Investments in Joint Ventures In May 2014, the Company, through a general partnership with NorthStar Realty, acquired a 5.6 interest in a 1.1 billion
healthcare real estate portfolio and contributed 23.4 million of cash for its interest in the investment. The purchase was approved by the Company’s board of directors, including all of its independent directors.
In December 2014, the Company, through a general partnership with NorthStar Realty, acquired a 14.3 interest in the Griffin- American portfolio for 187.2 million in cash, including the Company’s pro rata share of transaction costs. The purchase was
approved by the Company’s board of directors, including all of its independent directors.
In connection with the acquisition of the Griffin-American portfolio by NorthStar Realty and the Company, the Sponsor acquired a 43, as adjusted, ownership interest in American Healthcare Investors LLC “AHI” and Mr. James F. Flaherty III, a
strategic partner of the Sponsor and the Company’s Vice Chairman, acquired a 12.3 ownership interest in AHI. AHI is a healthcare-focused real estate investment management firm that co-sponsored and advised Griffin-American, until Griffin-
American was acquired by the Company and NorthStar Realty. In connection with the Sponsor’s acquisition of an interest in AHI, AHI provides certain asset management and related services, including property management, to the Advisor, NorthStar
Realty and the Company. Initially, AHI provides such services to the Company only with respect to its interest in the Griffin- American portfolio or in connection with certain joint acquisitions with NorthStar Realty and, following completion of the
Offering and full investment of the Company’s proceeds, AHI may provide such services to a larger subset or all of the Company’s assets. Consequently, AHI will assist the Advisor in managing the Griffin-American portfolio and other current and
future healthcare assets owned by the Company and NorthStar Realty.
In May 2015, the Company, through general partnerships with NorthStar Realty, acquired a 40.0 interest in a 875.0 million Winterfell portfolio and contributed 98.7 million of cash for its interest in the investment, including the Company’s pro rata
share of transaction costs.
Origination of Mezzanine Loan In July 2015, the Company originated a 75.0 million mezzanine loan to a subsidiary of Espresso, which bears interest at a
fixed rate of 10.0 per year and matures in January 2021.
8. Equity-Based Compensation
The Company adopted a long-term incentive plan, as amended the “Plan”, which it may use to attract and retain qualified officers, directors, employees and consultants, as well as an independent directors compensation plan, which is a component of
the Plan. Pursuant to the Plan, as of September 30, 2015, the Company’s independent directors were granted a total of 41,765 shares of restricted common stock for an aggregate 420,000. The restricted stock granted prior to 2015 generally vests
quarterly over four years and the restricted stock granted in 2015 generally vests quarterly over two years. However, the stock will become fully vested on the earlier occurrence of: i the termination of the independent director’s service as a director due
to his or her death or disability; or ii a change in control of the Company.
The Company recognized equity-based compensation expense of 33,330 and 16,847 for the three months ended September 30, 2015 and 2014, respectively, and 81,463 and 42,984 for the nine months ended September 30, 2015 and 2014,
respectively, related to the issuance of restricted stock to the independent directors, which was recorded in general and administrative expenses in the consolidated statements of operations.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Unaudited
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9. Stockholders’ Equity
Common Stock from Primary Offering For the nine months ended September 30, 2015, the Company issued 43.9 million shares of common stock generating gross
proceeds of 443.5 million. For the year ended December 31, 2014, the Company issued 85.7 million shares of common stock generating gross proceeds of 854.9 million. From inception through September 30, 2015, the Company issued 140.5 million
shares of common stock generating gross proceeds of 1.4 billion.
Distribution Reinvestment Plan The Company adopted a DRP through which common stockholders may elect to reinvest an amount equal to the distributions
declared on their shares in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per share pursuant to the Initial DRP and the Follow-on DRP was 9.50 and 9.69, respectively. Once the
Company establishes an estimated value per share, shares issued pursuant to the DRP will be priced at 95.0 of the estimated value per share of the Company’s common stock, as determined by the Advisor or another firm chosen for that purpose.
Pursuant to amended Rules 2310 and 2340 of the Financial Industry Regulatory Authority, Inc., the Company expects to establish an estimated value per share by April 11, 2016, the effective date of the amended rules. No selling commissions or
dealer manager fees are paid on shares issued pursuant to the DRP. Once established, the Company will disclose the per share estimated value in its annual report. The board of directors of the Company may amend, suspend or terminate the DRP for any
reason upon ten-days’ notice to participants, except that the Company may not amend the DRP to eliminate a participant’s ability to withdraw from the DRP. For the nine months ended September 30, 2015, the Company issued 3.3 million shares of
common stock totaling 32.3 million of gross offering proceeds pursuant to the DRP. For the year ended December 31, 2014, the Company issued 1.3 million shares of common stock totaling 12.4 million of gross offering proceeds pursuant to the DRP.
From inception through September 30, 2015, the Company issued 4.7 million shares of common stock, generating gross offering proceeds of 45.0 million pursuant to the DRP.
Distributions Distributions to stockholders are declared quarterly by the board of directors of the Company and are paid monthly based on a
daily amount of 0.00184932 per share, which is equivalent to an annualized distribution amount of 0.675 per share of the Company’s common stock. Distributions are generally paid to stockholders on the first business day of the month following the
month for which the distribution has accrued.
The following table presents distributions declared for the nine months ended September 30, 2015 dollars in thousands:
Distributions
1
Period Cash
DRP Total
January 2,686
3,379 6,065
February 2,518
3,203 5,721
March 2,819
3,561 6,380
April 2,784
3,513 6,297
May 2,974
3,765 6,739
June 3,014
3,790 6,804
July 3,265
4,107 7,372
August 3,415
4,307 7,722
September 3,462
4,377 7,839
Total 26,937
34,002 60,939
_________________________________________________ 1
Represents distributions declared for the period, even though such distributions are actually paid to stockholders the month following such period.
Share Repurchase Program The Company adopted a share repurchase program that may enable stockholders to sell their shares to the Company in limited
circumstances the “Share Repurchase Program”. The Company may not repurchase shares unless a stockholder has held shares for one year. However, the Company may repurchase shares held less than one year in connection with a stockholder’s
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Continued Unaudited
29
death or qualifying disability. The Company is not obligated to repurchase shares under the Share Repurchase Program. The Company may amend, suspend or terminate the Share Repurchase Program at its discretion at any time, subject to certain notice
requirements. For the nine months ended September 30, 2015, the Company repurchased 206,432 shares of common stock for 2.0 million at an average price of 9.75 per share. For the year ended December 31, 2014, the Company repurchased 14,355
shares of common stock for a 0.1 million at an average price of 9.92 per share pursuant to the Share Repurchase Program. The Company funds repurchase requests received during a quarter with proceeds set aside for that purpose which are not
expected to exceed proceeds received from its DRP. As of September 30, 2015, there were no unfulfilled repurchase requests.
10. Non-controlling Interests
