we are currently offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in our primary offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP, aggregating up to $3,150,000,000 . The shares of our Class T common stock in our primary offering are being offered at a price of $10.00 per share. The shares of our Class I common stock in our primary offering were being offered at a price of $9.30 per share prior to March 1, 2017, and are being offered at a price of $9.21 per share for all shares offered effective March 1, 2017. The shares of our Class T and Class I common stock issued pursuant to the DRIP were sold at a price of $9.50 per share prior to January 1, 2017, and are sold at a price of $9.40 per share for all shares issued pursuant to the DRIP effective January 1, 2017. After our board of directors determines an estimated net asset value, or NAV, per share of our common stock, share prices are expected to be adjusted to reflect the estimated NAV per share and, in the case of shares offered pursuant to our primary offering, up-front selling commissions and dealer manager fees other than those funded by Griffin-American Healthcare REIT IV Advisor, LLC, or Griffin-American Healthcare REIT IV Advisor, or our advisor. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the DRIP, and among classes of stock. As of June 30, 2017 , we had received and accepted subscriptions in our offering for 28,236,137 aggregate shares of our Class T and Class I common stock, or approximately $280,969,000 , excluding shares of our common stock issued pursuant to the DRIP.

We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. We are externally advised by our advisor pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one -year term, subject to successive one -year renewals upon the mutual consent of the parties. The Advisory Agreement was renewed pursuant to the mutual consent of the parties on February 13, 2017 and expires on February 16, 2018. Our advisor uses its best efforts, subject to the oversight and review of our board of directors, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by American Healthcare Investors, LLC, or American Healthcare Investors, and 25.0% owned by a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital (formerly known as Griffin Capital Corporation), or collectively, our co-sponsors. Effective March 1, 2015, American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony NorthStar, Inc. (NYSE: CLNS), or Colony NorthStar (formerly known as NorthStar Asset Management Group Inc. prior to its merger with Colony Capital, Inc. and NorthStar Realty Finance Corp. on January 10, 2017), and 7.8% owned by James F. Flaherty III, one of Colony NorthStar’s partners. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony NorthStar or Mr. Flaherty; however, we are affiliated with Griffin-American Healthcare REIT IV Advisor, American Healthcare Investors and AHI Group Holdings.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.

Basis of Presentation

Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership and the wholly owned subsidiaries of our operating partnership, as well as any variable interest entities, or VIEs, in which we are the primary beneficiary. We evaluate our ability to control an entity, and whether the entity is a VIE and we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance as defined in Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 810, Consolidation , or ASC Topic 810.

We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of o ur operating partnership, and as of June 30, 2017 and December 31, 2016 , we owned greater than a 99.99% general partnership interest therein. Our advisor is a limited partner, and as of June 30, 2017 and December 31, 2016 , owned less than a 0.01% noncontrolling limited partnership interest in our operating partnership.

Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our condensed consolidated financial statements. All intercompany accounts and transactions are eliminated in consolidation.

Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the United States Securities and Exchange Commission, or SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to 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 2016 Annual Report on Form 10-K, as filed with the SEC on March 1, 2017.

Use of Estimates

The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.

Allowance for Uncollectible Accounts

Tenant receivables and unbilled deferred rent receivables are carried net of an allowance for uncollectible amounts. An allowance is maintained for estimated losses resulting from the inability of certain tenants to meet the contractual obligations

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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

under their lease agreements. We also maintain an allowance for deferred rent receivables arising from the straight line recognition of rents. Such allowances are charged to bad debt expense, which is included in general and administrative 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 tenant’s financial condition, security deposits, letters of credit, lease guarantees, current economic conditions and other relevant factors.

As of June 30, 2017 and December 31, 2016, we had $ 67,000 and $0 , respectively, in allowance for uncollectible accounts, which was determined necessary to reduce receivables to our estimate of the amount recoverable. For the three and six months ended June 30, 2017 and 2016, we did not write off any of our receivables directly to bad debt expense. For the three and six months ended June 30, 2017 and 2016, we did not write off any receivables against the allowance for uncollectible accounts.

As of June 30, 2017 and December 31, 2016, we did not have any allowance for uncollectible accounts for deferred rent receivables. For the three and six months ended June 30, 2017 , $2,000 of our deferred rent receivables were directly written off to bad debt expense. For the three and six months ended June 30, 2016, we did not write off any of our deferred rent receivables directly to bad debt expense.

Property Acquisitions

In accordance with ASC Topic 805, Business Combinations , and Accounting Standards Update, or ASU, 2017-01, Clarifying the Definition of a Business , or ASU 2017-01, we determine whether a transaction is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired and liabilities assumed are not a business, we account for the transaction as an asset acquisition. Under both methods, we recognize the identifiable assets acquired and liabilities assumed; however, for a transaction accounted for as an asset acquisition, we allocate the purchase price to the identifiable assets acquired and liabilities assumed based on their relative fair values. We immediately expense acquisition related expenses associated with a business combination and capitalize acquisition related expenses directly associated with an asset acquisition. As a result of our early adoption of ASU 2017-01 on January 1, 2017, we accounted for the seven property acquisitions we completed for the six months ended June 30, 2017 as asset acquisitions rather than business combinations. See Note 3, Real Estate Investments, Net , for a further discussion. For the six months ended June 30, 2016, we completed one property acquisition, which we accounted for as a business combination. See Note 14, Business Combinations , for a further discussion.

Recently Issued or Adopted Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , or ASU 2014-09, which replaces the existing accounting standards for revenue recognition. ASU 2014-09 provides a five-step framework to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration expected to be received in exchange for those goods or services. Since its issuance, the FASB has amended several aspects of ASU 2014-09, including provisions that address principal-versus-agent implementation guidance and identifying performance obligations. ASU 2014-09 is effective for interim and annual reporting periods beginning after December 15, 2017. It may be adopted either by restating all years presented in the financial statements or by recording the impact of adoption as an adjustment to retained earnings at the beginning of the year of adoption. Our primary source of revenue is generated through leasing arrangements, which are excluded from ASU 2014-09 and its amendments; however, we expect that the adoption of ASU 2014-09 and its amendments on January 1, 2018 will impact the recognition of non-lease revenue, such as certain resident fees for any healthcare-related facilities we acquire and operate in the future 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 Code authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008).

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities , or ASU 2016-01, which amends the classification and measurement of financial instruments. ASU 2016-01 revises the accounting related to: (i) the classification and measurement of investments in equity securities; and (ii) the presentation of certain fair value changes for financial liabilities measured at fair value. ASU 2016-01 also amends certain disclosure requirements associated with the fair value of financial instruments. ASU 2016-01 is effective for interim and annual reporting periods beginning after December 15, 2017. Early adoption is permitted, with respect to only certain of the amendments in ASU 2016-01, for financial statements that have not yet been made available for issuance. ASU 2016-01 requires the application of the amendments by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with certain exceptions. We do not expect the adoption of ASU 2016-01 on January 1, 2018 to have a material impact on our consolidated financial statements.

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In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, or ASU 2016-13, which introduces a new approach to estimate credit losses on certain types of financial instruments based on expected losses. It also modifies the impairment model for available-for-sale debt securities and provides for a simplified accounting model for purchased financial assets with credit deterioration since their origination. ASU 2016-13 is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted after December 15, 2018. We do not expect the adoption of ASU 2016-13 on January 1, 2020 to have a material impact on our consolidated financial statements.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, or ASU 2016-15, which intends to reduce diversity in practice in how certain transactions are classified in the statement of cash flows. ASU 2016-15 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2016-15 on January 1, 2018 to have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU 2016-16, Intra-Entity Transfers of Assets Other Than Inventory, or ASU 2016-16, which removes the prohibition in ASC 740, Income Taxes , against the immediate recognition of the current and deferred income tax effects of intra-entity transfers of assets other than inventory. ASU 2016-16 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2016-16 on January 1, 2018 to have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment , or ASU 2017-04, which eliminates Step 2 from the goodwill impairment test and allows an entity to perform its goodwill impairment test by comparing the fair value of a reporting segment with its carrying amount. ASU 2017-04 is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. We early adopted ASU 2017-04 on January 1, 2017, which did not have an impact on our consolidated financial statements.

In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, or ASU 2017-09, which clarifies when changes to the terms or conditions of a share-based payment award must be accounted for as modifications. Modification accounting is only applied if the value, the vesting conditions or the classification of the award (or equity or liability) changes as a result of the change in terms or conditions. ASU 2017-09 is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted. We do not expect the adoption of ASU 2017-09 on January 1, 2018 to have a material impact on our consolidated financial statements.

3. Real Estate Investments, Net

Our real estate investments, net consisted of the following as of June 30, 2017 and December 31, 2016 :



	June 30, 2017			December 31, 2016
Building and improvements	$	274,015,000		$	106,442,000
Land	36,122,000			12,322,000
	310,137,000			118,764,000
Less: accumulated depreciation	(3,619,000		)	(822,000		)
	$	306,518,000		$	117,942,000

Depreciation expense for the three and six months ended June 30, 2017 was $1,665,000 and $2,805,000 , respectively. We did not incur any depreciation expense for the three and six months ended June 30, 2016.

For the three months ended June 30, 2017, we incurred capital expenditures of $44,000 on our medical office buildings and $0 on our senior housing facilities. In addition to the acquisitions discussed below, for the six months ended June 30, 2017, we incurred capital expenditures of $752,000 on our medical office buildings and $0 on our senior housing facilities.

We reimburse our advisor or its affiliates for acquisition expenses related to selecting, evaluating and acquiring assets. The reimbursement of acquisition expenses, acquisition fees and real estate commissions and other fees paid to unaffiliated parties will not exceed, in the aggregate, 6.0% of the contract purchase price or total development costs, unless fees in excess of such limits are approved by a majority of our directors, including a majority of our independent directors. For the three and six months ended June 30, 2017 and 2016, such fees and expenses paid did not exceed 6.0% of the contract purchase price of our property acquisitions, except with respect to our acquisitions of Auburn MOB and Pottsville MOB. Our directors, including a majority of our independent directors, not otherwise interested in the transactions, approved the reimbursement of fees and

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expenses to our advisor or its affiliates with the acquisitions of Auburn MOB and Pottsville MOB in excess of the 6.0% limit and determined that such fees and expenses were commercially fair and reasonable to us.

Acquisitions in 2017

For the six months ended June 30, 2017 , using net proceeds from our offering and debt financing, we completed seven property acquisitions comprising 16 buildings from unaffiliated third parties. The aggregate contract purchase price of these properties was $202,425,000 and we incurred $9,109,000 in total acquisition fees to our advisor in connection with these property acquisitions. The following is a summary of our property acquisitions for the six months ended June 30, 2017 :



Acquisition(1)	Location	Type	Date Acquired	Contract Purchase Price		Mortgage Loan Payable(2)		Line of Credit(3)		Total Acquisition Fee(4)
Battle Creek MOB	Battle Creek, MI	Medical Office	03/10/17	$	7,300,000	$	—	$	—	$	328,000
Reno MOB	Reno, NV	Medical Office	03/13/17	66,250,000		—		60,000,000		2,982,000
Athens MOB Portfolio	Athens, GA	Medical Office	05/18/17	16,800,000		—		7,800,000		756,000
SW Illinois Senior Housing Portfolio	Columbia, Millstadt, Red Bud and Waterloo, IL	Senior Housing	05/22/17	31,800,000		—		31,700,000		1,431,000
Lawrenceville MOB	Lawrenceville, GA	Medical Office	06/12/17	11,275,000		8,000,000		3,000,000		507,000
Northern California Senior Housing Portfolio	Belmont, Fairfield, Menlo Park and Sacramento, CA	Senior Housing	06/28/17	45,800,000		—		21,600,000		2,061,000
Roseburg MOB	Roseburg, OR	Medical Office	06/29/17	23,200,000		—		23,000,000		1,044,000
Total				$	202,425,000	$	8,000,000	$	147,100,000	$	9,109,000

___________


(1)	We own 100% of our properties acquired in 2017.


(2)	Represents the principal balance of the mortgage loan payable assumed by us at the time of acquisition.


(3)	Represents a borrowing under the Line of Credit, as defined in Note 7, Line of Credit , at the time of acquisition.

(4)

Our advisor was paid, as compensation for services rendered in connection with the investigation, selection and acquisition of our properties, a base acquisition fee of 2.25% of the aggregate contract purchase price upon the closing of the acquisition. In addition, the total acquisition fee includes a Contingent Advisor Payment, as defined in Note 12, Related Party Transactions , in the amount of 2.25% of the aggregate contract purchase price of the property acquired, which shall be paid by us to our advisor, subject to the satisfaction of certain conditions. See Note 12, Related Party Transactions — Acquisition and Development Stage — Acquisition Fee, for a further discussion.

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We accounted for the seven property acquisitions we completed for the six months ended June 30, 2017 as asset acquisitions. We incurred base acquisition fees and direct acquisition related expenses of $6,455,000 , which were capitalized in accordance with our early adoption of ASU 2017-01. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed from our seven property acquisitions in 2017:



	2017 Acquisitions
Building and improvements	$	166,828,000
Land	23,800,000
In-place leases	17,802,000
Above-market leases	127,000
Total assets acquired	208,557,000
Mortgage loan payable	8,000,000
Below-market leases	85,000
Above-market leasehold interests	395,000
Total liabilities assumed	8,480,000
Net assets acquired	$	200,077,000

4. Identified Intangible Assets, Net

Identified intangible assets, net consisted of the following as of June 30, 2017 and December 31, 2016:



	June 30, 2017		December 31, 2016
In-place leases, net of accumulated amortization of $1,802,000 and $430,000 as of June 30, 2017 and December 31, 2016, respectively (with a weighted average remaining life of 9.6 years and 8.1 years as of June 30, 2017 and December 31, 2016, respectively)	$	28,934,000	$	12,504,000
Leasehold interests, net of accumulated amortization of $71,000 and $22,000 as of June 30, 2017 and December 31, 2016, respectively (with a weighted average remaining life of 71.0 years and 71.5 years as of June 30, 2017 and December 31, 2016, respectively)	6,341,000		6,390,000
Above-market leases, net of accumulated amortization of $97,000 and $31,000 as of June 30, 2017 and December 31, 2016, respectively (with a weighted average remaining life of 6.1 years and 6.3 years as of June 30, 2017 and December 31, 2016, respectively)	839,000		779,000
	$	36,114,000	$	19,673,000

Amortization expense on identified intangible assets for the three and six months ended June 30, 2017 was $859,000 and $1,487,000 respectively, which included $33,000 and $66,000 , respectively, of amortization recorded against real estate revenue for above-market leases and $25,000 and $49,000 , respectively, of amortization recorded to rental expenses for leasehold interests in our accompanying condensed consolidated statements of operations. We did not incur any amortization expense on identified intangible assets for the three and six months ended June 30, 2016.

The aggregate weighted average remaining life of the identified intangible assets was 20.3 years and 28.6 years as of June 30, 2017 and December 31, 2016, respectively. As of June 30, 2017 , estimated amortization expense on the identified intangible assets for the six months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter was as follows:



Year	Amount
2017	$	2,390,000
2018	4,417,000
2019	4,041,000
2020	3,526,000
2021	3,168,000
Thereafter	18,572,000
	$	36,114,000

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5. Other Assets, Net

Other assets, net consisted of the following as of June 30, 2017 and December 31, 2016 :



	June 30, 2017		December 31, 2016
Deferred financing costs, net of accumulated amortization of $289,000 and $112,000 as of June 30, 2017 and December 31, 2016, respectively(1)	$	778,000	$	943,000
Deferred rent receivables	761,000		207,000
Prepaid expenses and deposits	693,000		257,000
Lease commissions	102,000		—
	$	2,334,000	$	1,407,000

___________


(1)	In accordance with ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, or ASU 2015-03, and ASU 2015-15, Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements, or ASU 2015-15, deferred financing costs only include costs related to the Line of Credit, as defined in Note 7, Line of Credit .

Amortization expense on deferred financing costs of the Line of Credit for the three and six months ended June 30, 2017 was $90,000 and $177,000 , respectively. Amortization expense on deferred financing costs of the Line of Credit is recorded to interest expense in our accompanying condensed consolidated statements of operations. We did no t incur any amortization expense on deferred financing costs of the Line of Credit for the three and six months ended June 30, 2016.

6. Mortgage Loans Payable, Net

Mortgage loans payable were $11,782,000 ( $11,691,000 , including premium and deferred financing costs, net) and $3,908,000 ( $3,965,000 , including premium and deferred financing costs, net) as of June 30, 2017 and December 31, 2016 , respectively. As of June 30, 2017 , we had two fixed-rate mortgage loans, with interest rates ranging from 4.77% to 5.25% per annum, maturity dates ranging from April 1, 2020 to August 1, 2029 and a weighted average effective interest rate of 4.92% . As of December 31, 2016, we had one fixed-rate mortgage loan with an interest rate of 5.25% per annum and a maturity date of August 1, 2029.

We did no t have any mortgage loans payable, net as of June 30, 2016 . The changes in the carrying amount of mortgage loans payable, net consisted of the following for the six months ended June 30, 2017 :



	Amount
Beginning balance — December 31, 2016	$	3,965,000
Additions:
Assumption of mortgage loan payable	8,000,000
Amortization of deferred financing costs(1)	8,000
Deductions:
Deferred financing costs(1)	(151,000		)
Scheduled principal payments on mortgage loan payable	(125,000		)
Amortization of premium on mortgage loan payable	(6,000		)
Ending balance — June 30, 2017	$	11,691,000

___________


(1)	In accordance with ASU 2015-03 and ASU 2015-15, deferred financing costs only include costs related to our mortgage loans payable.

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As of June 30, 2017 , the principal payments due on our mortgage loans payable for the six months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter were as follows:



Year	Amount
2017	$	148,000
2018	386,000
2019	407,000
2020	8,035,000
2021	314,000
Thereafter	2,492,000
	$	11,782,000

7. Line of Credit

On August 25, 2016, we, through our operating partnership, as borrower, and certain of our subsidiaries, or the subsidiary guarantors, and us, collectively as guarantors, entered into a credit agreement, or the Credit Agreement, with Bank of America, N.A., or Bank of America, as administrative agent, swing line lender and letters of credit issuer; and KeyBank, National Association, or KeyBank, as syndication agent and letters of credit issuer, to obtain a revolving line of credit with an aggregate maximum principal amount of $100,000,000 , or the Line of Credit, subject to certain terms and conditions.

On August 25, 2016, we also entered into separate revolving notes, or the Revolving Notes, with each of Bank of America and KeyBank, whereby we promised to pay the principal amount of each revolving loan and accrued interest to the respective lender or its registered assigns, in accordance with the terms and conditions of the Credit Agreement. The proceeds of loans made under the Line of Credit may be used for general working capital (including acquisitions), capital expenditures and other general corporate purposes not inconsistent with obligations under the Credit Agreement. We may obtain up to $20,000,000 in the form of standby letters of credit and up to $25,000,000 in the form of swing line loans. The Line of Credit matures on August 25, 2019, and may be extended for one 12 -month period during the term of the Credit Agreement subject to satisfaction of certain conditions, including payment of an extension fee.

The maximum principal amount of the Credit Agreement may be increased by up to $100,000,000 , for a total principal amount of $200,000,000 , subject to: (i) the terms of the Credit Agreement; and (ii) at least five business days’ prior written notice to Bank of America.

At our option, the Line of Credit bears interest at per annum rates equal to (a) (i) the Eurodollar Rate (as defined in the Credit Agreement) plus (ii) a margin ranging from 1.75% to 2.25% based on our Consolidated Leverage Ratio (as defined in the 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 Credit Agreement) plus 0.50% , (3) the one-month Eurodollar Rate plus 1.00% , and (4) 0.00% , plus (ii) a margin ranging from 0.55% to 1.05% based on our Consolidated Leverage Ratio. Accrued interest on the Line of Credit is payable monthly. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions.

We are required to pay a fee on the unused portion of the lenders’ commitments under the Credit Agreement at a per annum rate equal to 0.20% if the average daily used amount is greater than 50.0% of the commitments and 0.25% if the average daily used amount is less than or equal to 50.0% of the commitments, which fee shall be measured and payable on a quarterly basis.

The Credit Agreement contains various affirmative and negative covenants that are customary for credit facilities and transactions of this type, including limitations on the incurrence of debt by our operating partnership and its subsidiaries. The Credit Agreement also imposes certain financial covenants based on the following criteria, which are specifically defined in the Credit Agreement: (a) Consolidated Leverage Ratio; (b) Consolidated Secured Leverage Ratio; (c) Consolidated Tangible Net Worth; (d) Consolidated Fixed Charge Coverage Ratio; (e) Unencumbered Indebtedness Yield; (f) Consolidated Unencumbered Leverage Ratio; (g) Consolidated Unencumbered Interest Coverage Ratio; (h) Secured Recourse Indebtedness; and (i) Consolidated Unsecured Indebtedness.

The Credit Agreement permits us to add additional subsidiaries as guarantors. In the event of default, Bank of America has the right to terminate its obligations under the Credit Agreement, including the funding of future loans, and to accelerate the payment on any unpaid principal amount of all outstanding loans and interest thereon. Additionally, in connection with the

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Credit Agreement, we also entered into a Pledge Agreement on August 25, 2016, pursuant to which we pledged the capital stock of our subsidiaries which own the real property to be included in the Unencumbered Property Pool, as such term is defined in the Credit Agreement. The pledged collateral will be released upon achieving a consolidated total asset value of at least $750,000,000 .

As of June 30, 2017 and December 31, 2016, our aggregate borrowing capacity under the Line of Credit was $100,000,000 . As of June 30, 2017 and December 31, 2016, borrowings outstanding totaled $71,100,000 and $33,900,000 , respectively, and $28,900,000 and $66,100,000 , respectively, remained available under the Line of Credit. As of June 30, 2017 and December 31, 2016, the weighted average interest rate on borrowings outstanding was 4.16% and 4.30% per annum, respectively.

8. Identified Intangible Liabilities, Net

Identified intangible liabilities, net consisted of the following as of June 30, 2017 and December 31, 2016:



	June 30, 2017		December 31, 2016
Below-market leases, net of accumulated amortization of $195,000 and $60,000 as of June 30, 2017 and December 31, 2016, respectively (with a weighted average remaining life of 5.7 years and 5.4 years as of June 30, 2017 and December 31, 2016, respectively)	$	1,013,000	$	1,063,000
Above-market leasehold interests, net of accumulated amortization of $2,000 and $0 as of June 30, 2017 and December 31, 2016, respectively (with a weighted average remaining life of 52.7 years and 0 years as of June 30, 2017 and December 31, 2016, respectively)	393,000		—
	$	1,406,000	$	1,063,000

Amortization expense on identified intangible liabilities for the three and six months ended June 30, 2017 was $69,000 and $137,000 , respectively, which included $68,000 and $135,000 , respectively, of amortization recorded to real estate revenue for below-market leases and $1,000 and $2,000 , respectively, of amortization recorded to rental expenses for above-market leasehold interests in our accompanying condensed consolidated statements of operations. We did no t incur any amortization expense on identified intangible liabilities for the three and six months ended June 30, 2016 .

The aggregate weighted average remaining life of the identified intangible liabilities was 18.8 years and 5.4 years as of June 30, 2017 and December 31, 2016, respectively. As of June 30, 2017 , estimated amortization expense on identified intangible liabilities for the six months ending December 31, 2017 and for each of the next four years ending December 31 and thereafter was as follows:



Year	Amount
2017	$	140,000
2018	279,000
2019	251,000
2020	88,000
2021	65,000
Thereafter	583,000
	$	1,406,000

9. Commitments and Contingencies

Litigation

We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Environmental Matters

We follow a policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position,

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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.

10. Redeemable Noncontrolling Interest

As of June 30, 2017 and December 31, 2016 , 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. The noncontrolling interest of our advisor in our operating partnership, which has redemption features outside of our control, is accounted for as a redeemable noncontrolling interest and is presented outside of permanent equity in our accompanying condensed consolidated balance sheets. See Note 11, Equity — Noncontrolling Interest of Limited Partner in Operating Partnership, for a further discussion. In addition, see Note 12, Related Party Transactions — Liquidity Stage — Subordinated Participation Interest — Subordinated Distribution Upon Listing, and Note 12, Related Party Transactions — Subordinated Distribution Upon Termination, for a further discussion of the redemption features of the limited partnership units.

We record the carrying amount of redeemable noncontrolling interest at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interest’s share of net income or loss and distributions; or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interest consisted of the following for the six months ended June 30, 2017 and 2016:



	Six Months Ended June 30,
	2017		2016
Beginning balance	$	2,000	$	—
Reclassification from equity	—		2,000
Net income (loss) attributable to redeemable noncontrolling interest	—		—
Ending balance	$	2,000	$	2,000

11. Equity

Preferred Stock

Our charter authorizes us to issue 200,000,000 shares of our preferred stock, par value $0.01 per share. As of June 30, 2017 and December 31, 2016 , no shares of preferred stock were issued and outstanding.

Common Stock

Our charter authorizes us to issue 1,000,000,000 shares of our common stock, par value $0.01 per share. We commenced our public offering of shares of our common stock on February 16, 2016, and as of such date we were offering to the public up to $3,150,000,000 in shares of our Class T common stock, consisting of up to $3,000,000,000 in shares of our Class T common stock at a price of $10.00 per share in our primary offering and up to $150,000,000 in shares of our Class T common stock for $9.50 per share pursuant to the DRIP. Effective June 17, 2016, we reallocated certain of the unsold shares of our Class T common stock being offered and began offering shares of our Class I common stock, such that we are currently offering up to approximately $2,800,000,000 in shares of Class T common stock and $200,000,000 in shares of Class I common stock in our primary offering, and up to an aggregate of $150,000,000 in shares of our Class T and Class I common stock pursuant to the DRIP. Subsequent to the reallocation, of the 1,000,000,000 shares of common stock authorized, 900,000,000 shares are classified as Class T common stock and 100,000,000 shares are classified as Class I common stock. We reserve the right to reallocate the shares of common stock we are offering between the primary offering and the DRIP, and among classes of stock.

The shares of our Class T common stock in the primary offering are being offered at a price of $10.00 per share. The shares of our Class I common stock in the primary offering were being offered at a price of $9.30 per share prior to March 1, 2017, and are being offered at a price of $9.21 per share for all shares offered effective March 1, 2017. The shares of our Class T and Class I common stock issued pursuant to the DRIP were sold at a price of $9.50 per share prior to January 1, 2017, and are sold at a price of $9.40 per share for all shares issued pursuant to the DRIP effective January 1, 2017. After our board of

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directors determines an estimated NAV per share of our common stock, share prices are expected to be adjusted to reflect the estimated NAV per share and, in the case of shares offered pursuant to our primary offering, up-front selling commissions and dealer manager fees other than those funded by our advisor.

Each share of our common stock, regardless of class, will be entitled to one vote per share on matters presented to the common stockholders for approval; provided, however, that stockholders of one share class shall have exclusive voting rights on any amendment to our charter that would alter only the contract rights of that share class, and no stockholders of another share class shall be entitled to vote thereon.

On February 6, 2015, our advisor acquired shares of our Class T common stock for total cash consideration of $200,000 and was admitted as our initial stockholder. We used the proceeds from the sale of shares of our Class T common stock to our advisor to make an initial capital contribution to our operating partnership. As of June 30, 2017 and December 31, 2016, our advisor owned 20,833 shares of our Class T common stock.

Through June 30, 2017 , we had issued 28,236,137 aggregate shares of our Class T and Class I common stock in connection with the primary portion of our offering and 389,515 aggregate shares of our Class T and Class I common stock pursuant to the DRIP. We also granted an aggregate of 22,500 shares of our restricted Class T common stock to our independent directors and repurchased 7,174 shares of our common stock under our share repurchase plan through June 30, 2017. As of June 30, 2017 and December 31, 2016 , we had 28,661,811 and 11,377,439 aggregate shares of our Class T and Class I common stock, respectively, issued and outstanding.

As of June 30, 2017 , we had a receivable of $906,000 for offering proceeds, net of selling commissions and dealer manager fees, from our transfer agent, which was received in July 2017.

Distribution Reinvestment Plan

We have registered and reserved $150,000,000 in shares of our common stock for sale pursuant to the DRIP in our offering. The DRIP allows stockholders to purchase additional Class T shares and Class I shares of our common stock through the reinvestment of distributions during our offering. Prior to January 1, 2017, we issued both Class T shares and Class I shares pursuant to the DRIP at a price of $9.50 per share. Effective January 1, 2017, shares of both Class T shares and Class I shares issued pursuant to the DRIP are issued at a price of $9.40 per share until our board of directors determines an estimated NAV per share of our common stock. After our board of directors determines an estimated NAV per share of our common stock, participants in the DRIP will receive Class T shares and Class I shares, as applicable, at the most recently published estimated NAV per share of our common stock. Pursuant to the DRIP, distributions with respect to Class T shares are reinvested in Class T shares and distributions with respect to Class I shares are reinvested in Class I shares.

For the three and six months ended June 30, 2017 , $1,811,000 and $2,874,000 , respectively, in distributions were reinvested and 192,651 and 305,798 shares of our common stock, respectively, were issued pursuant to the DRIP. For the three and six months ended June 30, 2016, $19,000 in distributions were reinvested and 2,003 shares of our common stock were issued pursuant to the DRIP. As of June 30, 2017 and December 31, 2016, a total of $3,670,000 and $796,000 , respectively, in distributions were reinvested that resulted in 389,515 and 83,717 shares of our common stock, respectively, being issued pursuant to the DRIP.

Share Repurchase Plan

In February 2016, our board of directors approved a share repurchase plan. The share repurchase plan allows for repurchases of shares of our common stock by us when certain criteria are met. Share repurchases will be made at the sole discretion of our board of directors. Subject to the availability of the funds for share repurchases, we will limit the number of shares of our common stock repurchased during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year; provided, however, that shares subject to a repurchase requested upon the death of a stockholder will not be subject to this cap. Funds for the repurchase of shares of our common stock will come exclusively from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to the DRIP.

All repurchases will be subject to a one -year holding period, except for repurchases made in connection with a stockholder’s death or “qualifying disability,” as defined in our share repurchase plan. Further, all share repurchases will be repurchased following a one -year holding period at a price between 92.5% to 100% of each stockholder’s repurchase amount depending on the period of time their shares have been held. At any time we are engaged in an offering of shares of our common stock, the repurchase amount for shares repurchased under our share repurchase plan will always be equal to or lower than the applicable per share offering price. However, if shares of our common stock are repurchased in connection with a

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stockholder’s death or qualifying disability, the repurchase price will be no less than 100% of the price paid to acquire the shares of our common stock from us. Furthermore, our share repurchase plan provides that if there are insufficient funds to honor all repurchase requests, pending requests will be honored among all requests for repurchase in any given repurchase period, as follows: first, pro rata as to repurchases sought upon a stockholder’s death; next, pro rata as to repurchases sought by stockholders with a qualifying disability; and, finally, pro rata as to other repurchase requests.

For the three and six months ended June 30, 2017, we received share repurchase requests and repurchased 7,174 shares of our common stock for an aggregate of $69,000 at an average repurchase price of $9.66 per share. No share repurchases were requested or made for the three and six months ended June 30, 2016.

As of June 30, 2017, we received share repurchase requests and repurchased 7,174 shares of our common stock for an aggregate of $69,000 at an average repurchase price of $9.66 per share. All shares were repurchased using proceeds we received from the sale of shares of our common stock pursuant to the DRIP. As of December 31, 2016, no share repurchases were requested or made.

2015 Incentive Plan

In February 2016, we adopted our incentive plan, pursuant to which our board of directors or a committee of our independent directors may make grants of options, restricted shares of common stock, stock purchase rights, stock appreciation rights or other awards to our independent directors, employees and consultants. The maximum number of shares of our common stock that may be issued pursuant to our incentive plan is 4,000,000 shares.

Through June 30, 2017, we granted an aggregate of 22,500 shares of our restricted Class T common stock, as defined in our incentive plan, to our independent directors in connection with their initial election or re-election to our board of directors, of which 20.0% immediately vested on the grant date and 20.0% will vest on each of the first four anniversaries of the grant date. Shares of our restricted common stock may not be sold, transferred, exchanged, assigned, pledged, hypothecated or otherwise encumbered. Such restrictions expire upon vesting. Shares of our restricted common stock will have full voting rights and rights to distributions.

From the applicable service inception dates to the applicable grant dates, we recognized compensation expense related to the shares of our restricted Class T common stock based on the reporting date fair value, which was estimated at $10.00 per share, the price paid to acquire one share of Class T common stock in our offering. Beginning on the applicable grant dates, compensation cost related to the shares of our restricted Class T common stock is measured based on the applicable grant date fair value, which was estimated at $10.00 per share, the price paid to acquire one share of Class T common stock in our offering. Stock compensation expense is recognized from the applicable service inception date to the applicable vesting date for each vesting tranche (i.e., on a tranche-by-tranche basis) using the accelerated attribution method.

ASC Topic 718, Compensation — Stock Compensation , requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. For the three and six months ended June 30, 2017 and 2016, we did not assume any forfeitures. For the three months ended June 30, 2017 and 2016, we recognized compensation expense of $25,000 and $20,000 , respectively, and for the six months ended June 30, 2017 and 2016, we recognized stock compensation expense of $39,000 and $52,000 , respectively, which is included in general and administrative in our accompanying condensed consolidated statements of operations.

As of June 30, 2017 and December 31, 2016 , there was $106,000 and $70,000 , respectively, of total unrecognized compensation expense, net of estimated forfeitures, related to nonvested shares of our restricted Class T common stock. As of June 30, 2017 , this expense is expected to be recognized over a remaining weighted average period of 2.05 years.

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As of June 30, 2017 and December 31, 2016 , the weighted average grant date fair value of the nonvested shares of our restricted Class T common stock was $150,000 and $120,000 , respectively. A summary of the status of the nonvested shares of our restricted Class T common stock as of June 30, 2017 and December 31, 2016 and the changes for the six months ended June 30, 2017 is presented below:



	Number of Nonvested Shares of our Restricted Common Stock		Weighted Average Grant Date Fair Value
Balance — December 31, 2016	12,000		$	10.00
Granted	7,500		$	10.00
Vested	(4,500	)	$	10.00
Forfeited	—		$	—
Balance — June 30, 2017	15,000		$	10.00
Expected to vest — June 30, 2017	15,000		$	10.00

Offering Costs

Selling Commissions

Generally, we pay our dealer manager selling commissions of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our primary offering. To the extent that selling commissions are less than 3.0% of the gross offering proceeds for any Class T shares sold, such reduction in selling commissions will be accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No selling commissions are payable on Class I shares or shares of our common stock sold pursuant to the DRIP. Our dealer manager may re-allow all or a portion of these fees to participating broker-dealers. For the three and six months ended June 30, 2017, we incurred $2,634,000 and $4,704,000 , respectively, in selling commissions to our dealer manager. For the three and six months ended June 30, 2016, we incurred $380,000 in selling commissions to our dealer manager. Such commissions were charged to stockholders’ equity as such amounts were paid to our dealer manager from the gross proceeds of our offering.

Dealer Manager Fee

With respect to shares of our Class T common stock, our dealer manager generally receives a dealer manager fee of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds is funded by us and up to an amount equal to 2.0% of the gross offering proceeds is funded by our advisor. With respect to shares of our Class I common stock, prior to March 1, 2017, our dealer manager generally received a dealer manager fee up to 3.0% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds was funded by us and an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. Effective March 1, 2017, our dealer manager generally receives a dealer manager fee up to an amount equal to 1.5% of the gross offering proceeds from the sale of Class I shares pursuant to our primary offering, all of which is funded by our advisor. Our dealer manager may enter into participating dealer agreements with participating dealers that provide for a reduction or waiver of dealer manager fees. To the extent that the dealer manager fee is less than 3.0% of the gross offering proceeds for any Class T shares sold and less than 1.5% of the gross offering proceeds for any Class I shares sold, such reduction will be applied first to the portion of the dealer manager fee funded by our advisor. To the extent that any reduction in dealer manager fee exceeds the portion of the dealer manager fee funded by our advisor, such excess reduction will be accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No dealer manager fee is payable on shares of our common stock sold pursuant to the DRIP. Our dealer manager may re-allow all or a portion of these fees to participating broker-dealers.

For the three and six months ended June 30, 2017, we incurred $889,000 and $1,622,000 respectively, in dealer manager fees to our dealer manager. For the three and six months ended June 30, 2016, we incurred $151,000 in dealer manager fees to our dealer manager. Such fees were charged to stockholders’ equity as such amounts were paid to our dealer manager or its affiliates from the gross proceeds of our offering. See Note 12, Related Party Transactions — Offering Stage — Dealer Manager Fee, for a further discussion of the dealer manager fee funded by our advisor.

Stockholder Servicing Fee

We pay our dealer manager a quarterly stockholder servicing fee with respect to our Class T shares sold as additional compensation to the dealer manager and participating broker-dealers. No stockholder servicing fee shall be paid with respect to

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Class I shares or shares of our common stock sold pursuant to the DRIP. The stockholder servicing fee accrues daily in an amount equal to 1/365th of 1.0% of the purchase price per share of our Class T shares sold in our primary offering and, in the aggregate will not exceed an amount equal to 4.0% of the gross proceeds from the sale of Class T shares in our primary offering. We will cease paying the stockholder servicing fee with respect to our Class T shares sold in our offering upon the occurrence of certain defined events. Our dealer manager may re-allow to participating broker-dealers all or a portion of the stockholder servicing fee for services that such participating broker-dealers perform in connection with the shares of our Class T common stock. By agreement with participating broker-dealers, such stockholder servicing fee may be reduced or limited.

For the three and six months ended June 30, 2017, we incurred $3,384,000 and $6,138,000 , respectively, in stockholder servicing fees to our dealer manager. For the three and six months ended June 30, 2016, we incurred $507,000 in stockholder servicing fees to our dealer manager. As of June 30, 2017 and December 31, 2016, we accrued $9,603,000 and $3,973,000 , respectively, in connection with the stockholder servicing fee payable, which is included in accounts payable and accrued liabilities with a corresponding offset to stockholders’ equity in our accompanying condensed consolidated balance sheets.

Noncontrolling Interest of Limited Partner in Operating Partnership

On February 6, 2015, our advisor made an initial capital contribution of $2,000 to our operating partnership in exchange for Class T partnership units. Upon the effectiveness of the Advisory Agreement on February 16, 2016, Griffin-American Healthcare REIT IV Advisor became our advisor. As our advisor, Griffin-American Healthcare REIT IV Advisor is entitled to redemption rights of its limited partnership units. Therefore, as of February 16, 2016, such limited partnership units no longer meet the criteria for classification within the equity section of our accompanying condensed consolidated balance sheets, and as such, were reclassified outside of permanent equity, as a mezzanine item, in our accompanying condensed consolidated balance sheets. See Note 10, Redeemable Noncontrolling Interest , for a further discussion. As of June 30, 2017 and December 31, 2016, our advisor owned all of our 208 Class T partnership units outstanding.

12. Related Party Transactions

Fees and Expenses Paid to Affiliates

All of our executive officers and one of our non-independent directors are also executive officers and employees and/or holders of a direct or indirect interest in our advisor, one of our co-sponsors or other affiliated entities. We are affiliated with our advisor, American Healthcare Investors and AHI Group Holdings; however, we are not affiliated with Griffin Capital, our dealer manager, Colony NorthStar or Mr. Flaherty. We entered into the Advisory Agreement, which entitles our advisor and its affiliates to specified compensation for certain services, as well as reimbursement of certain expenses. For the three months ended June 30, 2017 and 2016, we incurred $5,688,000 and $2,862,000 , respectively, and for the six months ended June 30, 2017 and 2016, we incurred $9,777,000 and $3,169,000 , respectively, in fees and expenses to our affiliates as detailed below.

Offering Stage

Dealer Manager Fee

With respect to shares of our Class T common stock, our dealer manager generally receives a dealer manager fee of up to 3.0% of the gross offering proceeds from the sale of Class T shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds is funded by us and up to an amount equal to 2.0% of the gross offering proceeds is funded by our advisor. With respect to shares of our Class I common stock, prior to March 1, 2017, our dealer manager generally received a dealer manager fee up to 3.0% of the gross offering proceeds from the sale of Class I shares of our common stock pursuant to our primary offering, of which 1.0% of the gross offering proceeds was funded by us and an amount equal to 2.0% of the gross offering proceeds was funded by our advisor. Effective March 1, 2017, our dealer manager generally receives a dealer manager fee up to an amount equal to 1.5% of the gross offering proceeds from the sale of Class I shares pursuant to our primary offering, all of which is funded by our advisor. Our dealer manager may enter into participating dealer agreements with participating dealers that provide for a reduction or waiver of dealer manager fees. To the extent that the dealer manager fee is less than 3.0% of the gross offering proceeds for any Class T shares sold and less than 1.5% of the gross offering proceeds for any Class I shares sold, such reduction will be applied first to the portion of the dealer manager fee funded by our advisor. To the extent that any reduction in dealer manager fee exceeds the portion of the dealer manager fee funded by our advisor, such excess reduction will be accompanied by a corresponding reduction in the applicable per share purchase price for purchases of such shares. No dealer manager fee is payable on shares of our common stock sold pursuant to the DRIP. Our advisor intends to recoup the portion of the dealer manager fee it funds through the receipt of the Contingent Advisor Payment from us, as described below, through the payment of acquisition fees.

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For the three and six months ended June 30, 2017, we incurred $1,841,000 and $3,337,000 , respectively, payable to our advisor as part of the Contingent Advisor Payment in connection with the dealer manager fee that our advisor had incurred. For the three and six months ended June 30, 2016, we incurred $302,000 payable to our advisor as part of the Contingent Advisor Payment in connection with the dealer manager fee that our advisor had incurred. See Note 11, Equity — Offering Costs — Dealer Manager Fee, for a further discussion of the dealer manager fee funded by us.

Other Organizational and Offering Expenses

Our other organizational and offering expenses in connection with our offering (other than selling commissions, the dealer manager fee and the stockholder servicing fee) are funded by our advisor. Our advisor intends to recoup such expenses it funds through the receipt of the Contingent Advisor Payment from us, as described below, through the payment of acquisition fees. We anticipate that our other organizational and offering expenses will not exceed 1.0% of the gross offering proceeds for shares of our common stock sold pursuant to our primary offering. No other organizational and offering expenses will be paid with respect to shares of our common stock sold pursuant to the DRIP.

For the three and six months ended June 30, 2017, we incurred $336,000 and $892,000 , respectively, payable to our advisor as part of the Contingent Advisor Payment in connection with the other organizational and offering expenses that our advisor had incurred. For the three and six months ended June 30, 2016, we incurred $2,415,000 payable to our advisor as part of the Contingent Advisor Payment in connection with the other organizational and offering expenses that our advisor had incurred.

Acquisition and Development Stage

Acquisition Fee

We pay our advisor an acquisition fee of up to 4.50% of the contract purchase price, including any contingent or earn-out payments that may be paid, of each property we acquire or, with respect to any real estate-related investment we originate or acquire, up to 4.25% of the origination or acquisition price, including any contingent or earn-out payments that may be paid. The 4.50% or 4.25% acquisition fees consist of a 2.25% or 2.00% base acquisition fee, or the base acquisition fee, for real estate and real estate-related acquisitions, respectively, and an additional 2.25% contingent advisor payment, or the Contingent Advisor Payment. The Contingent Advisor Payment allows our advisor to recoup the portion of the dealer manager fee and other organizational and offering expenses funded by our advisor. Therefore, the amount of the Contingent Advisor Payment paid upon the closing of an acquisition shall not exceed the then outstanding amounts paid by our advisor for dealer manager fees and other organizational and offering expenses at the time of such closing. For these purposes, the amounts paid by our advisor and considered as “outstanding” are reduced by the amount of the Contingent Advisor Payment previously paid. Notwithstanding the foregoing, the initial $7,500,000 of amounts paid by our advisor to fund the dealer manager fee and other organizational and offering expenses, or the Contingent Advisor Payment Holdback, shall be retained by us until the later of the termination of our last public offering or the third anniversary of the commencement date of our initial public offering, at which time such amount shall be paid to our advisor or its affiliates. In connection with any subsequent public offering of shares of our common stock, the Contingent Advisor Payment Holdback may increase, based upon the maximum offering amount in such subsequent public offering and the amount sold in prior offerings. Our advisor or its affiliates will be entitled to receive these acquisition fees for properties and real estate-related investments acquired with funds raised in our offering, including acquisitions completed after the termination of the Advisory Agreement (including imputed leverage of 50.0% on funds raised in our offering), or funded with net proceeds from the sale of a property or real estate-related investment, subject to certain conditions. Our advisor may waive or defer all or a portion of the acquisition fee at any time and from time to time, in our advisor’s sole discretion.

The base acquisition fee in connection with the acquisition of properties accounted for as business combinations is expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. The base acquisition fee in connection with the acquisition of properties accounted for as asset acquisitions or the acquisition of real estate-related investments is capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. For the three and six months ended June 30, 2017, we paid base acquisition fees of $2,899,000 and $4,554,000 , respectively, to our advisor. For the three and six months ended June 30, 2016, we paid base acquisition fees $123,000 to our advisor. The Contingent Advisor Payment is used to decrease the liability we incur to our advisor in connection with the dealer manager fee and other organizational and offering expenses. As of June 30, 2017 and December 31, 2016, we recorded $7,774,000 and $5,404,000 , respectively, as part of the Contingent Advisor Payment, which is included in accounts payable due to affiliates with a corresponding offset to stockholders’ equity in our accompanying condensed consolidated balance sheets. As of June 30, 2017 , we have paid $1,859,000 in Contingent Advisor Payments to our advisor. For a further

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discussion of amounts paid in connection with the Contingent Advisor Payment, see Dealer Manager Fee and Other Organizational and Offering Expenses, above. In addition, see Note 3, Real Estate Investments, Net , for a further discussion.

Development Fee

In the event our advisor or its affiliates provide development-related services, we pay our advisor or its affiliates a development fee in an amount that is usual and customary for comparable services rendered for similar projects in the geographic market where the services are provided; however, we will not pay a development fee to our advisor or its affiliates if our advisor or its affiliates elect to receive an acquisition fee based on the cost of such development.

For the three and six months ended June 30, 2017 and 2016 , we did not incur any development fees to our advisor or its affiliates.

Reimbursement of Acquisition Expenses

We reimburse our advisor or its affiliates for acquisition expenses related to selecting, evaluating and acquiring assets, which will be reimbursed regardless of whether an asset is acquired. The reimbursement of acquisition expenses, acquisition fees and real estate commissions paid to unaffiliated parties will not exceed, in the aggregate, 6.0% of the contract purchase price of the property or real estate-related investment, total development costs or funds advanced in a loan, unless fees in excess of such limits are approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction. For the three and six months ended June 30, 2017 and 2016, such fees and expenses paid did not exceed 6.0% of the contract purchase price of our property acquisitions, except with respect to our acquisitions of Auburn MOB and Pottsville MOB. For a further discussion, see Note 3, Real Estate Investments, Net .

Reimbursements of acquisition expenses in connection with the acquisition of properties accounted for as business combinations are expensed as incurred and included in acquisition related expenses in our accompanying condensed consolidated statements of operations. Reimbursements of acquisition expenses in connection with the acquisition of properties accounted for as asset acquisitions or the acquisition of real estate-related investments are capitalized as part of the associated investment in our accompanying condensed consolidated balance sheets. For the three and six months ended June 30, 2017, we incurred $1,000 and $2,000 , respectively, in acquisition expenses to our advisor or its affiliates. We did not incur any acquisition expenses to our advisor or its affiliates for the three and six months ended June 30, 2016.

Operational Stage

Asset Management Fee

We pay our advisor or its affiliates a monthly fee for services rendered in connection with the management of our assets equal to one-twelfth of 0.80% of average invested assets. For such purposes, average invested assets means the average of the aggregate book value of our assets invested in real estate properties and real estate-related investments, before deducting depreciation, amortization, bad debt and other similar non-cash reserves, computed by taking the average of such values at the end of each month during the period of calculation.

For the three and six months ended June 30, 2017, we incurred $504,000 and $805,000 , respectively, in asset management fees to our advisor. We did not incur any asset management fees to our advisor or its affiliates for the three and six months ended June 30, 2016 as a result of our advisor waiving $2,000 in asset management fees. Our advisor agreed to waive certain asset management fees that may otherwise have been due to our advisor pursuant to the Advisory Agreement until such time as the amount of such waived asset management fees was equal to the amount of distributions payable to our stockholders for the period beginning on May 1, 2016 and ending on the date of the acquisition of our first property or real estate-related investment, as such terms are defined in the Advisory Agreement. We purchased our first property in June 2016. As such, the asset management fees of $2,000 that would have been incurred through June 2016 were waived by our advisor and an additional $78,000 in asset management fees was waived during the remainder for 2016. 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 asset management fees. Asset management fees are included in general and administrative in our accompanying condensed consolidated statements of operations.

Property Management Fee

American Healthcare Investors or its designated personnel may provide property management services with respect to our properties or may sub-contract these duties to any third party and provide oversight of such third-party property manager. We pay American Healthcare Investors a monthly management fee equal to a percentage of the gross monthly cash receipts of

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such property as follows: (i) a 1.0% property management oversight fee for any stand-alone, single-tenant, net leased property, except for such properties operated utilizing a RIDEA structure, for which we pay a property management oversight fee of 1.5% of the gross monthly cash receipts with respect to such property; (ii) a property management oversight fee of 1.5% of the gross monthly cash receipts of any property that is not a stand-alone, single-tenant, net leased property and for which American Healthcare Investors or its designated personnel provide oversight of a third party that performs the duties of a property manager with respect to such property; or (iii) a fair and reasonable property management fee that is approved by a majority of our directors, including a majority of our independent directors, that is not less favorable to us than terms available from unaffiliated third parties for any property that is not a stand-alone, single-tenant, net leased property and for which American Healthcare Investors or its designated personnel directly serve as the property manager without sub-contracting such duties to a third party.

Property management fees are included in rental expenses in our accompanying condensed consolidated statements of operations. For the three and six months ended June 30, 2017, we incurred property management fees of $87,000 and $146,000 , respectively, to American Healthcare Investors. We did not incur any property management fees to American Healthcare Investors for the three and six months ended June 30, 2016 .

Lease Fees

We may pay our advisor or its affiliates a separate fee for any leasing activities in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. Such fee is generally expected to range from 3.0% to 6.0% of the gross revenues generated during the initial term of the lease.

Lease fees are capitalized as lease commissions and are included in other assets, net in our accompanying condensed consolidated balance sheets. For the three and six months ended June 30, 2017 and 2016 , we did not incur any lease fees to our advisor or its affiliates.

Construction Management Fee

In the event that our advisor or its affiliates assist with planning and coordinating the construction of any capital or tenant improvements, we pay our advisor or its affiliates a construction management fee of up to 5.0% of the cost of such improvements. Construction management fees are capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets or are expensed and included in our accompanying condensed consolidated statements of operations, as applicable. For the three and six months ended June 30, 2017 and 2016 , we did not incur any construction management fees to our advisor or its affiliates.

Operating Expenses

We reimburse our advisor or its affiliates for operating expenses incurred in rendering services to us, subject to certain limitations. However, we will not reimburse our advisor or its affiliates at the end of any fiscal quarter for total operating expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of: (i) 2.0% of our average invested assets, as defined in the Advisory Agreement; or (ii) 25.0% of our net income, as defined in the Advisory Agreement, unless our independent directors determined that such excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient.

Our operating expenses as a percentage of average invested assets and as a percentage of net income were 1.6% and 145.3% , respectively, for the 12 months ended June 30, 2017 ; however, we did not exceed the aforementioned limitation as 2.0% of our average invested assets was greater than 25.0% of our net income.

For the three months ended June 30, 2017 and 2016, our advisor incurred operating expenses on our behalf of $20,000 and $22,000 , respectively, and for the six months ended June 30, 2017 and 2016, our advisor incurred operating expenses on our behalf of $41,000 and $329,000 , respectively. Operating expenses are generally included in general and administrative in our accompanying condensed consolidated statements of operations.

Compensation for Additional Services

We pay our advisor and its affiliates for services performed for us other than those required to be rendered by our advisor or its affiliates under the Advisory Agreement. The rate of compensation for these services has to be approved by a majority of our board of directors, including a majority of our independent directors, and cannot exceed an amount that would be paid to

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unaffiliated parties for similar services. For the three and six months ended June 30, 2017 and 2016 , our advisor and its affiliates were not compensated for any additional services.

Liquidity Stage

Disposition Fees

For services relating to the sale of one or more properties, we pay our advisor or its affiliates a disposition fee up to the lesser of 2.0% of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, in each case as determined by our board of directors, including a majority of our independent directors, upon the provision of a substantial amount of the services in the sales effort. The amount of disposition fees paid, when added to the real estate commissions paid to unaffiliated parties, will not exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price. For the three and six months ended June 30, 2017 and 2016 , we did not incur any disposition fees to our advisor or its affiliates.

Subordinated Participation Interest

Subordinated Distribution of Net Sales Proceeds

In the event of liquidation, we will pay our advisor a subordinated distribution of net sales proceeds. The distribution will be equal to 15.0% of the remaining net proceeds from the sales of properties, after distributions to our stockholders, in the aggregate, of: (i) a full return of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan); plus (ii) an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock, as adjusted for distributions of net sales proceeds. Actual amounts to be received depend on the sale prices of properties upon liquidation. For the three and six months ended June 30, 2017 and 2016 , we did not pay any such distributions to our advisor.

Subordinated Distribution Upon Listing

Upon the listing of shares of our common stock on a national securities exchange, in redemption of our advisor’s limited partnership units, we will pay our advisor a distribution equal to 15.0% of the amount by which: (i) the market value of our outstanding common stock at listing plus distributions paid prior to listing exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the amount of cash that, if distributed to stockholders as of the date of listing, would have provided them an annual 6.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the date of listing. Actual amounts to be received depend upon the market value of our outstanding stock at the time of listing, among other factors. For the three and six months ended June 30, 2017 and 2016 , we did not pay any such distributions to our advisor.

Subordinated Distribution Upon Termination

Pursuant to the Agreement of Limited Partnership, as amended, of our operating partnership upon termination or non-renewal of the Advisory Agreement, our advisor will also be entitled to a subordinated distribution in redemption of its limited partnership units from our operating partnership equal to 15.0% of the amount, if any, by which: (i) the appraised value of our assets on the termination date, less any indebtedness secured by such assets, plus total distributions paid through the termination date, exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) an d the total amount of cash equal to an annual 6.0% cumula tive, non-compounded return on the gross proceeds from the sale of shares of our common stock through the termination date. In addition, our advisor may elect to defer its right to receive a subordinated distribution upon termination until either a listing or other liquidity event, including a liquidation, sale of substantially all of our assets or merger in which our stockholders receive in exchange for their shares of our common stock, shares of a company that are traded on a national securities exchange.

As of June 30, 2017 and December 31, 2016, we had not recorded any charges to earnings related to the subordinated distribution upon termination.

Stock Purchase Plans

On February 29, 2016, our Chief Executive Officer and Chairman of the Board of Directors, Jeffrey T. Hanson, our President and Chief Operating Officer, Danny Prosky, and our Executive Vice President and General Counsel, Mathieu B. Streiff, each executed stock purchase plans, or the 2016 Stock Purchase Plans, whereby they each irrevocably agreed to invest 100% of their net after-tax base salary and cash bonus compensation earned as employees of American Healthcare Investors

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

directly into our company by purchasing shares of our Class T common stock. In addition, on February 29, 2016, three Executive Vice Presidents of American Healthcare Investors during 2016, including our Executive Vice President of Acquisitions, Stefan K.L. Oh, each executed similar 2016 Stock Purchase Plans whereby they each irrevocably agreed to invest a portion of their net after-tax base salary or a portion of their net after-tax base salary and cash bonus compensation, ranging from 10.0% to 15.0% , as employees of American Healthcare Investors directly into our company by purchasing shares of our Class T common stock. The 2016 Stock Purchase Plans terminated on December 31, 2016.

Purchases of shares of our Class T common stock pursuant to the 2016 Stock Purchase Plans commenced after the initial release from escrow of the minimum offering amount, beginning with the officers’ regularly scheduled payroll payment on April 13, 2016. The shares of Class T common stock were purchased at a price of $9.60 per share, reflecting the purchase price of the Class T shares in our offering, exclusive of selling commissions and the portion of the dealer manager fee funded by us.

On December 30, 2016, Messrs. Hanson, Prosky and Streiff each executed stock purchase plans for the purchase of shares of our Class I common stock, or the 2017 Stock Purchase Plans, on terms similar to their 2016 Stock Purchase Plans. In addition, on December 30, 2016, Mr. Oh, as well as Wendie Newman and Christopher M. Belford, both of whom were appointed as our Vice Presidents of Asset Management as of June 2017, each executed similar 2017 Stock Purchase Plans whereby they each irrevocably agreed to invest a portion of their net after-tax base salary or a portion of their net after-tax base salary and cash bonus compensation, ranging from 5.0% to 15.0% , as employees of American Healthcare Investors directly into our company by purchasing shares of our Class I common stock. The 2017 Stock Purchase Plans terminate on December 31, 2017 or earlier upon the occurrence of certain events, such as any earlier termination of our public offering of securities, unless otherwise renewed or extended.

Purchases of shares of our Class I common stock pursuant to the 2017 Stock Purchase Plans commenced beginning with the officers’ regularly scheduled payroll payment on January 23, 2017. The shares of Class I common stock are purchased pursuant to the 2017 Stock Purchase Plans at a price of $9.21 per share, reflecting the purchase price of the Class I shares in our offering. No selling commissions, dealer manager fees (including the portion of such dealer manager fees funded by our advisor) or stockholder servicing fees will be paid with respect to such sales of our Class I common stock.

For the three and six months ended June 30, 2017 and 2016, our officers invested the following amounts and we issued the following shares of our Class T and Class I common stock pursuant to the applicable stock purchase plan:



		Three Months Ended June 30,						Six Months Ended June 30,
		2017			2016			2017			2016
Officer’s Name	Title	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares
Jeffrey T. Hanson	Chief Executive Officer and Chairman of the Board of Directors	$	66,000	7,179	$	51,000	5,283	$	123,000	13,357	$	51,000	5,283
Danny Prosky	President and Chief Operating Officer	67,000		7,323	61,000		6,347	127,000		13,746	61,000		6,347
Mathieu B. Streiff	Executive Vice President and General Counsel	67,000		7,336	58,000		6,065	127,000		13,772	58,000		6,065
Stefan K.L. Oh	Executive Vice President of Acquisitions	8,000		859	7,000		730	16,000		1,701	7,000		730
Christopher M. Belford	Vice President of Asset Management	6,000		653	5,000		552	53,000		5,708	5,000		552
Wendie Newman	Vice President of Asset Management	2,000		221	—		—	4,000		386	—		—
		$	216,000	23,571	$	182,000	18,977	$	450,000	48,670	$	182,000	18,977

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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

Accounts Payable Due to Affiliates

The following amounts were outstanding to our affiliates as of June 30, 2017 and December 31, 2016:



Fee	June 30, 2017		December 31, 2016
Contingent Advisor Payment	$	7,774,000	$	5,404,000
Asset management fees	203,000		83,000
Property management fees	32,000		24,000
Operating expenses	15,000		20,000
	$	8,024,000	$	5,531,000

13. Fair Value Measurements

Financial Instruments Disclosed at Fair Value

ASC Topic 825, Financial Instruments, requires disclosure of the fair value of financial instruments, whether or not recognized on the face of the balance sheet. Fair value is defined under ASC Topic 820, Fair Value Measurements and Disclosures .

Our accompanying condensed consolidated balance sheets include the following financial instruments: cash and cash equivalents, accounts and other receivables, restricted cash, real estate deposits, accounts payable and accrued liabilities, accounts payable due to affiliates, mortgage loans payable and borrowings under the Line of Credit.

We consider the carrying values of cash and cash equivalents, accounts and other receivables, restricted cash, real estate deposits and accounts payable and accrued liabilities to approximate the fair values for these financial instruments based upon an evaluation of the underlying characteristics, market data and because of the short period of time between origination of the instruments and their expected realization. The fair value of cash and cash equivalents is classified in Level 1 of the fair value hierarchy. The fair value of accounts payable due to affiliates is not determinable due to the related party nature of the accounts payable. The fair value of the other financial instruments is classified in Level 2 of the fair value hierarchy.

The fair value of our mortgage loans payable and the Line of Credit is estimated using a discounted cash flow analysis using borrowing rates available to us for debt instruments with similar terms and maturities. As of June 30, 2017 and December 31, 2016, the fair value of our mortgage loans payable was $12,027,000 and $4,131,000 , respectively, compared to the carrying value of $11,691,000 and $3,965,000 , respectively. As of June 30, 2017 and December 31, 2016 , the fair value of the Line of Credit was $71,096,000 and $33,899,000 , respectively, compared to the carrying value of $70,322,000 and $32,957,000 , respectively. We have determined that our mortgage loans payable and the Line of Credit are classified in Level 2 within the fair value hierarchy.

14. Business Combinations

For the six months ended June 30, 2017, none of our property acquisitions were accounted for as business combinations. See Note 3, Real Estate Investments, Net , for a discussion of our 2017 property acquisitions accounted for as asset acquisitions. For the six months ended June 30, 2016, using net proceeds from our offering, we completed one property acquisition, Auburn MOB, comprising one building, which was accounted for as a business combination. The aggregate contract purchase price for this property acquisition was $5,450,000 , plus closing costs and a base acquisition fee of $286,000 , which are included in acquisition related expenses in our accompanying condensed consolidated statements of operations. In addition, we incurred a Contingent Advisor Payment of $123,000 to our advisor for this property acquisition. See See Note 12, Related Party Transactions , for a further discussion of the Contingent Advisor Payment.

Results of operations for Auburn MOB during the six months ended June 30, 2016 are reflected in our accompanying condensed consolidated statements of operations for the period from the date of acquisition of Auburn MOB through June 30, 2016. For the period from the acquisition date through June 30, 2016, we recognized $26,000 of revenue and $3,000 of net income for Auburn MOB.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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

The following table summarizes the acquisition date fair value of Auburn MOB:



	Amount
Building and improvements	$	4,600,000
Land	406,000
In-place leases	386,000
Total assets acquired	$	5,392,000

Assuming the property acquisition in 2016 discussed above had occurred on January 23, 2015 (Date of Inception), for the three months ended June 30, 2016 and 2015, for the six months ended June 30, 2016 and for the period from January 23, 2015 (Date of Inception) through June 30, 2015, unaudited pro forma revenue, net loss, net loss attributable to controlling interest and net loss per Class T and Class I common share attributable to controlling interest — basic and diluted would have been as follows:



	Three Months Ended June 30,						Six Months Ended			Period from January 23, 2015 (Date of Inception) through
	2016			2015			June 30, 2016			June 30, 2015
Revenue	$	111,000		$	108,000		$	222,000		$	216,000
Net loss	$	(350,000	)	$	(25,000	)	$	(524,000	)	$	(324,000	)
Net loss attributable to controlling interest	$	(350,000	)	$	(25,000	)	$	(524,000	)	$	(324,000	)
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted	$	(0.28	)	$	(0.04	)	$	(0.57	)	$	(0.53	)

The unaudited pro forma adjustments assume that the offering proceeds, at a price of $10.00 per share, net of offering costs, were raised as of January 1, 2015. In addition, acquisition related expenses associated with the acquisition of Auburn MOB have been excluded from the pro forma results in 2016 and added to the 2015 pro forma results. The pro forma results are not necessarily indicative of the operating results that would have been obtained had the acquisition occurred at the beginning of the periods presented, nor are they necessarily indicative of future operating results.

15. Segment Reporting

ASC Topic 280, Segment Reporting , establishes standards for reporting financial and descriptive information about a public entity’s reportable segments. As of June 30, 2017 , we evaluated our business and made resource allocations based on two reportable business segments — medical office buildings and senior housing. Our medical office buildings are typically leased to multiple tenants under separate leases in each building, thus requiring active management and responsibility for many of the associated operating expenses (although many of these are, or can effectively be, passed through to the tenants). Our senior housing facilities 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.

We evaluate performance based upon segment net operating income. We define segment net operating income as total revenues, less rental expenses, which excludes depreciation and amortization, general and administrative expenses, acquisition related expenses, interest expense and interest income for each segment. We believe that net income (loss), as defined by GAAP, is the most appropriate earnings measurement. However, we believe that segment net operating income serves as an appropriate supplemental performance measure to net income (loss) because it allows investors and our management to measure unlevered property-level operating results and to compare our operating results to the operating results of other real estate companies and between periods on a consistent basis.

Interest expense, depreciation and amortization and other expenses not attributable to individual properties are not allocated to individual segments for purposes of assessing segment performance.

Non-segment assets primarily consist of corporate assets including cash and cash equivalents, other receivables, real estate deposits and other assets not attributable to individual properties.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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

Summary information for the reportable segments during the three and six months ended June 30, 2017 and 2016 was as follows:



	Medical Office Buildings		Senior Housing		Three Months Ended June 30, 2017
Revenue:
Real estate revenue	$	5,455,000	$	743,000	$	6,198,000
Expenses:
Rental expenses	1,534,000		77,000		1,611,000
Segment net operating income	$	3,921,000	$	666,000	$	4,587,000
Expenses:
General and administrative					$	952,000
Acquisition related expenses					140,000
Depreciation and amortization					2,466,000
Income from operations					1,029,000
Other income (expense):
Interest expense (including amortization of deferred financing costs and debt premium)					(409,000		)
Interest income					1,000
Net income					$	621,000



	Medical Office Buildings		Senior Housing		Three Months Ended June 30, 2016
Revenue:
Real estate revenue	$	26,000	$	—	$	26,000
Expenses:
Rental expenses	23,000		—		23,000
Segment net operating income	$	3,000	$	—	$	3,000
Expenses:
General and administrative					$	246,000
Acquisition related expenses					370,000
Net loss					$	(613,000	)

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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



	Medical Office Buildings		Senior Housing		Six Months Ended June 30, 2017
Revenue:
Real estate revenue	$	9,126,000	$	1,124,000	$	10,250,000
Expenses:
Rental expenses	2,686,000		112,000		2,798,000
Segment net operating income	$	6,440,000	$	1,012,000	$	7,452,000
Expenses:
General and administrative					$	1,700,000
Acquisition related expenses					213,000
Depreciation and amortization					4,177,000
Income from operations					1,362,000
Other income (expense):
Interest expense (including amortization of deferred financing costs and debt premium)					(827,000		)
Interest income					1,000
Net income					$	536,000



	Medical Office Buildings		Senior Housing		Six Months Ended June 30, 2016
Revenue:
Real estate revenue	$	26,000	$	—	$	26,000
Expenses:
Rental expenses	23,000		—		23,000
Segment net operating income	$	3,000	$	—	$	3,000
Expenses:
General and administrative					$	396,000
Acquisition related expenses					370,000
Net loss					$	(763,000	)

Assets by reportable segment as of June 30, 2017 and December 31, 2016 were as follows:



	June 30, 2017		December 31, 2016
Medical office buildings	$	249,132,000	$	123,223,000
Senior housing	97,509,000		16,758,000
Other	2,833,000		2,777,000
Total assets	$	349,474,000	$	142,758,000

16. Concentration of Credit Risk

Financial instruments that potentially subject us to a concentration of credit risk are primarily cash and cash equivalents, accounts and other receivables, restricted cash and real estate deposits. Cash and cash equivalents are generally invested in investment-grade, short-term instruments with a maturity of three months or less when purchased. We have cash and cash equivalents in financial institutions that are insured by the Federal Deposit Insurance Corporation, or FDIC. As of June 30, 2017 and December 31, 2016, 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.

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GRIFFIN-AMERICAN HEALTHCARE REIT IV, INC.

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

Based on leases in effect as of June 30, 2017 , three states in the United States accounted for 10.0% or more of our annualized base rent of our total property portfolio. Our properties located in Nevada, Alabama and California accounted for approximately 19.0% , 16.1% and 13.5% , respectively, of the annualized base rent of our total property portfolio. Accordingly, there is a geographic concentration of risk subject to fluctuations in each state’s economy.

As of June 30, 2017 , we had two tenants that accounted for 10.0% or more of our annualized base rent, as follows:

Tenant

Annualized
Base Rent(1)

Percentage of

Annualized Base Rent

Acquisition

Reportable Segment

GLA
(Sq Ft)

Lease Expiration
Date

Colonial Oaks Master Tenant, LLC

4,108,000

16.3%

Lafayette Assisted Living Portfolio and Northern California Senior Housing Portfolio

Senior Housing

215,000

Multiple

Prime Healthcare Services – Reno

3,933,000

15.6%

Reno MOB

Medical Office

152,000

Multiple

___________


(1)	Annualized base rent is based on contractual base rent from the leases in effect as of June 30, 2017 . The loss of these tenants or their inability to pay rent could have a material adverse effect on our business and results of operations.

17. Per Share Data

We report earnings (loss) per share pursuant to ASC Topic 260, Earnings per Share . Basic earnings (loss) per share for all periods presented are computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of our common stock outstanding during the period. Net income (loss) applicable to common stock is calculated as net income (loss) attributable to controlling interest less distributions allocated to participating securities of $2,000 and $3,000 , respectively, for the three and six months ended June 30, 2017 . For the three and six months ended June 30, 2016 , we did not allocate any distributions to participating securities. Diluted earnings (loss) per share are computed based on the weighted average number of shares of our common stock and all potentially dilutive securities, if any. Nonvested shares of our restricted common stock and redeemable limited partnership units of our operating partnership are participating securities and give rise to potentially dilutive shares of our common stock. As of June 30, 2017 and 2016 , there were 15,000 and 12,000 nonvested shares, respectively, of our restricted Class T common stock outstanding, but such shares were excluded from the computation of diluted earnings (loss) per share because such shares were anti-dilutive during these periods. As of June 30, 2017 and 2016, there were 208 units of redeemable limited partnership units of our operating partnership outstanding, but such units were excluded from the computation of diluted earnings per share because such units were anti-dilutive during these periods.

18. Subsequent Event

Status of Our Offering

As of August 4, 2017, we had received and accepted subscriptions in our offering for 31,244,759 aggregate shares of our Class T and Class I common stock, or $310,906,000 , excluding shares of our common stock issued pursuant to the DRIP.

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

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 2016 Annual Report on Form 10-K, as filed with the United States Securities and Exchange Commission, or the SEC, on March 1, 2017. Such condensed consolidated financial statements and information have been prepared to reflect our financial position as of June 30, 2017 and December 31, 2016 , together with our results of operations for the three and six months ended June 30, 2017 and 2016 and cash flows for the six months ended June 30, 2017 and 2016.

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Our statements contained in this report that are not historical facts are forward-looking. Actual results may differ materially from those included in the forward-looking statements. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations, are generally identifiable by use of the words “expect,” “project,” “may,” “will,” “should,” “could,” “would,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future investments on a consolidated basis include, but are not limited to: changes in economic conditions generally and the real estate market specifically; legislative and regulatory changes, including changes to laws governing the taxation of real estate investment trusts, or REITs; the availability of capital; changes in interest rates; competition in the real estate industry; the supply and demand for operating properties in our proposed market areas; changes in accounting principles generally accepted in the United States of America, or GAAP, policies and guidelines applicable to REITs; the success of our best efforts initial public offering; the availability of properties to acquire; the availability of financing; and our ongoing relationship with American Healthcare Investors, LLC, or American Healthcare Investors, and Griffin Capital Company, LLC, or Griffin Capital (formerly known as Griffin Capital Corporation), and their affiliates. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Additional information concerning us and our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview and Background

Griffin-American Healthcare REIT IV, Inc., a Maryland corporation, was incorporated on January 23, 2015 and therefore we consider that our date of inception. We were initially capitalized on February 6, 2015 . We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, hospitals, skilled nursing facilities, senior housing and other healthcare-related facilities. We may also originate and acquire secured loans and real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income. We believe we currently qualify, and intend to elect to be treated, as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, for federal income tax purposes beginning with our taxable year ended December 31, 2016, and we intend to continue to be taxed as a REIT.

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offering for 28,236,137 aggregate shares of our Class T and Class I common stock, or approximately $280,969,000 , excluding shares of our common stock issued pursuant to the DRIP.

We conduct substantially all of our operations through Griffin-American Healthcare REIT IV Holdings, LP, or our operating partnership. We are externally advised by our advisor pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 16, 2016 and had a one -year term, subject to successive one -year renewals upon the mutual consent of the parties. The Advisory Agreement was renewed pursuant to the mutual consent of the parties on February 13, 2017 and expires on February 16, 2018. Our advisor uses its best efforts, subject to the oversight and review of our board of directors, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by American Healthcare Investors and 25.0% owned by a wholly owned subsidiary of Griffin Capital, or collectively, our co-sponsors. Effective March 1, 2015, American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony NorthStar, Inc. (NYSE: CLNS), or Colony NorthStar (formerly known as NorthStar Asset Management Group Inc. prior to its merger with Colony Capital, Inc. and NorthStar Realty Finance Corp. on January 10, 2017), and 7.8% owned by James F. Flaherty III, one of Colony NorthStar’s partners. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, or our dealer manager, Colony NorthStar or Mr. Flaherty; however, we are affiliated with Griffin-American Healthcare REIT IV Advisor, American Healthcare Investors and AHI Group Holdings.

We currently operate through two reportable business segments — medical office buildings and senior housing. As of June 30, 2017 , we had completed 16 real estate acquisitions whereby we owned 27 properties, comprising 28 buildings, or approximately 1,338,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $341,245,000 . As of June 30, 2017 , our portfolio capitalization rate was approximately 6.8%, which estimate was based upon total property portfolio net operating income from each property’s forward looking pro forma projections for the expected year one property performance, including any contractual rent increases contained in such leases for year one, divided by the contract purchase price of the total property portfolio, exclusive of any acquisition fees and expenses paid.

Critical Accounting Policies

The complete listing of our Critical Accounting Policies was previously disclosed in our 2016 Annual Report on Form 10-K, as filed with the SEC on March 1, 2017, and there have been no material changes to our Critical Accounting Policies as disclosed therein, except as noted below.

Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments, which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable. Our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2016 Annual Report on Form 10-K, as filed with the SEC on March 1, 2017.

Property Acquisitions

In accordance with Accounting Standards Codification Topic 805, Business Combinations , and Accounting Standards Update, or ASU, 2017-01, Clarifying the Definition of a Business , or ASU 2017-01, we determine whether a transaction is a business combination, which requires that the assets acquired and liabilities assumed constitute a business. If the assets acquired and liabilities assumed are not a business, we account for the transaction as an asset acquisition. Under both methods, we recognize the identifiable assets acquired and liabilities assumed. We immediately expense acquisition related expenses associated with a business combination and capitalize acquisition related expenses directly associated with an asset acquisition. As a result of our early adoption of ASU 2017-01 on January 1, 2017, we accounted for the seven property acquisitions we completed for the three and six months ended June 30, 2017 as asset acquisitions rather than business combinations.

Recently Issued or Adopted Accounting Pronouncements

For a discussion of recently issued or adopted accounting pronouncements, see Note 2, Summary of Significant Accounting Policies — Recently Issued or Adopted Accounting Pronouncements, to our accompanying condensed consolidated financial statements.

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Acquisitions in 2017

For a discussion of our property acquisitions in 2017, see Note 3, Real Estate Investments, Net , to our accompanying condensed consolidated financial statements.

Factors Which May Influence Results of Operations

We are not aware of any material trends or uncertainties, other than national economic conditions affecting real estate generally, that may reasonably be expected to have a material impact, favorable or unfavorable, on revenues or income from the acquisition, management and operation of properties other than those listed in Part II, Item 1A. Risk Factors, of this Quarterly Report on Form 10-Q and those Risk Factors previously disclosed in our 2016 Annual Report on Form 10-K, as filed with the SEC on March 1, 2017.

Real Estate Revenue

The amount of revenue generated by our properties depends principally on our ability to maintain the occupancy rates of leased space and to lease available space and space available from lease terminations at the then existing rental rates. Negative trends in one or more of these factors could adversely affect our revenue in the future.

Offering Proceeds

If we fail to raise significant additional proceeds in our offering, we will not have enough proceeds to invest in a diversified real estate portfolio. Our real estate portfolio would be concentrated in a small number of properties, resulting in increased exposure to local and regional economic downturns and the poor performance of one or more of our properties and, therefore, expose our stockholders to increased risk. In addition, many of our expenses are fixed regardless of the size of our real estate portfolio. Therefore, depending on the amount of proceeds we raise from our offering, we would expend a larger portion of our income on operating expenses. This would reduce our profitability and, in turn, the amount of net income available for distribution to our stockholders.

Scheduled Lease Expirations

As of June 30, 2017 , our properties were 95.8% leased and during the remainder of 2017, 2.5% 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 June 30, 2017 , our remaining weighted average lease term was 8.8 years.

Results of Operations

Comparison of the Three and Six Months Ended June 30, 2017 and 2016

We were incorporated on January 23, 2015, but we did not commence material operations until the commencement of our offering on February 16, 2016. We purchased our first property in June 2016. Accordingly, our results of operations for the three and six months ended June 30, 2017 and 2016 are not comparable. In general, we expect all amounts to increase in the future based on a full year of operations as well as increased activity as we acquire additional real estate or real estate-related investments. Our results of operations are not indicative of those expected in future periods.

As of June 30, 2017, we operated through two reportable business segments — medical office buildings and senior housing. We segregate our operations into reporting segments in order to assess the performance of our business in the same way that management reviews our performance and makes operating decisions. Accordingly, when we acquired our first medical office building in June 2016 and senior housing facility in December 2016, we added a new reportable segment at each such time.

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Except where otherwise noted, our results of operations are primarily due to owning 28 buildings as of June 30, 2017, as compared to owning one building as of June 30, 2016. As of June 30, 2017 and 2016, we owned the following types of properties:



	June 30,
	2017					2016
	Number of Buildings	Aggregate Contract Purchase Price		Leased %		Number of Buildings	Aggregate Contract Purchase Price		Leased %
Medical office buildings	16	$	246,895,000	94.0	%	1	$	5,450,000	100	%
Senior housing	12	94,350,000		100	%	—	—		—	%
Total/weighted average	28	$	341,245,000	95.8	%	1	$	5,450,000	100	%

Real Estate Revenue

For the three months ended June 30, 2017 and 2016, real estate revenue was $6,198,000 and $26,000, respectively, and was primarily comprised of base rent of $4,599,000 and $3,000, respectively, and expense recoveries of $1,271,000 and $23,000, respectively.

For the six months ended June 30, 2017 and 2016, real estate revenue was $10,250,000 and $26,000, respectively, and was primarily comprised of base rent of $7,599,000 and $3,000, respectively, and expense recoveries of $2,007,000 and $23,000, respectively. Real estate revenue by reportable segment consisted of the following for the periods then ended:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Medical office buildings	$	5,455,000	$	26,000	$	9,126,000	$	26,000
Senior housing	743,000		—		1,124,000		—
Total	$	6,198,000	$	26,000	$	10,250,000	$	26,000

Rental Expenses

For the three months ended June 30, 2017 and 2016, rental expenses were $1,611,000 and $23,000, respectively. For the six months ended June 30, 2017 and 2016, rental expenses were $2,798,000 and $23,000, respectively. Rental expenses consisted of the following for the periods then ended:



	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Building maintenance	$	472,000	$	—	$	860,000	$	—
Utilities	405,000		7,000		715,000		7,000
Real estate taxes	379,000