CNL HEALTHCARE PROPERTIES, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K)

Overview

CNL Healthcare Properties, Inc. is a Maryland corporation that elected to be
taxed as a REIT for U.S. federal income tax purposes. We have and intend to
continue to be organized and operate in a manner that allows us to remain
qualified as a REIT for federal income tax purposes. The terms "us," "we,"
"our," "Company" and "CNL Healthcare Properties" include CNL Healthcare
Properties, Inc. and each of its subsidiaries. The discussion of our financial
condition and results of operations for the year ended December 31, 2019
included in Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations in our Annual Report on Form 10-K for the year ended
December 31, 2020 as filed on March 15, 2021 is incorporated by reference
herein.

Substantially all of our assets are held by, and all operations are conducted,
either directly or indirectly, through: (1) the Operating Partnership in which
we are the sole limited partner and our wholly owned subsidiary, CHP GP, LLC, is
the sole general partner; (2) a wholly owned TRS, CHP TRS Holding, Inc.; (3)
property owner subsidiaries and lender subsidiaries, which are single purpose
entities; and (4) investments in joint ventures.

We are externally managed and advised by CNL Healthcare Corp. (the "Advisor").
Our Advisor has responsibility for our day-to-day operations, serving as our
consultant in connection with policy decisions to be made by our board of
directors, and for identifying, recommending and executing on Possible Strategic
Alternatives (as described below under "Possible Strategic Alternatives"), and
dispositions on our behalf pursuant to an advisory agreement. In May 2021, we
extended the advisory agreement with the Advisor through June 2022 and effective
with the renewal, reduced the asset management fee from 1.0% per annum to 0.8%
per annum of average invested assets. For additional information on our Advisor,
its affiliates or other related parties, as well as the fees and reimbursements
we pay, see Item 8. "Financial Statements and Supplementary Data-Note 10.
Related Party Arrangements."

As of December 31, 2021, our healthcare investment portfolio consisted of
interests in 73 properties, consisting of 71 senior housing communities, the
Hurst Specialty Hospital and one vacant land parcel. We are currently invested
in a geographically diversified portfolio of 71 seniors housing properties. The
types of seniors housing properties that we own include independent and assisted
living facilities, continuing care retirement communities and Alzheimer's/memory
care facilities. Five of our 71 seniors housing properties were owned through an
unconsolidated joint venture as of December 31, 2021, which became wholly-owned
effective January 1, 2022.

COVID-19

In March 2020, the World Health Organization declared the outbreak of the novel
coronavirus ("COVID-19") as a pandemic around the globe. Since the onset of the
pandemic we have operated and continue to operate our communities through the
disruptions and uncertainties of the pandemic, including disruptions from new
variants of the virus during 2021. Average occupancy began to decline at the
onset of the pandemic starting in the second half of March 2020 and trended
lower through February 2021. We began to experience small occupancy gains each
month starting in March 2021 as vaccines became available and regulatory move-in
restrictions were lifted or relaxed. As monthly marginal occupancy gains
continued, the rate of occupancy recovery during the latter part of 2021 was
impacted by the arrival of the Delta and Omicron strands of the coronavirus
during this time period. The spike in positive COVID-19 cases during the last
half of 2021 and in January 2022 resulted in regulatory move-in restrictions at
some of our communities and coupled with the seasonally cold temperatures
impacted the rate of move-ins and occupancy increases during this period.
Starting in February 2022, we experienced a decline in positive COVID-19 cases
in our communities and benefitted from relaxed COVID-19 restrictions by local
authorities which contributed to an increase in tours and move-ins at our
communities. We anticipate continued marginal occupancy improvements each month
during the year ending December 31, 2022.

Despite the marginal increases in occupancy during 2021, we experienced higher
than anticipated compression in property level NOI margins in the last half of
2021 due to increases in operating expenses. Labor costs increased at higher
rates and particularly during Q3 and Q4 as increased wages in a tight labor
market were coupled with increases in usage of agency temporary personnel to
fill vacancies from staff required to quarantine due to testing positive during
the Delta and Omicron spikes in the last half of 2021. The impact of rising
inflation began to surface in the form of higher food costs and other operating
expenses, which also contributed to margin compressions. We have begun

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implementing rate increases at our properties effective with renewals in 2022
which will result in an increase in revenues. COVID-19 positive cases amongst
staff have begun to decline since the beginning of the year which we anticipate
will reduce our use of agency labor during 2022. We anticipate that the rental
rate increases will partially offset the increase in operating costs and will
result in improved operating margins.

As of December 31, 2021, our 71 seniors housing communities were located
throughout the United States in 26 states with a population of nearly 7,000
residents and approximately 4,700 community-level staff. As of March 21, 2022,
as reported by our senior housing operators, we had 17 active, confirmed
positive cases among our residents and staff members in seven of our communities
located in six states. The number of confirmed cases in our senior housing
communities has and will continue to fluctuate based on the duration, scope and
depth of the COVID-19 pandemic, including new variants of the virus and
vaccination rates, as well as the timing and extent of imposing/ceasing vaccine
or mask mandates, or stay at home and other social distancing restrictions from
state and local governmental agencies.

As of December 31, 2021, we had approximately $67.3 million in liquidity
(consisting of $53.2 million in cash on hand and $14.1 million of availability
under our Revolving Credit Facility). We remain focused on maintaining liquidity
and financial flexibility and continue to monitor developments as we deal with
the disruptions and uncertainties from a business and financial perspective
relating to COVID-19.

Of our 71 senior housing communities, we owned 15 properties (leased to two
separate third party tenants under triple-net leases ("NNN")), and the remaining
56 properties were managed through third party operators, including five senior
housing communities owned through our unconsolidated joint venture. With respect
to one of our third-party tenants that had been granted a rent deferral during
May 2020, as of March 21, 2022, we have collected 100% of the $2 million in
rental deferrals and all rental amounts due under their lease agreements related
to the 13 seniors housing properties leased to this tenant under NNN leases. In
April 2021, we provided rent relief and entered into a rent deferral agreement
with our other tenant that leases two properties under NNN leases (the "First
Rent Deferral"). The tenant applied the entire balance of their security
deposits against amounts due under their NNN leases and deferred the maximum
$0.9 million eligible for rent deferral under their First Rent Deferral
agreement. The tenant may replenish the security deposits and repay any amounts
deferred at any time but no later than August 2025. In exchange for the First
Rent Deferral, our tenant exercised its first five-year renewal option under the
terms of each of its leases and terminated and released us from any further
promoted interest obligations under their development agreements. In December
2021, the tenant requested an additional $1.4 million in rent relief which we
provided in the form of a rent deferral (the "Second Rent Deferral"). The $1.4
million deferral will be collected in monthly installments starting in 2023
through the end of the lease terms. We did not grant any rent concessions as
part of either rent deferral provided to this tenant. As of March 21, 2022, we
had deferred $2.3 million of rental amounts and collected all other amounts due
in accordance with the terms of the tenant's lease agreements.

Since March 13, 2020, there have been a number of federal, state and local
government initiatives to manage the spread of the virus and its impact on the
economy, financial markets and continuity of businesses of all sizes and
industries. On March 27, 2020, the Coronavirus Aid, Relief, and Economic
Security Act ("CARES Act") was signed into law which provided, among other
things, for the establishment of a Provider Relief Fund under the direction of
the Department of Health and Human Services ("HHS"). During the years ended
December 31, 2021 and 2020, we received provider relief funds under the CARES
Act, which are deemed governmental grants provided that the recipient attests to
and complies with certain terms and conditions, and we recorded approximately
$0.5 million and $5.3 million, respectively, as other income as all conditions
of the provider relief funds had been met. We submitted our application for
Phase 4 of provider relief funds under the CARES Act in September 2021 and as of
March 21, 2022, are awaiting specific guidance from HHS on how Phase 4 relief
will be distributed.

We believe we are taking appropriate actions to manage through the COVID-19
pandemic. The COVID-19 pandemic has had and may continue to have a material and
adverse impact on our financial condition, results of operations and cash flows.
The extent of the continued impact of COVID-19 on our financial condition
results of operations and cash flows is uncertain and cannot be predicted at the
current time as it depends on several factors beyond our control including, but
not limited to (i) the severity and duration of the outbreak caused by new
variants of the virus, (ii) the effectiveness and acceptance of vaccines, (iii)
the pandemic's impact on the U.S. and global economies, (iv) the timing, scope
and effectiveness of additional governmental responses to the pandemic and (v)
the timing and speed of economic recovery.


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Possible Strategic Alternatives

In 2017, we began evaluating possible strategic alternatives to provide
liquidity to our stockholders. In April 2018, our board of directors formed a
special committee consisting solely of our independent directors ("Special
Committee") to consider possible strategic alternatives, including, but not
limited to (i) the listing of our or one of our subsidiaries' common stock on a
national securities exchange, (ii) an orderly disposition of our assets or one
or more of our asset classes and the distribution of the net sale proceeds
thereof to our stockholders and (iii) a potential business combination or other
transaction with a third-party or parties that provides our stockholders with
cash and/or securities of a publicly traded company (collectively, among other
options, "Possible Strategic Alternatives"). Since 2018, the Special Committee
has engaged KeyBanc Capital Markets Inc. to act as its financial advisor in
connection with exploring our Possible Strategic Alternatives.

In connection with our consideration of the Possible Strategic Alternatives, our
board of directors suspended both our Reinvestment Plan and our Redemption Plan
effective July 11, 2018. In addition, as part of executing on Possible Strategic
Alternatives, our board of directors committed to a plan to sell 70 properties
which included a portfolio of 63 properties (consisting of medical office
buildings ("MOBs"), post-acute care facilities and acute care hospitals across
the US), collectively (the "MOB/Healthcare Portfolio") plus seven skilled
nursing facilities. Through December 31, 2021, we sold 69 properties, received
net sales proceeds of approximately $1,449.7 million and used the net sales
proceeds to: (1) repay indebtedness secured by the properties; (2) strategically
rebalance other corporate borrowings; (3) make a special cash distribution in
May 2019 of approximately $347.9 million ($2.00 per share) to our stockholders
and (4) retained net sales proceeds for other corporate purposes, because we
were focused on maintaining balance sheet strength and liquidity during COVID-19
to enhance financial flexibility. In addition to declaring the special
distribution in May 2019, effective with the second quarter of 2019, our board
of directors adjusted our regular quarterly cash distribution to an amount equal
to $0.0512 per share, compared to $0.1164 per share that had been in effect
since the third quarter of 2017. The adjustment to our regular cash
distributions was the result of a reduction in our remaining earnings base and
operating cash flows given the associated impact of the sale of real estate on
our operating cash flows. In September 2020, we decided to discontinue marketing
for sale our Hurst Specialty Hospital, our remaining property that our board had
committed to sell, due to financial difficulties experienced by the tenant of
this property. In March 2022, we entered into a purchase and sale agreement for
this property with an unrelated third party for a gross sales price of $8.5
million and expect to close on the sale of the Hurst Specialty Hospital by the
second quarter of 2022.

During the year ended December 31, 2020, we shifted our focus away from the
pursuit of larger strategic alternatives to provide further liquidity to our
stockholders due to the market and industry disruptions in the seniors housing
sector from COVID-19. However, our Special Committee continued working and
continues to work with our financial advisor to carefully study market data and
potential options to determine suitable liquidity alternatives that are in the
best interests of all of our stockholders.

Inflation

Prior to 2021, inflation had been low and had a minimal impact on our operating
performance; however, inflation significantly increased starting in the last
half of 2021 and may continue to be elevated or increase further. The impact of
rising inflation began to surface in the form of higher food costs and other
operating expenses, which contributed to margin compressions in our managed
seniors housing communities. We have begun implementing rate increases at our
managed properties effective with renewals in 2022 which will result in an
increase in revenues. We anticipate that the rental rate increases will
partially offset the increase in operating costs and will result in improved
operating margins.

Our NNN leases contain provisions designed to mitigate the adverse impact of
inflation, including contractual rent escalations and requirements for tenants
to pay utilities, insurance, and real estate taxes, and certain capital
expenditures related to the maintenance of our properties, thereby reducing our
exposure to increases in property operating expenses resulting from inflation.
However, increases in our tenants' operating expenses and a failure of their
revenues to increase at least with inflation may adversely affect our tenants'
ability to pay rent owed to us which could adversely impact our financial
condition, cash flows and results of operations.

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With respect to our outstanding indebtedness, we periodically evaluate our exposure to interest rate fluctuations, and may continue to enter into derivatives that mitigate, but do not eliminate, the impact of changes in interest rates on our variable rate loans.

Seniors Housing Portfolio

Our remaining investment focus is in seniors housing communities. We invested in or developed the following types of seniors housing properties:

Independent Living Facilities. Independent living facilities are age-restricted,
multi-family rental or ownership (condominium) housing with central dining
facilities that provide residents, as part of a monthly fee, meals and other
services such as housekeeping, linen service, transportation, social and
recreational activities.

Assisted Living Facilities. Assisted living facilities are usually
state-regulated rental properties that provide the same services as independent
living facilities, but also provide, in a majority of the units, supportive care
from trained employees to residents who are unable to live independently and
require assistance with activities of daily living. The additional services may
include assistance with bathing, dressing, eating, and administering
medications.

Memory Care/Alzheimer's Facilities. Those suffering from the effects of Alzheimer's disease or other forms of memory loss need specialized care. Memory care/Alzheimer's centers provide the specialized care for this population including residential housing and assistance with the activities of daily living.

Portfolio Overview

As of December 31, 2021, our healthcare investment portfolio consisted of
interests in 73 properties, comprising 71 senior housing communities, the Hurst
Specialty Hospital and one vacant land parcel. Of our properties held as of
December 31, 2021, five of our 71 seniors housing properties were owned through
a 75% interest in the Windsor Manor Joint Venture, an unconsolidated joint
venture. Effective January 1, 2022, we purchased the remaining 25% interest in
the Windsor Manor Joint Venture from our joint venture partner and currently own
a 100% interest in what is now a consolidated joint venture.

We believe demographic trends and compelling supply and demand indicators
presented a strong case for an investment focus on seniors housing real estate
and real estate-related assets. Our seniors housing investment portfolio is
geographically diversified with properties in 26 states. The map below shows our
seniors housing investment portfolio across geographic regions as of March 21,
2022:

                     [[Image Removed: img261546096_1.jpg]]

The following table summarizes our seniors housing investment portfolio by investment structure as of March 21, 2022 and reflects the purchase of the remaining 25% interest in Windsor Manor Joint Venture, which was previously an unconsolidated joint venture:

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                                                       Amount of         Percentage
                                    Number of         Investments         of Total
      Type of Investment           Investments       (in millions)       Investments
Consolidated investments:
Seniors housing leased (1)                   15     $         311.0              17.3 %
Seniors housing managed (2)(3)               56             1,458.9              81.0 %
Seniors housing unimproved land               1                 1.1               0.1 %
Acute care leased (1)(4)                      1                29.5               1.6 %
                                             73     $       1,800.5             100.0 %


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FOOTNOTES:

(1)

Properties that are leased to third-party tenants for which we report rental income and related revenues.

(2)

Properties that are leased to TRS entities and managed pursuant to third-party
management contracts (i.e. RIDEA structure) where we report resident fees and
services, and the corresponding property operating expenses.

(3)

Includes five properties owned by Windsor Manor Joint Venture, which became wholly owned effective January 1, 2022. The joint venture was accounted for using the equity method through December 31, 2021.

(4)

In March 2022, we entered into a purchase and sale agreement relating to this property.

Portfolio Evaluation

While we are not directly impacted by the performance of the underlying
properties leased to third-party tenants, we believe that the financial and
operational performance of our tenants provides an indication about the
stability of our tenants and their ability to pay rent. To the extent that our
tenants, managers or joint venture partners experience operating difficulties
and become unable to generate sufficient cash to make rent payments to us, there
could be a material adverse impact on our consolidated results of operations,
liquidity and/or financial condition. Our tenants and managers are generally
contractually required to provide this information to us in accordance with
their respective lease, management and/or joint venture agreements. Therefore,
in order to mitigate the aforementioned risk, we monitor our investments through
a variety of methods determined by the type of property.

We monitor the performance of our tenants and third-party operators to stay
abreast of any material changes in the operations of the underlying properties
by (1) reviewing the current, historical and prospective operating margins
(measured by a tenant's earnings before interest, taxes, depreciation,
amortization and facility rent), (2) monitoring trends in the source of our
tenants' revenue, including the relative mix of public payors (including
Medicare, Medicaid, etc.) and private payors (including commercial insurance and
private pay patients), (3) evaluating the effect of evolving healthcare
legislation and other regulations on our tenants' profitability and liquidity,
and (4) reviewing the competition and demographics of the local and surrounding
areas in which the tenants operate. We have and continue to proactively work
closely with our tenants and third-party operators to monitor the impact from
COVID-19 on the operations of our seniors housing communities.

We monitor the credit of our tenants to stay abreast of any material changes in
credit quality. We monitor credit quality by (1) reviewing financial statements
that are publicly available or that are required to be delivered to us under the
applicable lease, (2) direct interaction with onsite property managers, (3)
monitoring news and rating agency reports regarding our tenants (or their parent
companies) and their underlying businesses, (4) monitoring the timeliness of
rent collections and (5) monitoring lease coverage.

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When evaluating the performance of our seniors housing portfolio, management
reviews property-level operating performance versus budgeted expectations,
conducts periodic operational review calls with operators and conducts periodic
property inspections or site visits. Management also reviews occupancy levels
and monthly revenue per occupied unit, which we define as total revenue divided
by average number of occupied units. Similarly, when evaluating the performance
of our third-party operators, management reviews monthly financial statements,
property-level operating performance versus budgeted expectations, conducts
periodic operational review calls with operators and conducts periodic property
inspections or site visits. All of the aforementioned operating and statistical
metrics assist us in determining the ability of our properties or operators to
achieve market rental rates, to assess the overall performance of our
diversified healthcare portfolio, and to review compliance with leases, debt,
licensure, real estate taxes, and other collateral.

Significant Tenants and Operators

Our real estate portfolio of 73 properties is operated by a mix of national or
regional operators and the following represent the significant tenants and
operators that lease or manage 10% or more of our rentable space as of March 21,
2022, excluding the vacant land parcel:

                                                      Rentable          Percentage         Lease
                                     Number of      Square Feet         of Rentable      Expiration
Tenants                              Properties    (in thousands)       Square Feet         Year
TSMM Management, LLC                     13                  1,261              74.8 %      2025
Wellmore, LLC                            2                     366              21.7 %   2031-2032
Other tenant                             1                      58               3.5 %      2031
                                         16                  1,685             100.0 %

                                                      Rentable          Percentage        Operator
                                     Number of      Square Feet         of Rentable      Expiration
Operators                            Properties    (in thousands)       Square Feet         Year
Integrated Senior Living, LLC            7                   1,948              30.4 %   2022-2024
Prestige Senior Living, LLC              13                    895              13.9 %   2023-2024
Morningstar Senior Management, LLC       4                     834              13.0 %      2023
Other operators (1)                      32                  2,740              42.7 %   2022-2029
                                         56                  6,417             100.0 %


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FOOTNOTE:

(1)

Each operator comprises less than 10% of our consolidated square footage.

Tenant Lease Expirations

As of December 31, 2021, we owned 15 seniors housing properties and the Hurst
Specialty Hospital that were leased to third party tenants under triple-net
operating leases. During the year ended December 31, 2021, our rental income
from continuing operations represented approximately 10.2% of our total revenues
from continuing operations.

Under the terms of our triple-net lease agreements, each tenant is responsible
for payment of property taxes, general liability insurance, utilities, repairs
and maintenance, including structural and roof expenses. Each tenant is expected
to pay real estate taxes directly to the taxing authorities. However, if the
tenant does not pay the real estate taxes, we will be liable. Refer to
"Liquidity and Capital Resources - Tenant Financial Difficulties" below for
information on real estate taxes paid relating to the Hurst Specialty Hospital.

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We work with our tenants in advance of the lease expirations or renewal period
options in order for us to maintain a balanced lease rollover schedule and high
occupancy levels, as well as to enhance the value of our properties through
extended lease terms. Certain amendments or modifications to the terms of
existing leases could require lender approval. In April 2021, as part of
providing temporary rent relief to the tenant of two of our properties, our
tenant exercised its first renewal option extending the maturity date of each
lease beyond 2030. In addition, we entered into new leases covering five of our
properties that expired in February 2022. The new leases commenced February 2022
with the same tenant and will expire in 2025.

The following table lists, on an aggregate basis, scheduled expirations for the
next 10 years ending December 31st and thereafter on our consolidated healthcare
investment portfolio, assuming that none of the tenants exercise any of their
renewal options (in thousands, except for number of properties):

                                                                                         Percentage
                                                  Expiring             Expiring          of Expiring
                             Number of             Leased             Annualized           Annual
Year of Expiration (1)      Properties          Square Feet         Base Rents (2)       Base Rents
         2022                            -                  -       $             -                 -
         2023                            -                  -                     -                 -
         2024                            -                  -                     -                 -
         2025                           13              1,261                20,609              66.5 %
         2026                            -                  -                     -                 -
         2027                            -                  -                     -                 -
         2028                            -                  -                     -                 -
         2029                            -                  -                     -                 -
         2030                            -                  -                     -                 -
         2031                            2                195                 5,737              18.5 %
      Thereafter                         1                229                 4,653              15.0 %
                 Total                  16              1,685       $        30,999             100.0 %

                   Weighted Average Remaining Lease Term: (3)       5.7 years


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FOOTNOTES:

(1)

Represents current lease expiration and does not take into consideration lease renewals available under existing leases at the option of the tenants.

(2)

Represents the current base rent, excluding tenant reimbursements and the impact
of future rent bumps included in leases, multiplied by 12 and included in the
year of expiration.

(3)

Weighted average remaining lease term is the average remaining term weighted by annualized current base rents.

Liquidity and Capital Resources

General

Our ongoing primary source of capital is proceeds from operating cash flows. Our
primary uses of capital include the payment of distributions, payment of
operating expenses, funding capital improvements to existing properties and
payment of debt service. Generally, we expect to meet short-term working capital
needs from our cash flows from operations. Our ongoing sources and uses of
capital have been and will continue to be impacted by the COVID-19 pandemic as
described above in "COVID-19". As necessary, we may use financings or other
sources of capital in the event of unforeseen significant capital expenditures
or to cover periodic shortfalls between distributions paid and cash flows from
operating activities.

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As of December 31, 2021, we had approximately $67.3 million of liquidity
(consisting of $53.2 million cash on hand and $14.1 million in availability
under the Revolving Credit Facility) and were well positioned to manage our
near-term debt maturities and uses of cash within the next 12 months. We remain
focused on maintaining liquidity and financial flexibility and continue to
monitor developments as we continue to deal with the disruptions and
uncertainties from a business and financial perspective relating to COVID-19 and
impacts on operating expenses from the rise in inflation. The extent of the
continued impact of COVID-19 on our financial condition, results of operations
and cash flows is uncertain and cannot be predicted at the current time as it
depends on several factors beyond our control including, but not limited to (i)
the severity and duration of the outbreak caused by new variants of the virus,
(ii) the effectiveness of and acceptance of vaccines, (iii) the pandemic's
impact on the U.S. and global economies, (iv) the timing, scope and
effectiveness of additional governmental responses to the pandemic and (v) the
timing and speed of economic recovery.

We have pledged certain of our properties in connection with our borrowings and
may continue to strategically leverage our real estate and use debt financing as
a means of providing additional funds for the payment of distributions to
stockholders, working capital and for other corporate purposes. Our ability to
increase our borrowings could be adversely affected by credit market conditions,
inflation and rising interest rates, which could result in lenders reducing or
limiting funds available for loans, including loans collateralized by real
estate. We may also be negatively impacted by rising interest rates on our
unhedged variable rate debt or the timing of when we seek to refinance existing
debt. In addition, we continue to evaluate the need for additional interest rate
protection in the form of interest rate swaps or caps on unhedged variable rate
debt.

Our cash flows from operating and investing activities as described within
"Sources of Liquidity and Capital Resources" and "Uses of Liquidity and Capital
Resources" represent cash flows from continuing operations and exclude the
results of two properties that were classified as discontinued operations, one
of which was sold in February 2020 and the other which was sold in January 2021.

Sources of Liquidity and Capital Resources

Proceeds from Sale of Real Estate - Continuing Operations

As part of executing under our Possible Strategic Alternatives, during the year
ended December 31, 2020, we closed on the sale of six skilled nursing properties
(the Perennial Communities) and received net sales proceeds of $53.7 million. We
retained the net sales proceeds for corporate purposes given our focus on
maintaining a strong balance sheet, liquidity and financial flexibility because
of the uncertainty relating to COVID-19. We did not sell any properties from
continuing operations during the year ended December 31, 2021.

Proceeds from Sale of Real Estate - Discontinued Operations

As part of executing under our Possible Strategic Alternatives, during the year
ended December 31, 2021, we closed on the sale of one acute care property and
received net sales proceeds of $7.4 million. During the year ended December 31,
2020, we closed on the sale of one post-acute care property and received net
sales proceeds of $28.4 million. We retained these net sales proceeds for
corporate purposes to maintain liquidity due to COVID-19.

Borrowings

In September 2021, we entered into a new term loan agreement which provided for
an additional $150 million senior unsecured term loan facility (the "2021 Term
Loan Facility") to complement and become part of our existing Credit Facilities.
The 2021 Term Loan Facility has an initial term that is co-terminus with the
Credit Facilities, maturing May 15, 2024, subject to one 12-month extension, and
bears interest based on 30-day LIBOR plus a spread that varies with the
Company's leverage ratio. The 2021 Term Loan Facility is pre-payable at any time
in whole or part without fees or penalties, has a borrowing availability
calculation that is subject to a similar borrowing base calculation as the
Credit Facilities and contains similar affirmative, negative and financial
covenants as the covenants in the Credit Facilities. We paid fees totaling
approximately $0.9 million to unrelated third parties and a refinancing fee to
the Advisor of approximately $1.5 million. See Item 8. "Financial Statements and
Supplementary Data-Note 10. Related Party Arrangements" for additional
information regarding the refinancing fee.

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In October 2021, we borrowed $238.0 million, which consisted of $88 million
drawn on our Revolving Credit Facility and $150.0 million available under the
2021 Term Loan Facility to refinance approximately $238.0 million of secured
indebtedness in advance of its January 2022 maturity. In April 2020, we borrowed
$40.0 million from our 2019 Credit Facilities as a precautionary measure to
increase liquidity and preserve financial flexibility in light of COVID-19
(which we repaid in September 2020). See "Liquidity and Capital Resources - Uses
of Liquidity and Capital Resources - Debt Repayments" below for additional
information regarding debt repayments during the years ended December 31, 2021
and 2020.

We may borrow money to fund enhancements to our portfolio, as well as to cover
periodic shortfalls between distributions paid and cash flows from operating
activities, to the extent impacted by the disruption and uncertainties from
COVID-19.

Net Cash Provided by Operating Activities - Continuing Operations

Cash flows from operating activities for the years ended December 31, 2021 and
2020 were approximately $46.4 million and $62.1 million, respectively. The
change in cash flows from operating activities for the year ended December 31,
2021 as compared to the same period in 2020 was primarily the result of the
following:

•

a decline in property net operating income ("NOI"), related to our seniors housing properties due to the COVID-19 pandemic, caused primarily by lower revenue and higher operating expenses; and

•

the receipt of $5.7 million in provider relief funds in 2020 (no provider relief funds were received in 2021); partially offset by

•

lower interest expense resulting from lower weighted average debt outstanding
due to principal repayments during 2020 and 2021 and lower cost of funds from
the refinancing of secured indebtedness with our Credit Facilities in October
2021; and

•

a decline in asset management fees to the Advisor lowering the AUM fee in May 2021 from 1% per annum to 0.8% per annum as part of the annual Advisory agreement renewal.

Lease Renewals and Extensions

In April 2021, as part of providing temporary rent relief to the tenant of two
of our properties, our tenant exercised its first renewal option extending the
maturity date of each lease beyond 2030. In addition, we entered into new leases
covering five of our properties that expired in February 2022. The new leases
with the same tenant commenced in February 2022 and will expire in February
2025. We do not have any leases expiring in the next 24 months.

Tenant Financial Difficulties

The tenant of our Hurst Specialty Hospital experienced financial difficulties
during 2020, was unable to remain current under its lease obligation and we
reserved $1.2 million of past due 2020 rents and real estate tax receivables
outstanding (all of which were reserved) as of December 31, 2020. We record
rental income on a cash basis for this tenant because we assessed that
collectability of lease payments was not probable. During the year ended
December 31, 2021, we collected approximately $2.2 million from the tenant,
representing the majority of the rental amounts due under its lease agreement
and have not collected rental amounts due from January through March 2022 in
accordance with the terms of its lease agreement. We have initiated legal action
and reserve the right to terminate the lease and/or remove the tenant if rental
amounts are not collected. In March 2022, we entered into a purchase and sale
agreement for this property with an unrelated third party for a gross sales
price of $8.5 million and expect to close on the sale of the Hurst Specialty
Hospital by the second quarter of 2022. Refer to "Results of Operations -
Impairment Provision" for further discussion on the impairment recorded related
to this property.

Distributions from Unconsolidated Entities

As of December 31, 2021 and 2020, we had an investment in five unconsolidated
properties through a 75% interest in an unconsolidated joint venture (the
"Windsor Manor Joint Venture"). Pursuant to the joint venture agreement, we were
entitled to receive quarterly preferred cash distributions to the extent there
was cash available to distribute. These

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distributions were generally received within 45 days after each quarter end. For
the years ended December 31, 2021 and 2020, we received approximately $0.7
million and $0.3 million, respectively, of operating distributions from our
investment in these unconsolidated entities. Effective January 1, 2022, we
acquired the remaining 25% interest in the Windsor Manor Joint Venture for
approximately $3.3 million and currently own a 100% interest in the Windsor
Manor Joint Venture. Effective January 1, 2022 we began consolidating the
revenues and expenses of the five properties in the Windsor Manor Joint Venture
and will not record distributions from unconsolidated joint ventures going
forward.

As of December 31, 2021, the unconsolidated Windsor Manor Joint Venture in which
we owned a 75% interest had outstanding indebtedness of $18.5 million related to
five senior housing communities. The loan matures in February 2024, has monthly
principal and interest payments based upon a 25-year amortization and a variable
interest rate equal to LIBOR plus 2.5%. Annual scheduled payments of interest
and principal are approximately $1.1 million, $1.1 million and $17.3 million for
the years ended December 31, 2022, 2023 and 2024, respectively. As a result of
acquiring the remaining 25% interest in the Windsor Manor Joint Venture from our
joint venture partner, effective January 1, 2022 we began consolidating the
indebtedness of the Windsor Manor Joint Venture and will not have any
Off-Balance Sheet Arrangements going forward. Refer to Item 2. "Properties" for
additional information related to the five seniors housing communities owned
through our Windsor Manor Joint Venture.

Amended and Restated Expense Support Agreement

We have entered into an amended and restated expense support agreement with our
Advisor (the "Amended and Restated Expense Support Agreement"). Pursuant to the
Amended and Restated Expense Support Agreement, our Advisor agreed to provide
expense support through forgoing the payment of fees in cash and acceptance of
restricted forfeitable stock for services in an amount equal to the positive
excess, if any, of (a) Aggregate Stockholder Cash Distributions declared for the
applicable year, over (b) our aggregate modified funds from operations over the
same period (as defined in the Amended and Restated Expense Support Agreement).

Under the terms of the Amended and Restated Expense Support Agreement with our
Advisor, for each quarter within a calendar expense support year, we will record
a proportional estimate of the cumulative year-to-date period based on an
estimate of expense support amounts for the calendar expense support year.
Moreover, in exchange for services rendered and in consideration of the expense
support provided under the expense support agreement, we will issue, within 90
days following the determination date, a number of shares of forfeitable
restricted common stock ("Restricted Stock") equal to the quotient of the
expense support amounts provided by our Advisor for the preceding calendar year
divided by our then-current NAV per share of common stock. The terms of the
Amended and Restated Expense Support Agreement automatically renew for
consecutive one-year periods, subject to the right of our Advisor to terminate
upon 30 days' written notice. We did not recognize any expense support for the
years ended December 31, 2021 or 2020. See Item 8. "Financial Statements and
Supplementary Data - Note 10. Related Party Arrangements" for additional
information.

Uses of Liquidity and Capital Resources

Capital Expenditures

We paid approximately $14.2 million and $12.2 million in capital expenditures during the years ended December 31, 2021 and 2020, respectively.

Debt Repayments

During the year ended December 31, 2021, we paid approximately $247.8 million,
which included $9.8 million of scheduled repayments on our mortgages and other
notes payable and the October 2021 refinance of approximately $238.0 million of
secured indebtedness, consisting of debt collateralized by 22 properties, in
advance of its scheduled maturity of January 2022. We added the 22 properties to
the borrowing base of our unsecured Credit Facilities and used $88 million from
amounts available under the Revolving Credit Facility and the entire $150
million available under the new 2021 Term Loan to repay our secured
indebtedness. During the year ended December 31, 2020, we repaid approximately
$39.7 million of debt, which included approximately $28.5 million of debt
obligations that were scheduled to mature in June 2020 and $11.2 million of
scheduled repayments on our mortgages and other notes payable. In September
2020, we repaid the $80 million that was outstanding under our Revolving Credit
Facility.

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On an ongoing basis, we monitor our debt maturities, engage in dialogue with
third-party lenders about various financing scenarios and analyze our overall
portfolio borrowings in advance of scheduled maturity dates of the debt
obligations to determine the optimal borrowing strategy.

The following table provides details of the Company's indebtedness as of December 31, 2021 and 2020, (in thousands):

                                                  As of December 31,
                                                  2021          2020

Mortgages payable and other notes payable:

 Fixed rate debt (1)                            $  89,766     $ 337,519
Premium(2)                                             59           101
Loan costs, net                                      (425 )        (935 )

Total mortgages and other notes payable, net 89,400 336,685 Credit facilities: Revolving Credit Facility(3)(4)(5)

                 88,000             -
Term Loan Facility(3)(5)                          265,000       265,000
2021 Term Loan Facility(3)(5)                     150,000             -
Loan costs, net related to Term Loan Facilities    (3,272 )      (1,577 )
Total credit facilities, net                      499,728       263,423
  Total indebtedness, net                       $ 589,128     $ 600,108


_____________
FOOTNOTES:

(1)

As of December 31, 2021 and 2020, the Company's mortgages and other notes payable were collateralized by seven and 29 properties, respectively, with a total carrying value of approximately $135.4 million and $497.4 million, respectively.

(2)

Premium is reflective of the Company recording mortgage note payables assumed at fair value on the respective acquisition dates.

(3)

As of December 31, 2021 and 2020, the Company had entered into interest rate
caps with notional amounts of approximately $355.0 million and $225.0 million,
respectively. Refer to Item 8. "Financial Statements and Supplementary Data-Note
11. "Derivative Financial Instruments" for additional information.

(4)

As of December 31, 2021 and 2020, the Company had undrawn availability under the
applicable revolving credit facility of approximately $14.1 million and $150.2
million, respectively, based on the value of the properties in the unencumbered
pool of assets supporting the loan.

(5)

The 30-day LIBOR was approximately 0.10% and 0.14%, respectively, as of December 31, 2021 and 2020.

The following is a schedule of future principal payments and maturity for our
total indebtedness for the next five years and thereafter, in the aggregate, as
of December 31, 2021 (in thousands):

2022       $  45,684
2023         111,407
2024         435,675
2025               -
2026               -
Thereafter         -
           $ 592,766




As of December 31, 2021, we had approximately $67.3 million of liquidity
(consisting of $53.2 million of cash on hand and $14.1 million available under
the Revolving Credit Facility) and were well positioned to manage our near-term
debt maturities. We have $45.7 million of scheduled principal payments coming
due during the year ending December 31, 2022, which includes $45.0 million
relating to secured debt collateralized by five properties that matures in
September 2022. We have been evaluating various options and estimate that the
addition of the five properties to the borrowing base of our Credit Facilities
would result in at least $50 million of additional availability under our

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Revolving Credit Facility. We will begin working with various lenders on repayment or refinancing options, including refinancing the facility with another lending institution as a secured debt facility.

The aggregate amount of long-term financing is not expected to exceed 60% of our
gross asset values (as defined in our Credit Facilities) on an annual basis. As
of December 31, 2021 and 2020, we had aggregate debt leverage ratios of
approximately 31.8% and 32.3%, respectively, of the aggregate carrying value of
our assets. Refer to "Uses of Liquidity and Capital Resources - Debt Repayments"
for additional information.

Generally, the loan agreements for our mortgage loans contain customary
financial covenants and ratios; including (but not limited to) the following:
debt service coverage ratio, minimum occupancy levels, limitations on incurrence
of additional indebtedness, etc. The loan agreements also contain customary
performance criteria and remedies for the lenders.

The Credit Facilities contain affirmative, negative, and financial covenants
which are customary for loans of this type, including (but not limited to): (i)
maximum leverage, (ii) minimum fixed charge coverage ratio, (iii) minimum
consolidated net worth, (iv) restrictions on payments of cash distributions
except if required by REIT requirements, (v) maximum secured indebtedness, (vi)
maximum secured recourse debt, (vii) minimum unsecured interest coverage, (viii)
maximum unsecured indebtedness ratio and (ix) limitations on certain types of
investments and with respect to the pool of properties supporting borrowings
under the credit facilities, minimum weighted average occupancy, and remaining
lease terms, as well as property type, MSA, operator, and asset value
concentration limits. The limitations on distributions generally include a
limitation on the extent of allowable distributions, which are not to exceed the
greater of 95% of adjusted FFO (as defined per the credit facilities) and the
minimum amount of distributions required to maintain the Company's REIT status.
As of December 31, 2021 we were in compliance with all financial covenants
related to our Credit Facilities.

See "Off-Balance Sheet Arrangements" below for a description of the borrowings of our unconsolidated entities.

Distributions

In order to qualify as a REIT, we are required to make distributions, other than
capital gain distributions, to our stockholders each year in the amount of at
least 90% of our taxable income. We may make distributions in the form of cash
or other property, including distributions of our own securities. While we
generally expect to pay distributions from cash flows provided by operating
activities, we have and may continue to cover periodic shortfalls between
distributions paid and cash flows from operating activities with proceeds from
other sources; such as from cash flows provided by financing activities ("Other
Sources"), a component of which could include borrowings, whether collateralized
by our properties or unsecured, or net sales proceeds from the sale of real
estate.

On March 21, 2022, our Board approved $0.0256 per share as the first quarter
2022 distribution (the "First Quarter Distribution"). The First Quarter
Distribution represents a fifty percent (50%) discount from the previous
quarter's declared cash distribution. The First Quarter Distribution rate is the
result of various factors including, without limitation, the continued COVID-19
impact on industry performance, inflation rates and volatility in the credit
markets. We, along with our Board, will continue to monitor our cash flow and
operating proceeds as well as our strategic alternatives process and make no
assurances regarding future quarterly cash distributions.

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The following table represents total cash distributions declared, distributions
reinvested and cash distributions per share, by quarter, for the years ended
December 31, 2021, 2020 and 2019 (in thousands, except per share data):

                                                          Cash Flows
                     Cash             Total Cash          Provided by
                 Distributions       Distributions         Operating
   Periods         per Share         Declared (1)       Activities (2)
2021 Quarters
First           $       0.05120     $         8,907     $        12,633
Second                  0.05120               8,906              11,560
Third                   0.05120               8,907               8,719
Fourth                  0.05120               8,907              13,450
Total           $       0.20480     $        35,627     $        46,362

2020 Quarters
First           $       0.05120     $         8,906     $        17,860
Second                  0.05120               8,907              14,151
Third                   0.05120               8,907              15,486
Fourth                  0.05120               8,907              15,622
Total           $       0.20480     $        35,627     $        63,119

2019 Quarters
First           $       0.11639     $        20,246     $        26,155
Second (3)              2.05120             356,832              10,835
Third                   0.05120               8,907              16,905
Fourth                  0.05120               8,907               6,055
Total           $       2.26999     $       394,892     $        59,950


____________
FOOTNOTES:

(1)
For the years ended December 31, 2021, 2020 and 2019, our net (loss) income
attributable to common stockholders was approximately ($22.9) million, $3.9
million and $351.5 million, respectively, while cash distributions declared for
each of the periods were approximately $35.6 million, $35.6 million and $394.9
million, respectively, of which $347.9 million for the year ended December 31,
2019 represented a special cash distribution that was funded with net sales
proceeds from the sale of real estate. For the years ended December 31, 2021,
2020 and 2019, (excluding the special cash distribution paid during the year
ended December 31, 2019) 100% of regular cash distributions declared to
stockholders were considered to be funded with cash provided by operating
activities as calculated on a quarterly basis for GAAP purposes.

(2)

Amounts herein include cash flows from discontinued operations. Cash flows from
operating activities calculated in accordance with GAAP are not necessarily
indicative of the amount of cash available to pay distributions and as such our
board of directors uses other measures such as FFO and MFFO in order to evaluate
the level of distributions.

(3)

Our board of directors used a portion of the net sales proceeds from the MOB
Sale to declare a special cash distribution of $347.9 million, or $2.00 per
share of common stock. In addition, as a result of the MOB Sale, our board of
directors adjusted our regular quarterly cash distributions to an amount equal
to $0.0512 per share.

Results of Operations

Except for the impact from the COVID-19 pandemic as described above in
"COVID-19", we are not aware of other material trends or uncertainties,
favorable or unfavorable, that may be reasonably anticipated to have a material
impact on either capital resources or the revenues or income to be derived from
the operation of properties, other than those referred to in the risk factors
identified in "Part I, Item 1A" of this report.

The following discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the notes thereto.

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Fiscal year ended December 31, 2021 as compared to the fiscal year ended December 31, 2020

As of December 31, 2021, excluding the five properties owned by the unconsolidated joint venture and our unimproved land, we owned 67 consolidated operating investment properties.

                                                         Investment count as of December 31,
Consolidated operating investment types:                2021                             2020
Seniors housing leased                                            15                               15
Seniors housing managed                                           51                               51
Acute care leased                                                  1                                1
                                                                  67                               67




Rental Income and Related Revenues. Rental income and related revenues were
approximately $30.1 million and $26.3 million for the years ended December 31,
2021 and 2020, respectively. The increase in revenue was primarily due to
recording a write-off of $2.5 million during the year ended December 31, 2020,
representing deferred rent from prior GAAP straight-line adjustments and
unamortized lease costs, as well as establishing rent reserves of $0.8 million
for uncollected rents relating to our Hurst Specialty Hospital due to tenant
financial difficulties, and $2.2 million of rent collected from our Hurst
Specialty Hospital during 2021, partially offset by the sale of the six skilled
nursing facilities located in Arkansas ("Perennial Communities") in March 2020.

Resident Fees and Services. Resident fees and services income was approximately
$265.3 million and $280.9 million for the years ended December 31, 2021 and
2020, respectively. As described above in "COVID-19", resident fees and services
were negatively impacted starting in mid-March 2020 as a result of declines in
occupancy levels affected by move-in restrictions, intensified screening and
other measures enacted at our communities to address the spread of COVID-19.

Property Operating Expenses. Property operating expenses were approximately
$197.6 million and $193.4 million for the years ended December 31, 2021 and
2020, respectively. Property operating expenses increased during the year ended
December 31, 2021 primarily as a result of increased labor costs primarily
driven by higher wages and usage of agency labor in a tight labor market and an
increase in operating expenses due to inflation.

General and Administrative Expenses. General and administrative expenses were
approximately $9.1 million and $9.4 million for the years ended December 31,
2021 and 2020, respectively. General and administrative expenses were comprised
primarily of personnel expenses of affiliates of our Advisor, directors' and
officers' insurance, franchise taxes, accounting and legal fees, and board of
director fees.

Asset Management Fees. We incurred asset management fees of approximately $15.7
million and $18.1 million for the years ended December 31, 2021 and 2020,
respectively. Asset management fees are paid to our Advisor for the management
of our real estate assets, including our pro rata share of investments in
unconsolidated entities, loans and other permitted investments. In May 2021, our
Advisor amended the advisory agreement, effective May 26, 2021, to reduce asset
management fees from 1.0% per annum to 0.80% per annum of average invested
assets, resulting in reduced asset management fees expense for the year ended
December 31, 2021.

Property Management Fees. We incurred property management fees payable to our
third-party property managers of approximately $13.0 million and $13.8 million
for the years ended December 31, 2021 and 2020, respectively. The decrease
across periods is reflective of the decrease in resident fees and service
revenue over the same period.

Depreciation and Amortization. Depreciation and amortization expenses were
approximately $50.4 million and $51.8 million for the years ended December 31,
2021 and 2020, respectively. Depreciation and amortization expenses are
comprised of depreciation and amortization of the buildings, equipment, land
improvements and in-place leases related to our real estate portfolio.

Impairment Provision. As described above in "Liquidity and Capital Resources -
Tenant Financial Difficulties," in March 2022 we entered into a purchase and
sale agreement for the Hurst Specialty Hospital with an unrelated third party
for a gross sales price of $8.5 million. In conjunction therewith, we determined
that the carrying value of this

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property was not recoverable and during the year ended December 31, 2021, we
recorded an impairment provision of approximately $9.8 million to write-down the
value of our Hurst Specialty Hospital to its estimated sales proceeds expected
from the sale of the Hurst Specialty Hospital. There was no impairment provision
recorded during the year ended December 31, 2020.

Gain on Sale of Real Estate. We did not sell any properties from continuing
operations during the year ended December 31, 2021. Gain on sale of real estate
relating to the sale of the Perennial Communities was approximately $1.1 million
for the year ended December 31, 2020.

Interest and Other Income. Interest and other income was approximately $0.7
million and $5.7 million for the years ended December 31, 2021 and 2020,
respectively. Other income includes approximately $0.5 million and $5.3 million
in CARES Act Provider Relief Funds ("PRFs") recorded as other income during the
years ended December 31, 2021 and 2020, respectively, as conditions of the grant
were met. See "COVID-19" above and Item 8. "Financial Statements and
Supplemental Data - Note 2. Summary of Significant Accounting Policies -
Government Grant Income" for additional information.

Interest Expense and Loan Cost Amortization. Interest expense and loan cost
amortization were approximately $19.7 million and $24.3 million for the years
ended December 31, 2021 and 2020, respectively. The decrease in interest expense
and loan cost amortization was primarily the result of the reduction in average
debt outstanding as a result of principal repayments during 2020 and 2021 and a
reduction in weighted average interest costs as a result of refinancing
approximately $238.0 million of secured indebtedness in October 2021 with
proceeds from our Credit Facilities.

Income Tax Expense. We incurred income tax expense of approximately $4.2 million
and $1.1 million for the years ended December 31, 2021 and 2020, respectively.
The increase in income tax expense during the year ended December 31, 2021, is
primarily attributable to an increase in our valuation allowance of $3.6 million
against deferred tax assets driven by continued margin pressure on our managed
properties resulting from the COVID-19 pandemic and other market conditions,
including inflation.

Net Operating Income

We generally expect to meet future cash needs for general and administrative
expenses, debt service and distributions from NOI. We define NOI, a non-GAAP
measure, as total revenues less the property operating expenses and property
management fees from managed properties. We use NOI as a key performance metric
for internal monitoring and planning purposes, including the preparation of
annual operating budgets and monthly operating reviews, as well as to facilitate
analysis of future investment and business decisions. It does not represent cash
flows from operating activities in accordance with GAAP and should not be
considered to be an alternative to net income or loss (determined in accordance
with GAAP) as an indication of our operating performance or to be an alternative
to cash flows from operating activities (determined in accordance with GAAP) as
a measure of our liquidity. We believe the presentation of this non-GAAP measure
is important to the understanding of our operating results for the periods
presented because it is an indicator of the return on property investment and
provides a method of comparing property performance over time. In addition, we
have aggregated NOI on a "same-store" basis only for comparable properties that
we have owned during the entirety of all periods presented. Non-same-store NOI
represents NOI from the Perennial Communities that were sold in March 2020, as
we did not own those properties during the entirety of all periods presented.
The chart below presents a reconciliation of our net income to NOI for the years
ended December 31, 2021 and 2020 (in thousands) and the amount invested in
properties as of December 31, 2021 and 2020 (in millions), excluding properties
classified as discontinued operations:

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                                       Years Ended December 31,                  Change
                                       2021                2020             $              %
Net (loss) income                  $     (22,866 )     $      4,011
Adjusted to exclude:
General and administrative
expenses                                   9,116              9,413
Asset management fees                     15,733             18,051
Impairment provision                       9,790                  -
Depreciation and amortization             50,417             51,817
Gain on sale of real estate                    -             (1,074 )
Other expenses, net of other
income                                    18,505             17,580
Income tax expense                         4,174              1,098
Loss (income) from discontinued
operations                                    10               (954 )
NOI                                $      84,879       $     99,942     $  (15,063 )       (15.1 )%
Less: Non-same-store NOI                       -                962
Same-store NOI                     $      84,879       $     98,980     $  (14,101 )       (14.2 )%
Invested in operating
properties, end of period          $       1,768       $      1,768



Overall, our same-store NOI for the years ended December 31, 2021 and 2020
decreased by approximately $14.1 million, respectively, as compared to the same
period in the prior year. As described above in "COVID-19", same store NOI was
negatively impacted as a result of declines in property occupancy levels,
resident fees and services affected by move-in restrictions and an increase in
expenses related to intensified screening and other measures enacted at our
communities to address the spread of COVID-19 as well as rising costs from
inflation.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as
discussed below, the National Association of Real Estate Investment Trusts,
("NAREIT") promulgated a measure known as funds from operations ("FFO"), which
we believe to be an appropriate supplemental measure to reflect the operating
performance of a REIT. The use of FFO is recommended by the REIT industry as a
supplemental performance measure. FFO is not equivalent to net income or loss as
determined under GAAP.

We define FFO, a non-GAAP measure, consistent with the standards approved by the
Board of Governors of NAREIT. NAREIT defines FFO as net income or loss computed
in accordance with GAAP, excluding gains or losses from sales of property, real
estate asset impairment write-downs, plus depreciation and amortization of real
estate related assets, and after adjustments for unconsolidated partnerships and
joint ventures. Our FFO calculation complies with NAREIT's policy described
above.

The historical accounting convention used for real estate assets requires
straight-line depreciation of buildings and improvements, which implies that the
value of real estate assets diminishes predictably over time, especially if such
assets are not adequately maintained or repaired and renovated as required by
relevant circumstances and/or is requested or required by lessees for
operational purposes in order to maintain the value of the property. We believe
that, because real estate values historically rise and fall with market
conditions, including inflation, interest rates, the business cycle,
unemployment and consumer spending, presentations of operating results for a
REIT using historical accounting for depreciation may be less informative.
Historical accounting for real estate involves the use of GAAP. Any other method
of accounting for real estate such as the fair value method cannot be construed
to be any more accurate or relevant than the comparable methodologies of real
estate valuation found in GAAP. Nevertheless, we believe that the use of FFO,
which excludes the impact of real estate related depreciation and amortization,
provides a more complete understanding of our performance to investors and to
management, and when compared year over year, reflects the impact on our
operations from trends in occupancy rates, rental rates, operating costs,
general and administrative expenses, and interest costs, which may not be
immediately apparent from net income or loss. However, FFO and MFFO, as
described below, should not be construed to be more relevant or accurate than
the current GAAP methodology in calculating net income or loss in its
applicability in evaluating operating performance. The method utilized to
evaluate the value and performance of real estate under GAAP should be construed
as a more relevant measure of operational performance and considered more
prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP
in calculating FFO and MFFO.
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Changes in the accounting and reporting promulgations under GAAP (for
acquisition fees and expenses for business combinations from a
capitalization/depreciation model) to an expensed-as-incurred model that were
put into effect in 2009, and other changes to GAAP accounting for real estate
subsequent to the establishment of NAREIT's definition of FFO, have prompted an
increase in cash-settled expenses, specifically acquisition fees and expenses,
as items that are expensed under GAAP and accounted for as operating expenses.
Our management believes these fees and expenses do not affect our overall
long-term operating performance. Publicly registered, non-listed REITs typically
have a significant amount of acquisition activity and are substantially more
dynamic during their initial years of investment and operation. While other
start up entities may also experience significant acquisition activity during
their initial years, we believe that non-listed REITs are unique in that they
have a limited life with targeted exit strategies within a relatively limited
time frame after acquisition activity ceases. Due to the above factors and other
unique features of publicly registered, non-listed REITs, the IPA has
standardized a measure known as modified funds from operations ("MFFO") which
the IPA has recommended as a supplemental measure for publicly registered
non-listed REITs and which we believe to be another appropriate supplemental
measure to reflect the operating performance of a non-listed REIT. MFFO is not
equivalent to our net income or loss as determined under GAAP, and MFFO may not
be a useful measure of the impact of long-term operating performance on value if
we do not continue to operate with a limited life and targeted exit strategy, as
currently intended. We believe that because MFFO excludes costs that we consider
more reflective of investing activities and other non-operating items included
in FFO and also excludes acquisition fees and expenses that affect our
operations only in periods in which properties are acquired, MFFO can provide,
on a going forward basis, an indication of the sustainability (that is, the
capacity to continue to be maintained) of our operating performance after the
period in which we acquired our properties and once our portfolio is in place.
By providing MFFO, we believe we are presenting useful information that assists
investors and analysts to better assess the sustainability of our operating
performance after our properties have been acquired. We also believe that MFFO
is a recognized measure of sustainable operating performance by the non-listed
REIT industry.

We define MFFO, a non-GAAP measure, consistent with the IPA's Guideline 2010-01,
Supplemental Performance Measure for Publicly Registered, Non-Listed REITs:
MFFO, or the Practice Guideline, issued by the IPA in November 2010. The
Practice Guideline defines MFFO as FFO further adjusted for the following items,
as applicable, included in the determination of GAAP net income or loss:
acquisition fees and expenses; amounts relating to deferred rent receivables and
amortization of above and below market leases and liabilities (which are
adjusted from a GAAP accrual basis in order to reflect such payments on a cash
basis of amounts expected to be received for such lease and rental payments);
contingent purchase price consideration adjustments; accretion of discounts and
amortization of premiums on debt investments; mark-to-market adjustments
included in net income or loss; gains or losses included in net income from the
extinguishment or sale of debt, hedges, foreign exchange, derivatives or
securities holdings where trading of such holdings is not a fundamental
attribute of the business plan; and unrealized gains or losses resulting from
consolidation from, or deconsolidation to, equity accounting and after
adjustments for consolidated and unconsolidated partnerships and joint ventures,
with such adjustments calculated to reflect MFFO on the same basis. The
accretion of discounts and amortization of premiums on debt investments,
unrealized gains and losses on hedges, foreign exchange, derivatives or
securities holdings, unrealized gains and losses resulting from consolidations,
as well as other listed cash flow adjustments are adjustments made to net income
or loss in calculating the cash flows provided by operating activities and, in
some cases, reflect gains or losses which are unrealized and may not ultimately
be realized.

Our MFFO calculation complies with the IPA's Practice Guideline described above.
In calculating MFFO, we exclude acquisition related expenses. Under GAAP,
acquisition fees and expenses are characterized as operating expenses in
determining operating net income or loss. These expenses are paid in cash by us.
All paid and accrued acquisition fees and expenses will have negative effects on
returns to investors, the potential for future distributions, and cash flows
generated by us, unless earnings from operations or net sales proceeds from the
disposition of other properties are generated to cover the purchase price of the
property.

Our management uses MFFO and the adjustments used to calculate it in order to
evaluate our performance against other non-listed REITs which have limited lives
with short and defined acquisition periods and targeted exit strategies shortly
thereafter. As noted above, MFFO may not be a useful measure of the impact of
long-term operating performance on value if we do not continue to operate in
this manner. We believe that our use of MFFO and the adjustments used to
calculate it allow us to present our performance in a manner that reflects
certain characteristics that are unique to non-listed REITs, such as their
limited life, limited and defined acquisition period and targeted exit
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strategy, and hence that the use of such measures is useful to investors. For
example, acquisition costs are funded from our subscription proceeds and other
financing sources and not from operations.

By excluding expensed acquisition costs, the use of MFFO provides information consistent with management's analysis of the operating performance of the properties.

Presentation of this information is intended to provide useful information to
investors as they compare the operating performance of different non-listed
REITs, although it should be noted that not all REITs calculate FFO and MFFO the
same way and as such comparisons with other REITs may not be meaningful.
Furthermore, FFO and MFFO are not necessarily indicative of cash flows available
to fund cash needs and should not be considered as an alternative to net income
(or loss) or income (or loss) from continuing operations as an indication of our
performance, as an alternative to cash flows from operations, as an indication
of our liquidity, or indicative of funds available to fund our cash needs
including our ability to make distributions to our stockholders. FFO and MFFO
should be reviewed in conjunction with other GAAP measurements as an indication
of our performance. MFFO is useful in assisting management and investors in
assessing the sustainability of operating performance in future operating
periods.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the
acceptability of the adjustments we use to calculate FFO or MFFO. In the future,
the SEC, NAREIT or another regulatory body may decide to standardize the
allowable adjustments across the non-listed REIT industry and we would have to
adjust our calculation and characterization of FFO or MFFO.


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The following table presents a reconciliation of net income to FFO and MFFO for
the years ended December 31, 2021, 2020 and 2019 (in thousands, except per share
data):

                                                        Year Ended December 31,
                                                   2021           2020           2019
Net (loss) income attributable to common
stockholders                                    $  (22,882 )   $    3,912     $  351,496
Adjustments:
Depreciation and amortization:
Continuing operations                               50,417         51,817         49,823
Impairment provision:
Continuing operations                                9,790              -              -
Gain on sale of real estate:
Continuing operations                                    -         (1,074 )         (432 )
Discontinued operations                                  -              -       (336,074 )
FFO adjustments attributable to
noncontrolling interests:
Continuing operations                                 (184 )         (192 )         (192 )
Discontinued operations                                  -              -            261
FFO adjustments from unconsolidated entities
(1)                                                    947            266   

112

FFO attributable to common stockholders             38,088         54,729   

64,994

Straight-line rent adjustments: (2)
Continuing operations                                1,231          1,697   

733

Discontinued operations                                  -              -         (1,242 )
Write-off of lease related costs: (3)
Continuing operations                                    -          2,468              -
Discontinued operations                                  -            103   

67

Amortization of premium for debt investments:
Continuing operations                                  (42 )          (42 )          (42 )
Realized gain on extinguishment of debt: (4)
Continuing operations                                   43             35   

1,163

Discontinued operations                                  -              -   

3,339

Unrealized gain on investment in short term
securities: (5)
Continuing operations                                    -             11            186
Discontinued operations                                  -              -           (429 )
MFFO adjustments attributable to
noncontrolling
  interests:
Continuing operations                                    1              9              -
Discontinued operations                                  -              -             (9 )
MFFO attributable to common stockholders        $   39,321     $   59,010     $   68,760
Weighted average number of shares of common
  stock outstanding (basic and diluted)            173,960        173,960   

173,963

Net (loss) income per share (basic and
diluted)                                        $    (0.13 )   $     0.02     $     2.02
FFO per share (basic and diluted)               $     0.22     $     0.31     $     0.37
MFFO per share (basic and diluted)              $     0.23     $     0.34     $     0.40


________________
FOOTNOTES:

(1)

This amount represents our share of the FFO or MFFO adjustments allowable under the NAREIT or IPA definitions, respectively, calculated using the HLBV method.

(2)

Under GAAP, rental receipts are allocated to periods using various
methodologies. This may result in income or expense recognition that is
significantly different than underlying contract terms. By adjusting for these
items (from a GAAP accrual basis in order to reflect such payments on a cash
basis of amounts expected to be received for such lease and rental payments),
MFFO provides useful supplemental information on the realized economic impact of
lease terms and debt investments, providing insight on the contractual cash
flows of such lease terms and debt investments, and aligns results with
management's analysis of operating performance.

(3)

Management believes that adjusting for write-offs of lease related assets is
appropriate because they are non-cash adjustments that may not be reflective of
our ongoing operating performance and, as a result, the adjustments better align
results with management's analysis of operating performance. In 2020, we
recorded write-offs totaling approximately $2.6 million for deferred rent from
prior GAAP straight-line adjustments, unamortized lease costs and lease related
intangibles.

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(4)

Management believes that adjusting for the realized gain on the extinguishment
of debt, hedges or other derivatives is appropriate because the adjustments are
not reflective of our ongoing operating performance and, as a result, the
adjustments better align results with management's analysis of operating
performance.

(5)

Management believes that adjusting for the unrealized gain on investment in
short term securities is appropriate because the adjustment is not reflective of
our ongoing operating performance and, as a result, the adjustments better align
results with management's analysis of operating performance.

Related-Party Transactions

Our Advisor and its affiliates are entitled to reimbursement of certain costs
incurred on our behalf in connection with our organization, acquisitions,
dispositions and operating activities. To the extent that operating expenses
payable or reimbursable by us in any four consecutive fiscal quarters ("Expense
Year"), commencing with the Expense Year ending June 30, 2013, exceed the
greater of 2% of average invested assets or 25% of net income, the Advisor shall
reimburse us, within 60 days after the end of the Expense Year, the amount by
which the total operating expenses paid or incurred by us exceed the greater of
the 2% or 25% threshold. Notwithstanding the above, we may reimburse the Advisor
for expenses in excess of this limitation if a majority of our independent
directors determines that such excess expenses are justified based on unusual
and non-recurring factors. For the Expense Year ended December 31, 2021, the
Company did not incur operating expenses in excess of the limitation.

See Item 8. "Financial Statements and Supplemental Data - Note 10. Related Party Arrangements" in the accompanying consolidated financial statements for additional information.

Critical Accounting Policies and Estimates

Below is a discussion of the accounting policies that management believes are
critical. We consider these policies critical because they involve difficult
management judgments and assumptions, require estimates about matters that are
inherently uncertain and because they are important for understanding and
evaluating our reported financial results. These judgments will affect the
reported amounts of assets and liabilities and our disclosure of contingent
assets and liabilities at the dates of the financial statements and the reported
amounts of revenue and expenses during the reporting periods. With different
estimates or assumptions, materially different amounts could be reported in our
financial statements. Additionally, other companies may utilize different
estimates that may impact the comparability of our results of operations to
those of companies in similar businesses. Our most sensitive estimates will
involve the allocation of the purchase price of acquired properties and
evaluating our real estate-related investments for impairment. See Item 8.
"Financial Statements and Supplemental Data - Note 2. Summary of Significant
Accounting Policies" in the accompanying consolidated financial statements for
additional information.

Basis of Presentation and Consolidation. Our consolidated financial statements
will include our accounts, the accounts of our wholly owned subsidiaries or
subsidiaries for which we have a controlling interest, the accounts of variable
interest entities ("VIEs") in which we are the primary beneficiary, and the
accounts of other subsidiaries over which we have a controlling financial
interest. All material intercompany accounts and transactions will be eliminated
in consolidation.

In accordance with the guidance for the consolidation of a VIE, we are required
to identify entities for which control is achieved through means other than
voting rights and to determine the primary beneficiary of our VIEs. We
qualitatively assess whether we are the primary beneficiary of a VIE and
consider various factors including, but not limited to, the design of the
entity, its organizational structure including decision-making ability and
financial agreements, our ability and the rights of others to participate in
policy making decisions, as well as our ability to replace the VIE manager
and/or liquidate the entity.

Risks and Uncertainties - The outbreak of the COVID-19 pandemic around the globe
continues to adversely impact commercial activity and has contributed to
significant volatility in financial markets. Various states in which the Company
owns properties have reacted by, among other things, instituting quarantines and
move-in restrictions that have negatively impacted occupancy at seniors housing
communities. While some of these restrictions have been relaxed, many still
remain in place. The pandemic has also resulted in the incurrence of costs
related to disease control and containment. Such actions have and continue to
create significant business disruption and have and continue to adversely impact
the senior housing sector. COVID-19 has had a continued and prolonged adverse
impact on

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economic and market conditions and has triggered a period of economic slowdown
which may have a material adverse effect on the Company's results and financial
condition.

The COVID-19 pandemic has had and may continue to have a material and adverse
impact on our financial condition, results of operations and cash flows. The
extent of the continued impact of COVID-19 on our financial condition, results
of operations and cash flows is uncertain and cannot be predicted at the current
time as it depends on several factors beyond our control including, but not
limited to (i) the severity and duration of the outbreak caused by new variants
of the virus, (ii) the effectiveness and acceptance of vaccines, (iii) the
pandemic's impact on the U.S. and global economies, (iv) the timing, scope and
effectiveness of additional governmental responses to the pandemic and (v) the
timing and speed of economic recovery.

Use of Estimates. The preparation of financial statements in conformity with
GAAP requires us to make estimates and assumptions that affect the reported
amounts of assets and liabilities as of the date of the consolidated financial
statements, the reported amounts of revenues and expenses during the reporting
periods and the disclosure of contingent liabilities. For example, significant
assumptions are made in the analysis of real estate impairments, the valuation
of contingent assets and liabilities, and the valuation of restricted common
stock shares issued to the Advisor. Accordingly, actual results could differ
from those estimates.

Assets Held For Sale, net and Discontinued Operations - The Company determines
to classify a property as held for sale once management has the authority to
approve and commits to a plan to sell the property, the property is available
for immediate sale, there is an active program to locate a buyer, the sale of
the property is probable and the transfer of the property is expected to occur
within one year. Upon the determination to classify a property as held for sale,
the Company ceases recording further depreciation and amortization relating to
the associated assets and those assets are measured at the lower of its carrying
amount or fair value less disposition costs and are presented separately in the
consolidated balance sheets for all periods presented. In addition, the Company
classifies assets held for sale as discontinued operations if the disposal
represents a strategic shift that has (or will have) a major effect on the
Company's operations and financial results. For any disposal(s) qualifying as
discontinued operations, the Company allocates interest expense and loan cost
amortization that directly relates to either: (1) expense on mortgages and other
notes payable collateralized by properties classified as discontinued
operations; or (2) expense on the Company's Credit Facilities, which is
allocated based on the value of the properties that are classified as
discontinued operations since these properties are included in the Credit
Facilities' unencumbered pool of assets and the related indebtedness is required
to be repaid upon sale of the properties.

Impairment of Real Estate Assets. Real estate assets are reviewed on an ongoing
basis to determine whether there are any impairment indicators. Management
considers potential impairment indicators to primarily include (i) changes in a
real estate asset's operating performance, such as a current period net
operating loss combined with a history of net operating losses, or changes in a
lease which demonstrate potential future losses associated with the use of a
real estate asset or (ii) a current expectation that, more likely than not, a
real estate asset will be sold or otherwise disposed of significantly before the
end of its previously estimated holding period. To assess if an asset group is
potentially impaired, we compare the estimated current and projected
undiscounted cash flows, including estimated net sales proceeds, of the asset
group over its remaining useful life, or our estimated holding period if
shorter, to the net carrying value of the asset group. Such cash flow
projections consider factors such as expected future operating income, trends
and prospects, as well as the effects of demand, competition and other factors.
In the event that the carrying value exceeds the undiscounted operating cash
flows, we would recognize an impairment provision to adjust the carrying value
of the asset group to the estimated fair value of the asset group. In March
2022, we received an unsolicited offer and entered into a purchase and sale
agreement for the Hurst Specialty Hospital with an unrelated third party for a
gross sales price of $8.5 million. In conjunction therewith, we determined that
the carrying value of this property was not recoverable and during the year
ended December 31, 2021, we recorded an impairment provision of approximately
$9.8 million to write-down the value of our Hurst Specialty Hospital to its
estimated sales proceeds expected from the sale of the Hurst Specialty Hospital.

When impairment indicators are present for real estate indirectly owned, through
an investment in a joint venture or other similar investment structure accounted
for under the equity method, we will compare the estimated fair value of our
investment to the carrying value. An impairment charge will be recorded to the
extent the fair value of our investment is less than the carrying amount and the
decline in value is determined to be other than a temporary decline.

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Income Taxes. To qualify as a REIT, we are subject to certain organizational and
operational requirements, including a requirement to distribute to stockholders
each year at least 90% of our annual REIT taxable income (which is computed
without regard to the dividends-paid deduction or net capital gain and which
does not necessarily equal net income as calculated in accordance with GAAP). As
a REIT, we generally will not be subject to U.S. federal income tax on income
that we distribute as dividends to our stockholders. If we fail to qualify as a
REIT in any taxable year, we will be subject to U.S. federal income tax on our
taxable income at regular corporate income tax rates and generally will not be
permitted to qualify for treatment as a REIT for federal income tax purposes for
the four taxable years following the year during which qualification is lost,
unless the IRS grants us relief under certain statutory provisions. Even if we
qualify for taxation as a REIT, we may be subject to certain state and local
taxes on our income and property, and U.S. federal income and excise taxes on
our undistributed income.

We have and will continue to form subsidiaries which may elect to be taxed as a
TRS for U.S. federal income tax purposes. Under the provisions of the Internal
Revenue Code and applicable state laws, a TRS will be subject to tax on its
taxable income from its operations. We will account for federal and state income
taxes with respect to a TRS using the asset and liability method. Deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the consolidated financial statement
carrying amounts of existing assets and liabilities, the respective tax bases,
operating losses and/or tax-credit carryforwards.

Revenue Recognition. Rental income and related revenues for operating leases are
recognized based on the assessment of collectability of lease payments. When
collectability is probable at commencement of the lease, lease income is
recognized on an accrual basis and includes rental income that is recorded on
the straight-line basis over the term of the lease. Collectability is reassessed
during the lease term. When collectability of lease payments is no longer
probable, lease income is recorded on a cash basis and limited to the amount of
lease payments collected. In addition, lease related costs (the deferred rent
from prior GAAP straight-line adjustments, unamortized lease costs and other
lease related intangibles) are written-off when the Company determines that
these assets are no longer realizable.

Rental income and related revenues recorded on an accrual basis include rental
income that is recorded on the straight-line basis over the terms of the leases
for new leases and the remaining terms of existing leases for those acquired as
part of a property acquisition. The straight-line method records the periodic
average amount of base rent earned over the term of a lease, taking into account
contractual rent increases over the lease term. We record the difference between
base rent revenues earned and amounts due per the respective lease agreements,
as applicable, as an increase or decrease to deferred rent and lease incentives
in the accompanying consolidated balance sheets.

Rental income and related revenues also includes tenant reimbursements that represent amounts tenants are required to reimburse us for expenses incurred on behalf of the tenants, in accordance with the terms of the leases and are recognized in the period in which the related reimbursable expenses are incurred, such as real estate taxes, common area maintenance, and similar items.

We account for our resident agreements as a single performance obligation under
ASC 606 given our overall promise to provide a series of stand-ready goods and
services to our residents each month. Resident fees and services are recorded in
the period in which the goods are provided and the services are performed and
generally consist of (1) monthly rent, which covers occupancy of the residents'
unit as well as basic services, such as utilities, meals and certain
housekeeping services, and (2) service level charges, such as assisted living
care, memory care and ancillary services. Resident agreements are generally
short-term in nature, billed monthly in advance and cancelable by the residents
with a 30-day notice. Resident agreements may require the payment of upfront
fees prior to moving into the community with any non-refundable portion of such
fees being recorded as deferred revenue and amortized over the estimated
resident stay.

Impact of Accounting Pronouncements

See Item 8. "Financial Statements and Supplemental Data - Note 2. Summary of
Significant Accounting Policies" for additional information about the impact of
accounting pronouncements.



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