Company Quick10K Filing
Griffin-American Healthcare REIT III
Price-0.00 EPS-0
Shares197 P/E0
MCap-0 P/FCF-0
Net Debt745 EBIT52
TEV745 TEV/EBIT14
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-15
10-K 2019-12-31 Filed 2020-03-26
10-Q 2019-09-30 Filed 2019-11-14
10-Q 2019-06-30 Filed 2019-08-14
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-03-21
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-16
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-15
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-13
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-14
10-K 2014-12-31 Filed 2015-03-19
10-Q 2014-09-30 Filed 2014-11-12
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-07
8-K 2020-06-10
8-K 2020-06-10
8-K 2020-05-29
8-K 2020-05-22
8-K 2020-04-23
8-K 2020-04-08
8-K 2020-03-31
8-K 2020-02-11
8-K 2020-01-29
8-K 2019-12-17
8-K 2019-11-20
8-K 2019-10-29
8-K 2019-10-03
8-K 2019-09-25
8-K 2019-09-05
8-K 2019-08-22
8-K 2019-06-12
8-K 2019-05-28
8-K 2019-05-22
8-K 2019-05-16
8-K 2019-03-29
8-K 2019-03-19
8-K 2019-02-13
8-K 2019-01-25
8-K 2018-12-20
8-K 2018-12-11
8-K 2018-12-10
8-K 2018-10-03
8-K 2018-10-01
8-K 2018-09-26
8-K 2018-08-31
8-K 2018-08-16
8-K 2018-06-20
8-K 2018-06-11
8-K 2018-05-17
8-K 2018-03-26
8-K 2018-03-19
8-K 2018-02-14

GAHR 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 ex311-2020xq110xqgahr3.htm
EX-31.2 ex312-2020xq110xqgahr3.htm
EX-32.1 ex321-2020xq110xqgahr3.htm
EX-32.2 ex322-2020xq110xqgahr3.htm

Griffin-American Healthcare REIT III Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
3.22.61.91.30.60.02014201620182020
Assets, Equity
0.40.30.20.10.0-0.12014201620182020
Rev, G Profit, Net Income
0.90.50.2-0.2-0.5-0.92014201620182020
Ops, Inv, Fin

10-Q 1 gahr3-10xq2020xq1.htm 10-Q Document

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

(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                    to                     
Commission File Number: 000-55434
GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
(Exact name of registrant as specified in its charter)

Maryland
 
46-1749436
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
18191 Von Karman Avenue, Suite 300,
Irvine, California
 
92612
(Address of principal executive offices)
 
(Zip Code)

(949) 270-9200
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
None
 
None
 
None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    x  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
¨
Accelerated filer
¨
 
Non-accelerated filer
x
Smaller reporting company
¨
 
 
 
Emerging growth company
¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ¨  Yes   x  No
As of May 8, 2020, there were 194,166,914 shares of common stock of Griffin-American Healthcare REIT III, Inc. outstanding.
 
 
 
 
 



GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
(A Maryland Corporation)
TABLE OF CONTENTS
 
 
Page
 
 
 
 
 


2


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2020 and December 31, 2019
(Unaudited)
 
March 31,
2020
 
December 31,
2019
ASSETS
Real estate investments, net
$
2,279,757,000

 
$
2,270,421,000

Debt security investment, net
73,476,000

 
72,717,000

Cash and cash equivalents
44,683,000

 
53,149,000

Accounts and other receivables, net
139,848,000

 
144,130,000

Restricted cash
36,831,000

 
36,731,000

Real estate deposits
38,000

 
223,000

Identified intangible assets, net
159,031,000

 
160,247,000

Goodwill
75,309,000

 
75,309,000

Operating lease right-of-use assets, net
218,031,000

 
219,187,000

Other assets, net
140,045,000

 
140,175,000

Total assets
$
3,167,049,000

 
$
3,172,289,000

 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
 
 
 
Mortgage loans payable, net(1)
$
797,774,000

 
$
792,870,000

Lines of credit and term loans(1)
834,379,000

 
815,879,000

Accounts payable and accrued liabilities(1)
161,829,000

 
171,394,000

Accounts payable due to affiliates(1)
2,238,000

 
2,321,000

Identified intangible liabilities, net
570,000

 
663,000

Financing obligations(1)
29,303,000

 
30,918,000

Operating lease liabilities(1)
206,922,000

 
207,371,000

Security deposits, prepaid rent and other liabilities(1)
55,361,000

 
48,105,000

Total liabilities
2,088,376,000

 
2,069,521,000

 
 
 
 
Commitments and contingencies (Note 11)

 

 
 
 
 
Redeemable noncontrolling interests (Note 12)
44,543,000

 
44,105,000

 
 
 
 
Equity:
 
 
 
Stockholders’ equity:
 
 
 
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding

 

Common stock, $0.01 par value per share; 1,000,000,000 shares authorized; 195,365,495 and 193,967,474 shares issued and outstanding as of March 31, 2020 and December 31, 2019, respectively
1,953,000

 
1,939,000

Additional paid-in capital
1,741,580,000

 
1,728,421,000

Accumulated deficit
(866,614,000
)
 
(827,550,000
)
Accumulated other comprehensive loss
(2,788,000
)
 
(2,255,000
)
Total stockholders’ equity
874,131,000

 
900,555,000

Noncontrolling interests (Note 13)
159,999,000

 
158,108,000

Total equity
1,034,130,000

 
1,058,663,000

Total liabilities, redeemable noncontrolling interests and equity
$
3,167,049,000

 
$
3,172,289,000


3


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
As of March 31, 2020 and December 31, 2019
(Unaudited)

___________
(1)
Such liabilities of Griffin-American Healthcare REIT III, Inc. as of March 31, 2020 and December 31, 2019 represented liabilities of Griffin-American Healthcare REIT III Holdings, LP or its consolidated subsidiaries. Griffin-American Healthcare REIT III Holdings, LP is a variable interest entity, or VIE, and a consolidated subsidiary of Griffin-American Healthcare REIT III, Inc. The creditors of Griffin-American Healthcare REIT III Holdings, LP or its consolidated subsidiaries do not have recourse against Griffin-American Healthcare REIT III, Inc., except for the 2019 Corporate Line of Credit, as defined in Note 8, held by Griffin-American Healthcare REIT III Holdings, LP in the amount of $562,500,000 and $557,000,000 as of March 31, 2020 and December 31, 2019, respectively, which is guaranteed by Griffin-American Healthcare REIT III, Inc.
The accompanying notes are an integral part of these condensed consolidated financial statements.

4


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)


 
Three Months Ended March 31,
 
2020
 
2019
Revenues:
 
 
 
Resident fees and services
$
289,926,000

 
$
268,282,000

Real estate revenue
30,118,000

 
32,776,000

Total revenues
320,044,000

 
301,058,000

Expenses:
 
 
 
Property operating expenses
255,740,000

 
234,952,000

Rental expenses
8,170,000

 
8,425,000

General and administrative
6,574,000

 
6,917,000

Acquisition related expenses
234,000

 
(696,000
)
Depreciation and amortization
25,087,000

 
25,628,000

Total expenses
295,805,000

 
275,226,000

Other income (expense):
 
 
 
Interest expense:
 
 
 
Interest expense (including amortization of deferred financing costs and debt discount/premium)
(18,534,000
)
 
(19,059,000
)
Loss in fair value of derivative financial instruments
(8,183,000
)
 
(560,000
)
Impairment of real estate investments
(5,102,000
)
 

Loss from unconsolidated entities
(904,000
)
 
(454,000
)
Foreign currency (loss) gain
(3,065,000
)
 
1,042,000

Other income
555,000

 
208,000

(Loss) income before income taxes
(10,994,000
)
 
7,009,000

Income tax benefit (expense)
3,211,000

 
(151,000
)
Net (loss) income
(7,783,000
)
 
6,858,000

Less: net income attributable to noncontrolling interests
(2,127,000
)
 
(1,348,000
)
Net (loss) income attributable to controlling interest
$
(9,910,000
)
 
$
5,510,000

Net (loss) income per common share attributable to controlling interest — basic and diluted
$
(0.05
)
 
$
0.03

Weighted average number of common shares outstanding — basic and diluted
194,844,516

 
198,400,657

 
 
 
 
Net (loss) income
$
(7,783,000
)
 
$
6,858,000

Other comprehensive (loss) income:
 
 
 
Foreign currency translation adjustments
(533,000
)
 
219,000

Total other comprehensive (loss) income
(533,000
)
 
219,000

Comprehensive (loss) income
(8,316,000
)
 
7,077,000

Less: comprehensive income attributable to noncontrolling interests
(2,127,000
)
 
(1,348,000
)
Comprehensive (loss) income attributable to controlling interest
$
(10,443,000
)
 
$
5,729,000

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

5


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)


 
Stockholders’ Equity
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
of
Shares
 
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total Equity
 
BALANCE — December 31, 2019
193,967,474

 
$
1,939,000

 
$
1,728,421,000

 
$
(827,550,000
)
 
$
(2,255,000
)
 
$
900,555,000

 
$
158,108,000

 
$
1,058,663,000

 
Issuance of common stock under the DRIP
1,398,021

 
14,000

 
13,127,000

 

 

 
13,141,000

 

 
13,141,000

 
Amortization of nonvested common stock compensation

 

 
43,000

 

 

 
43,000

 

 
43,000

 
Stock based compensation

 

 

 

 

 

 
195,000

 
195,000

 
Distributions to noncontrolling interests

 

 

 

 

 

 
(4,000
)
 
(4,000
)
 
Reclassification of noncontrolling interests to mezzanine equity

 

 

 

 

 

 
(195,000
)
 
(195,000
)
 
Fair value adjustment to redeemable noncontrolling interests

 

 
(11,000
)
 

 

 
(11,000
)
 
(4,000
)
 
(15,000
)
 
Distributions declared ($0.15 per share)

 

 

 
(29,154,000
)
 

 
(29,154,000
)
 

 
(29,154,000
)
 
Net (loss) income

 

 

 
(9,910,000
)
 

 
(9,910,000
)
 
1,899,000

 
(8,011,000
)
(1
)
Other comprehensive loss

 

 

 

 
(533,000
)
 
(533,000
)
 

 
(533,000
)
 
BALANCE — March 31, 2020
195,365,495

 
$
1,953,000

 
$
1,741,580,000

 
$
(866,614,000
)
 
$
(2,788,000
)
 
$
874,131,000

 
$
159,999,000

 
$
1,034,130,000

 
 
Stockholders’ Equity
 
 
 
 
 
 
Common Stock
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Number
of
Shares
 
Amount
 
Additional
Paid-In
Capital
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Loss
 
Total
Stockholders’
Equity
 
Noncontrolling
Interests
 
Total Equity
 
BALANCE — December 31, 2018
197,557,377

 
$
1,975,000

 
$
1,765,840,000

 
$
(704,748,000
)
 
$
(2,560,000
)
 
$
1,060,507,000

 
$
158,128,000

 
$
1,218,635,000

 
Offering costs — common stock

 

 
(83,000
)
 

 

 
(83,000
)
 

 
(83,000
)
 
Issuance of common stock under the DRIP
1,515,098

 
15,000

 
14,181,000

 

 

 
14,196,000

 

 
14,196,000

 
Amortization of nonvested common stock compensation

 

 
43,000

 

 

 
43,000

 

 
43,000

 
Stock based compensation

 

 

 

 

 

 
195,000

 
195,000

 
Repurchase of common stock
(3,883,716
)
 
(39,000
)
 
(36,447,000
)
 

 

 
(36,486,000
)
 

 
(36,486,000
)
 
Contributions from noncontrolling interests

 

 

 

 

 

 
3,000,000

 
3,000,000

 
Distributions to noncontrolling interests

 

 

 

 

 

 
(1,817,000
)
 
(1,817,000
)
 
Reclassification of noncontrolling interests to mezzanine equity

 

 

 

 

 

 
(195,000
)
 
(195,000
)
 
Fair value adjustment to redeemable noncontrolling interests

 

 
177,000

 

 

 
177,000

 
76,000

 
253,000

 
Distributions declared ($0.15 per share)

 

 

 
(29,360,000
)
 

 
(29,360,000
)
 

 
(29,360,000
)
 
Net income

 

 

 
5,510,000

 

 
5,510,000

 
1,208,000

 
6,718,000

(1
)
Other comprehensive income

 

 

 

 
219,000

 
219,000

 

 
219,000

 
BALANCE — March 31, 2019
195,188,759

 
$
1,951,000

 
$
1,743,711,000

 
$
(728,598,000
)
 
$
(2,341,000
)
 
$
1,014,723,000

 
$
160,595,000

 
$
1,175,318,000

 
___________
(1)
For the three months ended March 31, 2020 and 2019, amounts exclude $228,000 and $140,000, respectively, of net income attributable to redeemable noncontrolling interests. See Note 12, Redeemable Noncontrolling Interests, for a further discussion.
The accompanying notes are an integral part of these condensed consolidated financial statements.

6


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)

 
Three Months Ended March 31,
 
2020
 
2019
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net (loss) income
$
(7,783,000
)
 
$
6,858,000

Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
Depreciation and amortization
25,087,000

 
25,628,000

Other amortization
7,689,000

 
7,577,000

Deferred rent
(1,096,000
)
 
(1,746,000
)
Stock based compensation
195,000

 
195,000

Stock based compensation — nonvested restricted common stock
43,000

 
43,000

Loss from unconsolidated entities
904,000

 
454,000

Bad debt expense

 
448,000

Foreign currency loss (gain)
3,007,000

 
(1,042,000
)
Deferred income taxes
(3,329,000
)
 
6,000

Change in fair value of contingent consideration

 
(681,000
)
Change in fair value of derivative financial instruments
8,183,000

 
560,000

Impairment of real estate investments
5,102,000

 

Changes in operating assets and liabilities:
 
 
 
Accounts and other receivables
5,039,000

 
(5,756,000
)
Other assets
(3,104,000
)
 
780,000

Accounts payable and accrued liabilities
(6,090,000
)
 
(132,000
)
Accounts payable due to affiliates
(35,000
)
 
21,000

Security deposits, prepaid rent, operating lease and other liabilities
(7,929,000
)
 
(7,913,000
)
Net cash provided by operating activities
25,883,000

 
25,300,000

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Acquisitions of real estate investments
(1,478,000
)
 
(16,036,000
)
Investments in unconsolidated entities
(350,000
)
 
(1,100,000
)
Capital expenditures
(37,217,000
)
 
(16,722,000
)
Real estate and other deposits
(173,000
)
 
(187,000
)
Net cash used in investing activities
(39,218,000
)

(34,045,000
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Borrowings under mortgage loans payable
8,239,000

 
6,080,000

Payments on mortgage loans payable
(3,137,000
)
 
(2,867,000
)
Borrowings under the lines of credit and term loans
28,500,000

 
651,501,000

Payments on the lines of credit and term loans
(10,000,000
)
 
(585,500,000
)
Payments under financing obligations
(1,615,000
)
 
(2,133,000
)
Deferred financing costs
(849,000
)
 
(6,020,000
)
Repurchase of common stock

 
(36,486,000
)
Repurchase of stock warrants and redeemable noncontrolling interest

 
(78,000
)
Contributions from noncontrolling interests

 
3,000,000

Distributions to noncontrolling interests

 
(1,813,000
)
Distributions to redeemable noncontrolling interests

 
(485,000
)
Security deposits and other
(3,000
)
 
(97,000
)

7


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
For the Three Months Ended March 31, 2020 and 2019
(Unaudited)

 
Three Months Ended March 31,
 
2020
 
2019
Distributions paid
$
(16,032,000
)
 
$
(15,227,000
)
Net cash provided by financing activities
5,103,000

 
9,875,000

NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH
$
(8,232,000
)
 
$
1,130,000

EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH
(134,000
)
 
41,000

CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period
89,880,000

 
72,705,000

CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period
$
81,514,000

 
$
73,876,000

 
 
 
 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
 
 
 
Beginning of period:
 
 
 
Cash and cash equivalents
$
53,149,000

 
$
35,132,000

Restricted cash
36,731,000

 
37,573,000

Cash, cash equivalents and restricted cash
$
89,880,000

 
$
72,705,000

 
 
 
 
End of period:
 
 
 
Cash and cash equivalents
$
44,683,000

 
$
34,904,000

Restricted cash
36,831,000

 
38,972,000

Cash, cash equivalents and restricted cash
$
81,514,000

 
$
73,876,000

 
 
 
 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
 
 
Cash paid for:
 
 
 
Interest
$
17,181,000

 
$
16,345,000

Income taxes
$
111,000

 
$
160,000

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES
 
 
 
Investing Activities:
 
 
 
Accrued capital expenditures
$
22,579,000

 
$
9,309,000

Capital expenditures from financing obligations
$

 
$
2,563,000

Tenant improvement overage
$
896,000

 
$
313,000

The following represents the increase in certain liabilities in connection with our acquisitions of real estate investments:
 
 
 
Accounts payable and accrued liabilities
$

 
$
37,000

Prepaid rent
$

 
$
105,000

Financing Activities:
 
 
 
Issuance of common stock under the DRIP
$
13,141,000

 
$
14,196,000

Distributions declared but not paid
$
9,955,000

 
$
10,125,000

Reclassification of noncontrolling interests to mezzanine equity
$
195,000

 
$
195,000

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

8


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended March 31, 2020 and 2019
The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT III, Inc. and its subsidiaries, including Griffin-American Healthcare REIT III Holdings, LP, except where otherwise noted.
1. Organization and Description of Business
Griffin-American Healthcare REIT III, Inc., a Maryland corporation, was incorporated on January 11, 2013 and therefore, we consider that our date of inception. We were initially capitalized on January 15, 2013. We invest in a diversified portfolio of real estate properties, focusing primarily on medical office buildings, hospitals, skilled nursing facilities, senior housing and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). We also originate and acquire secured loans and may also originate and acquire other real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income. We qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes beginning with our taxable year ended December 31, 2014, and we intend to continue to qualify to be taxed as a REIT.
On February 26, 2014, we commenced a best efforts initial public offering, or our initial offering, in which we offered to the public up to $1,900,000,000 in shares of our common stock. As of April 22, 2015, the deregistration date of our initial offering, we had received and accepted subscriptions in our initial offering for 184,930,598 shares of our common stock, or $1,842,618,000, excluding shares of our common stock issued pursuant to our initial distribution reinvestment plan, or the Initial DRIP. As of April 22, 2015, a total of $18,511,000 in distributions were reinvested that resulted in 1,948,563 shares of our common stock being issued pursuant to the Initial DRIP.
On March 25, 2015, we filed a Registration Statement on Form S-3 under the Securities Act of 1933, as amended, or the Securities Act, to register a maximum of $250,000,000 of additional shares of our common stock to be issued pursuant to the Initial DRIP, or the 2015 DRIP Offering. We commenced offering shares pursuant to the 2015 DRIP Offering following the deregistration of our initial offering. Effective October 5, 2016, we amended and restated the Initial DRIP, or the Amended and Restated DRIP, to amend the price at which shares of our common stock are issued pursuant to the 2015 DRIP Offering. We continued to offer shares of our common stock pursuant to the 2015 DRIP Offering until the termination and deregistration of such offering on March 29, 2019. As of March 29, 2019, a total of $245,396,000 in distributions were reinvested that resulted in 26,386,545 shares of common stock being issued pursuant to the 2015 DRIP Offering.
On January 30, 2019, we filed a Registration Statement on Form S-3 under the Securities Act to register a maximum of $200,000,000 of additional shares of our common stock to be issued pursuant to the Amended and Restated DRIP, or the 2019 DRIP Offering. We commenced offering shares pursuant to the 2019 DRIP Offering on April 1, 2019, following the deregistration of the 2015 DRIP Offering. As of March 31, 2020, a total of $54,385,000 in distributions were reinvested that resulted in 5,796,607 shares of common stock being issued pursuant to the 2019 DRIP Offering. We collectively refer to the Initial DRIP portion of our initial offering, the 2015 DRIP Offering and the 2019 DRIP Offering as our DRIP Offerings.
We conduct substantially all of our operations through Griffin-American Healthcare REIT III Holdings, LP, or our operating partnership. We are externally advised by Griffin-American Healthcare REIT III Advisor, LLC, or Griffin-American Advisor, or our advisor, pursuant to an advisory agreement, or the Advisory Agreement, between us and our advisor. The Advisory Agreement was effective as of February 26, 2014 and had a one-year initial term, subject to successive one-year renewals upon the mutual consent of the parties. The Advisory Agreement was last renewed pursuant to the mutual consent of the parties on February 11, 2020 and expires on February 26, 2021. Our advisor uses its best efforts, subject to the oversight, review and approval of our board of directors, or our board, to, among other things, research, identify, review and make investments in and dispositions of properties and securities on our behalf consistent with our investment policies and objectives. Our advisor performs its duties and responsibilities under the Advisory Agreement as our fiduciary. Our advisor is 75.0% owned and managed by wholly owned subsidiaries of American Healthcare Investors, LLC, or American Healthcare Investors, and 25.0% owned by a wholly owned subsidiary of Griffin Capital Company, LLC, or Griffin Capital, or collectively, our co-sponsors. American Healthcare Investors is 47.1% owned by AHI Group Holdings, LLC, or AHI Group Holdings, 45.1% indirectly owned by Colony Capital, Inc. (NYSE: CLNY), or Colony Capital, and 7.8% owned by James F. Flaherty III, a former partner of Colony Capital. We are not affiliated with Griffin Capital, Griffin Capital Securities, LLC, the dealer manager for our initial offering, or our dealer manager, Colony Capital or Mr. Flaherty; however, we are affiliated with Griffin-American Advisor, American Healthcare Investors and AHI Group Holdings.

9


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

We currently operate through six reportable business segments: medical office buildings, hospitals, skilled nursing facilities, senior housing, senior housing — RIDEA and integrated senior health campuses. As of March 31, 2020, we owned and/or operated 98 properties, comprising 102 buildings, and 118 integrated senior health campuses including completed development projects, or approximately 13,841,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $3,002,533,000. In addition, as of March 31, 2020, we also owned a real estate-related investment purchased for $60,429,000.
2. Summary of Significant Accounting Policies
The summary of significant accounting policies presented below is designed to assist in understanding our accompanying condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.
Basis of Presentation
Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership, the wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries in which we have control, as well as any VIEs in which we are the primary beneficiary. We evaluate our ability to control an entity, and whether the entity is a VIE and we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance.
We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries of which we have control, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of our operating partnership, and as of March 31, 2020 and December 31, 2019, we owned greater than a 99.99% general partnership interest therein. Our advisor is a limited partner, and as of March 31, 2020 and December 31, 2019, owned less than a 0.01% noncontrolling limited partnership interest in our operating partnership.
Because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership), the accounts of our operating partnership are consolidated in our accompanying condensed consolidated financial statements. All intercompany accounts and transactions are eliminated in consolidation.
Interim Unaudited Financial Data
Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the United States Securities and Exchange Commission, or SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable.
In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2019 Annual Report on Form 10-K, as filed with the SEC on March 26, 2020.
Use of Estimates
The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported

10


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the initial and recurring valuation of certain assets acquired and liabilities assumed through property acquisitions, allowance for credit losses, impairment of long-lived assets and contingencies. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.
Revenue Recognition Resident Fees and Services Revenue
Disaggregation of Resident Fees and Services Revenue
The following table disaggregates our resident fees and services revenue by line of business, according to whether such revenue is recognized at a point in time or over time:
 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
Point in Time
 
Over Time
 
Total
 
Point in Time
 
Over Time
 
Total
Integrated senior health campuses
 
$
54,528,000

 
$
213,266,000

 
$
267,794,000

 
$
52,342,000

 
$
199,372,000

 
$
251,714,000

Senior housing — RIDEA(1)
 
872,000

 
21,260,000

 
22,132,000

 
711,000

 
15,857,000

 
16,568,000

Total resident fees and services
 
$
55,400,000

 
$
234,526,000

 
$
289,926,000

 
$
53,053,000

 
$
215,229,000

 
$
268,282,000

The following table disaggregates our resident fees and services revenue by payor class:
 
 
Three Months Ended March 31,
 
 
2020
 
2019
 
 
Integrated
Senior Health
Campuses
 
Senior
Housing
 — RIDEA(1)
 
Total
 
Integrated
Senior Health
Campuses
 
Senior
Housing
 — RIDEA(1)
 
Total
Private and other payors
 
$
128,267,000

 
$
21,700,000

 
$
149,967,000

 
$
122,201,000

 
$
16,555,000

 
$
138,756,000

Medicare
 
87,219,000

 

 
87,219,000

 
84,477,000

 

 
84,477,000

Medicaid
 
52,308,000

 
432,000

 
52,740,000

 
45,036,000

 
13,000

 
45,049,000

Total resident fees and services
 
$
267,794,000

 
$
22,132,000

 
$
289,926,000

 
$
251,714,000

 
$
16,568,000

 
$
268,282,000

___________
(1)
This includes fees for basic housing and assisted living care. We record revenue when services are rendered at amounts billable to individual residents. Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For patients under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered.
Accounts Receivable, Net Resident Fees and Services Revenue
The beginning and ending balances of accounts receivable, net resident fees and services are as follows:
 
 
Medicare
 
Medicaid
 
Private
and
Other Payors
 
Total
Beginning balance — January 1, 2020
 
$
32,127,000

 
$
26,366,000

 
$
46,543,000

 
$
105,036,000

Ending balance — March 31, 2020
 
31,766,000

 
23,095,000

 
48,094,000

 
102,955,000

(Decrease)/increase
 
$
(361,000
)
 
$
(3,271,000
)
 
$
1,551,000

 
$
(2,081,000
)

11


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Deferred Revenue Resident Fees and Services Revenue
The beginning and ending balances of deferred revenue resident fees and services, all of which relates to private and other payors, are as follows:
 
 
Total
Beginning balance — January 1, 2020
 
$
13,518,000

Ending balance — March 31, 2020
 
13,529,000

Increase
 
$
11,000

Tenant and Resident Receivables and Allowances
On January 1, 2020, we adopted Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 326, Financial Instruments Credit Losses, or ASC Topic 326. We adopted ASC Topic 326 using the modified retrospective approach whereby the cumulative effect of adoption was recognized on the adoption date and prior periods were not restated. There was no net cumulative effect adjustment to retained earnings as of January 1, 2020.
Resident receivables are carried net of an allowance for credit losses. An allowance is maintained for estimated losses resulting from the inability of residents and payors to meet the contractual obligations under their lease or service agreements. Substantially all of such allowances are recorded as direct reductions of resident fees and services revenue as contractual adjustments provided to third-party payors or implicit price concessions in our accompanying condensed consolidated statements of operations and comprehensive income (loss). Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the residents’ financial condition, security deposits, cash collection patterns by payor and by state, current economic conditions, future expectations in estimating credit losses and other relevant factors.
Tenant receivables and unbilled deferred rent receivables are recognized as direct reductions of real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
As of March 31, 2020 and December 31, 2019, we had $10,809,000 and $11,435,000, respectively, in allowances, which were determined necessary to reduce receivables by our expected future credit losses. For the three months ended March 31, 2020 and 2019, we increased allowances by $3,826,000 and $3,244,000, respectively, and reduced allowances for collections or adjustments by $2,478,000 and $1,227,000, respectively. For the three months ended March 31, 2020 and 2019, $1,974,000 and $1,243,000, respectively, of our receivables were written off against the related allowances.
Impairment of Long-Lived Assets
We periodically evaluate our long-lived assets, primarily consisting of investments in real estate that we carry at our historical cost less accumulated depreciation, for impairment when events or changes in circumstances indicate that its carrying value may not be recoverable. Indicators we consider important and that we believe could trigger an impairment review include, among others, the following:
significant negative industry or economic trends;
a significant underperformance relative to historical or projected future operating results; and
a significant change in the extent or manner in which the asset is used or significant physical change in the asset.
For the three months ended March 31, 2020, we determined that one skilled nursing facility was impaired, and as such, we recognized an impairment charge of $3,711,000 to reduce the carrying value of such asset to $3,840,000. The fair value of such property was based on its projected sales price obtained from an independent third party using comparable market information, which was considered a Level 2 measurement within the fair value hierarchy. No impairment charges on long-lived assets were recognized for the three months ended March 31, 2019.
Properties Held for Sale
A property or a group of properties is required to be reported in discontinued operations in the statements of operations and comprehensive income (loss) for current and prior periods if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when either: (i) the component has been disposed of or (ii) is

12


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

classified as held for sale. At such time as a property is held for sale, such property is carried at the lower of: (i) its carrying amount or (ii) fair value less costs to sell. In addition, a property being held for sale ceases to be depreciated. For the three months ended March 31, 2020, we determined that the fair value of one integrated senior health campus that was held for sale was lower than its carrying amount, and as such, we recognized an impairment charge of $1,391,000 to reduce the carrying value of such asset to $350,000. The fair value of such asset was based on its projected sales price obtained from an independent third party using comparable market information, which was considered a Level 2 measurement within the fair value hierarchy. No impairment charges on properties held for sale were recognized for the three months ended March 31, 2019.
Debt Security Investment, Net
We classify our marketable debt security investment as held-to-maturity because we have the positive intent and ability to hold the security to maturity, and we have not recorded any unrealized holding gains or losses on such investment. Our held-to-maturity security is recorded at amortized cost and adjusted for the amortization of premiums or discounts through maturity. Prior to the adoption of ASC Topic 326, a loss was recognized in earnings when we determined declines in the fair value of marketable securities were other-than-temporary. For the three months ended March 31, 2019, we did not incur any such losses. Effective January 1, 2020, we evaluated our debt security investment for expected future credit loss in accordance with ASC Topic 326. There was no net cumulative effect adjustment to retained earnings as of January 1, 2020. See Note 4, Debt Security Investment, Net, for a further discussion.
Accounts Payable and Accrued Liabilities
As of March 31, 2020 and December 31, 2019, accounts payable and accrued liabilities primarily includes reimbursement of payroll related costs to the managers of our senior housing — RIDEA facilities and integrated senior health campuses of $33,472,000 and $24,118,000, respectively, insurance reserves of $33,237,000 and $35,581,000, respectively, accrued capital expenditures to unaffiliated third parties of $22,398,000 and $25,019,000, respectively, accrued property taxes of $15,885,000 and $14,501,000, respectively, and accrued distributions of $9,955,000 and $9,974,000, respectively.
Recently Issued Accounting Pronouncement
In March 2020, the FASB issued Accounting Standards Update, or ASU, 2020-04, Facilitation of the Effects of Reference Rate Reform of Financial Reporting, or ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria. ASU 2020-04 applies to the aforementioned transactions that reference LIBOR or another reference rate expected to be discontinued because of the reference rate reform. ASU 2020-04 is effective for fiscal years and interim periods beginning after March 12, 2020 and through December 31, 2022. We are currently evaluating this guidance to determine the impact on our disclosures.
3. Real Estate Investments, Net
Our real estate investments, net consisted of the following as of March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Building, improvements and construction in process
$
2,282,943,000

 
$
2,262,320,000

Land and improvements
197,187,000

 
195,491,000

Furniture, fixtures and equipment
159,284,000

 
150,508,000

 
2,639,414,000

 
2,608,319,000

Less: accumulated depreciation
(359,657,000
)
 
(337,898,000
)
 
$
2,279,757,000

 
$
2,270,421,000

Depreciation expense for the three months ended March 31, 2020 and 2019 was $22,742,000 and $22,204,000, respectively. For the three months ended March 31, 2020, we incurred capital expenditures of $30,332,000 for our integrated senior health campuses, $4,199,000 for our medical office buildings, $254,000 for our senior housing — RIDEA facilities and $15,000 for our hospitals. We did not incur any capital expenditures for our senior housing facilities and skilled nursing facilities for the three months ended March 31, 2020.

13


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

For the three months ended March 31, 2020, we, through a majority-owned subsidiary of Trilogy Investors, LLC, or Trilogy, of which we owned 67.6% at the time of acquisition, acquired a land parcel in Ohio for a contract purchase price of $1,693,000 plus closing costs and paid to our advisor an acquisition fee of 2.25% of the portion of the contract purchase price of such land parcel attributed to our ownership interest.
4. Debt Security Investment, Net
On October 15, 2015, we acquired a commercial mortgage-backed debt security, or debt security, from an unaffiliated third party. The debt security bears an interest rate on the stated principal amount thereof equal to 4.24% per annum, the terms of which security provide for monthly interest-only payments. The debt security matures on August 25, 2025 at a stated amount of $93,433,000, resulting in an anticipated yield-to-maturity of 10.0% per annum. The debt security was issued by an unaffiliated mortgage trust and represents a 10.0% beneficial ownership interest in such mortgage trust. The debt security is subordinate to all other interests in the mortgage trust and is not guaranteed by a government-sponsored entity.
As of March 31, 2020 and December 31, 2019, the carrying amount of the debt security investment was $73,476,000 and $72,717,000, respectively, net of unamortized closing costs of $1,335,000 and $1,375,000, respectively. Accretion on debt security for the three months ended March 31, 2020 and 2019 was $799,000 and $725,000, respectively, which is recorded to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive income (loss). Amortization expense of closing costs for the three months ended March 31, 2020 and 2019 was $40,000 and $33,000, respectively, which is recorded against real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive income (loss). In accordance with ASC Topic 326, we evaluated credit quality indicators such as the agency ratings and the underlying collateral of such investment in order to determine expected future credit loss. No credit loss was recorded for the three months ended March 31, 2020.
5. Identified Intangible Assets, Net
Identified intangible assets, net consisted of the following as of March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Amortized intangible assets:
 
 
 
In-place leases, net of accumulated amortization of $21,663,000 and $21,029,000 as of March 31, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 9.3 years and 9.4 years as of March 31, 2020 and December 31, 2019, respectively)
$
27,550,000

 
$
30,407,000

Customer relationships, net of accumulated amortization of $374,000 and $336,000 as of March 31, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 16.5 years and 16.8 years as of March 31, 2020 and December 31, 2019, respectively)
2,466,000

 
2,504,000

Above-market leases, net of accumulated amortization of $2,033,000 and $2,057,000 as of March 31, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 4.9 years and 5.0 years as of March 31, 2020 and December 31, 2019, respectively)
1,340,000

 
1,452,000

Internally developed technology and software, net of accumulated amortization of $235,000 and $211,000 as of March 31, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 2.5 years and 2.8 years as of March 31, 2020 and December 31, 2019, respectively)
235,000

 
259,000

Unamortized intangible assets:
 
 
 
Certificates of need
96,653,000

 
94,838,000

Trade names
30,787,000

 
30,787,000

 
$
159,031,000

 
$
160,247,000

Amortization expense for the three months ended March 31, 2020 and 2019 was $2,106,000 and $3,345,000, respectively, which included $112,000 and $212,000, respectively, of amortization recorded against real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations and comprehensive income (loss).

14


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The aggregate weighted average remaining life of the identified intangible assets was 9.6 years and 9.7 years as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, estimated amortization expense on the identified intangible assets for the nine months ending December 31, 2020 and for each of the next four years ending December 31 and thereafter was as follows:
Year
 
Amount
2020
 
$
4,559,000

2021
 
4,639,000

2022
 
3,892,000

2023
 
3,123,000

2024
 
2,706,000

Thereafter
 
12,672,000

 
 
$
31,591,000

6. Other Assets, Net
Other assets, net consisted of the following as of March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Deferred rent receivables
$
34,149,000

 
$
33,205,000

Prepaid expenses, deposits and other assets
25,748,000

 
26,816,000

Inventory
21,497,000

 
23,872,000

Investments in unconsolidated entities
19,584,000

 
20,176,000

Deferred tax assets, net(1)
16,743,000

 
13,315,000

Lease commissions, net of accumulated amortization of $2,454,000 and $2,201,000 as of March 31, 2020 and December 31, 2019, respectively
11,157,000

 
10,794,000

Deferred financing costs, net of accumulated amortization of $2,902,000 and $2,138,000 as of March 31, 2020 and December 31, 2019, respectively(2)
7,395,000

 
8,137,000

Lease inducement, net of accumulated amortization of $1,228,000 and $1,140,000 as of March 31, 2020 and December 31, 2019, respectively (with a weighted average remaining life of 10.7 years and 10.9 years as of March 31, 2020 and December 31, 2019, respectively)
3,772,000

 
3,860,000

 
$
140,045,000

 
$
140,175,000

___________
(1)
See Note 16, Income Taxes, for a further discussion.
(2)
Deferred financing costs only include costs related to our lines of credit and term loans.
Amortization expense on deferred financing costs of our lines of credit and term loans for the three months ended March 31, 2020 and 2019 was $760,000 and $1,030,000, respectively, and is recorded to interest expense in our accompanying condensed consolidated statements of operations and comprehensive income (loss). Amortization expense on lease inducements for both the three months ended March 31, 2020 and 2019 was $88,000 and is recorded against real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive income (loss).

15


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Investments in unconsolidated entities primarily represents our investment in RHS Partners, LLC, or RHS, a privately-held company that operates 16 integrated senior health campuses, three of which are also owned by RHS. Our effective ownership of RHS was 33.8% as of both March 31, 2020 and December 31, 2019. As of March 31, 2020 and December 31, 2019, we had a receivable of $2,551,000 and $5,133,000, respectively, due from RHS, which is included in accounts and other receivables, net, in our accompanying condensed consolidated balance sheets. The following is summarized financial information of our investments in unconsolidated entities:
 
March 31, 2020
 
December 31, 2019
 
RHS
 
Other
 
Total
 
RHS
 
Other
 
Total
Balance Sheet Data:
 
 
 
 
 
 
 
 
 
 
 
Total assets
$
275,529,000

 
$
17,216,000

 
$
292,745,000

 
$
278,297,000

 
$
17,022,000

 
$
295,319,000

Total liabilities
$
249,727,000

 
$
17,430,000

 
$
267,157,000

 
$
251,283,000

 
$
17,245,000

 
$
268,528,000

 
Three Months Ended March 31,
 
2020
 
2019
 
RHS
 
Other
 
Total
 
RHS
 
Other
 
Total
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
 
 
Revenues
$
35,883,000

 
$
3,519,000

 
$
39,402,000

 
$
35,368,000

 
$

 
$
35,368,000

Expenses
37,095,000

 
4,210,000

 
41,305,000

 
36,231,000

 
46,000

 
36,277,000

Net loss
$
(1,212,000
)
 
$
(691,000
)
 
$
(1,903,000
)
 
$
(863,000
)
 
$
(46,000
)
 
$
(909,000
)
7. Mortgage Loans Payable, Net
As of March 31, 2020 and December 31, 2019, mortgage loans payable were $821,319,000 ($797,774,000, net of discount/premium and deferred financing costs) and $816,217,000 ($792,870,000, net of discount/premium and deferred financing costs), respectively. As of March 31, 2020, we had 58 fixed-rate mortgage loans payable and 11 variable-rate mortgage loans payable with effective interest rates ranging from 2.45% to 6.08% per annum based on interest rates in effect as of March 31, 2020 and a weighted average effective interest rate of 3.82%. As of December 31, 2019, we had 58 fixed-rate mortgage loans payable and seven variable-rate mortgage loans payable with effective interest rates ranging from 2.45% to 6.21% per annum based on interest rates in effect as of December 31, 2019 and a weighted average effective interest rate of 3.85%. We are required by the terms of certain loan documents to meet certain reporting requirements and covenants, such as net worth ratios, fixed charge coverage ratios and leverage ratios.
Mortgage loans payable, net consisted of the following as of March 31, 2020 and December 31, 2019:
 
March 31,
2020
 
December 31,
2019
Total fixed-rate debt
$
711,664,000

 
$
714,786,000

Total variable-rate debt
109,655,000

 
101,431,000

Total fixed- and variable-rate debt
821,319,000

 
816,217,000

Less: deferred financing costs, net
(9,768,000
)
 
(9,362,000
)
Add: premium
279,000

 
304,000

Less: discount
(14,056,000
)
 
(14,289,000
)
Mortgage loans payable, net
$
797,774,000

 
$
792,870,000


16


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The following table reflects the changes in the carrying amount of mortgage loans payable, net for the three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31,
 
2020
 
2019
Beginning balance
$
792,870,000

 
$
688,262,000

Additions:
 
 
 
Borrowings on mortgage loans payable
8,239,000

 
6,080,000

Amortization of deferred financing costs
395,000

 
258,000

Amortization of discount/premium on mortgage loans payable
208,000

 
169,000

Deductions:
 
 
 
Scheduled principal payments on mortgage loans payable
(3,137,000
)
 
(2,867,000
)
Deferred financing costs
(801,000
)
 
(6,000
)
Ending balance
$
797,774,000

 
$
691,896,000

As of March 31, 2020, the principal payments due on our mortgage loans payable for the nine months ending December 31, 2020 and for each of the next four years ending December 31 and thereafter were as follows:
Year
 
Amount
2020
 
$
68,701,000

2021
 
55,936,000

2022
 
62,070,000

2023
 
41,164,000

2024
 
73,176,000

Thereafter
 
520,272,000

 
 
$
821,319,000

8. Lines of Credit and Term Loans
2019 Corporate Line of Credit
On January 25, 2019, we, through our operating partnership and certain of our subsidiaries, entered into a credit agreement, or the 2019 Corporate Credit Agreement, with Bank of America, N.A., or Bank of America, as administrative agent, a swing line lender and a letter of credit issuer; KeyBank, National Association, or KeyBank, as syndication agent, a swing line lender and a letter of credit issuer; Citizens Bank, National Association, as a syndication agent, a swing line lender, a letter of credit issuer, a joint lead arranger and joint bookrunner; and a syndicate of other banks, as lenders, to obtain a credit facility with an aggregate maximum principal amount of $630,000,000, or the 2019 Corporate Line of Credit. The 2019 Corporate Line of Credit consists of a senior unsecured revolving credit facility in the initial aggregate amount of $150,000,000 and a senior unsecured term loan facility in the initial aggregate amount of $480,000,000. We may obtain up to $25,000,000 in the form of standby letters of credit and up to $25,000,000 in the form of swing line loans. The maximum principal amount of the 2019 Corporate Line of Credit may be increased by up to $370,000,000, for a total principal amount of $1,000,000,000, subject to: (i) the terms of the 2019 Corporate Credit Agreement; and (ii) at least five business days’ prior written notice to Bank of America. The 2019 Corporate Line of Credit matures on January 25, 2022, and may be extended for one 12-month period during the term of the 2019 Corporate Credit Agreement, subject to satisfaction of certain conditions, including payment of an extension fee.
At our option, the 2019 Corporate Line of Credit bears interest at per annum rates equal to (a) (i) the Eurodollar Rate, as defined in the 2019 Corporate Credit Agreement, plus (ii) a margin ranging from 1.50% to 2.20% based on our Consolidated Leverage Ratio, as defined in the 2019 Corporate Credit Agreement, or (b) (i) the greater of: (1) the prime rate publicly announced by Bank of America, (2) the Federal Funds Rate, as defined in the 2019 Corporate Credit Agreement, plus 0.50%, (3) the one-month Eurodollar Rate plus 1.00%, and (4) 0.00%, plus (ii) a margin ranging from 0.50% to 1.20% based on our Consolidated Leverage Ratio. Accrued interest on the 2019 Corporate Line of Credit is payable monthly. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions. We are required to pay a fee on the unused portion of the lenders’ commitments under the 2019 Corporate Credit Agreement at a per annum rate equal to 0.20%

17


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

if the average daily used amount is greater than 50% of the commitments and 0.25% if the average daily used amount is less than or equal to 50% of the commitments, which fee shall be measured and payable on a quarterly basis.
As of both March 31, 2020 and December 31, 2019, our aggregate borrowing capacity under the 2019 Corporate Line of Credit was $630,000,000. As of March 31, 2020 and December 31, 2019, borrowings outstanding under the 2019 Corporate Line of Credit totaled $562,500,000 and $557,000,000, respectively, and the weighted average interest rate on such borrowings outstanding was 2.99% and 3.83% per annum, respectively.
2019 Trilogy Credit Facility
On September 5, 2019, we, through Trilogy RER, LLC and certain subsidiaries of Trilogy OpCo, LLC, Trilogy RER, LLC, and Trilogy Pro Services, LLC, or the 2019 Trilogy Co-Borrowers, entered into an amended and restated loan agreement, or the 2019 Trilogy Credit Agreement, with KeyBank, as administrative agent; CIT Bank, N.A., as revolving agent; Regions Bank, as syndication agent; KeyBanc Capital Markets, Inc., or KeyBanc Capital Markets, as co-lead arranger and co-book runner; Regions Capital Markets, as co-lead arranger and co-book runner; Bank of America, as co-documentation agent; The Huntington National Bank, as co-documentation agent; and a syndicate of other banks, as lenders named therein, to amend and restate the terms of an existing credit agreement in order to obtain a senior secured revolving credit facility with an aggregate maximum principal amount of $360,000,000, consisting of: (i) a $325,000,000 secured revolver supported by real estate assets and ancillary business cash flow and (ii) a $35,000,000 accounts receivable revolving credit facility supported by eligible accounts receivable, or the 2019 Trilogy Credit Facility. We may obtain up to $35,000,000 in the form of swing line loans and up to $15,000,000 in the form of standby letters of credit under the 2019 Trilogy Credit Facility. The proceeds of the 2019 Trilogy Credit Facility may be used for acquisitions, debt repayment and general corporate purposes. The maximum principal amount of the 2019 Trilogy Credit Facility may be increased by up to $140,000,000, for a total principal amount of $500,000,000, subject to: (i) the terms of the 2019 Trilogy Credit Agreement and (ii) at least 10 business days’ prior written notice to KeyBank. The 2019 Trilogy Credit Facility matures on September 5, 2023 and may be extended for one 12-month period during the term of the 2019 Trilogy Credit Agreement subject to the satisfaction of certain conditions, including payment of an extension fee.
At our option, the 2019 Trilogy Credit Facility bears interest at per annum rates equal to (a) LIBOR plus 2.75% for LIBOR Rate Loans, as defined in the 2019 Trilogy Credit Agreement, and (b) for Base Rate Loans, as defined in the 2019 Trilogy Credit Agreement, 1.75% plus the greater of: (i) the fluctuating annual rate of interest announced from time to time by KeyBank as its prime rate, (ii) 0.5% above the Federal Funds Effective Rate, as defined in the 2019 Trilogy Credit Agreement, and (iii) 1.00% above the one-month LIBOR. Accrued interest on the 2019 Trilogy Credit Facility is payable monthly. The loans may be repaid in whole or in part without prepayment fees or penalty, subject to certain conditions. We are required to pay fees on the unused portion of the lenders’ commitments under the 2019 Trilogy Credit Facility, with respect to any day during a calendar quarter, at a per annum rate equal to (a) 0.15% if the sum of the Aggregate Real Estate Revolving Credit Obligations, as defined in the 2019 Trilogy Credit Agreement, outstanding on such day is greater than 50% of the commitments or 0.20% if the sum of the Aggregate Real Estate Revolving Credit Obligations on such day is less than or equal to 50% of the commitments, and (b) 0.15% if the sum of the Aggregate A/R Revolving Credit Obligations, as defined in the 2019 Trilogy Credit Agreement, outstanding on such day is greater than 50% of the commitments or 0.20% if the sum of the Aggregate A/R Revolving Credit Obligations on such day is less than or equal to 50% of the commitments, which fees shall be measured and payable on a quarterly basis.
As of both March 31, 2020 and December 31, 2019, our aggregate borrowing capacity under the 2019 Trilogy Credit Facility was $360,000,000. As of March 31, 2020 and December 31, 2019, borrowings outstanding under the 2019 Trilogy Credit Facility totaled $271,879,000 and $258,879,000, respectively, and the weighted average interest rate on such borrowings outstanding was 3.75% and 4.52% per annum, respectively.
Both the 2019 Corporate Credit Agreement and the 2019 Trilogy Credit Agreement contain various financial covenants. We were in compliance with such covenants as of March 31, 2020. The extent and severity of the coronavirus, or COVID-19, pandemic on our business continues to evolve, and any continued future deterioration of operations in excess of management's projections as a result of COVID-19 could impact future compliance with these financial covenants. If any future financial covenants are violated, we anticipate seeking a waiver or amending the debt covenants with the lenders when and if such event should occur. However, there can be no assurances that management will be able to effectively achieve such plans.

18


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

9. Derivative Financial Instruments
We record derivative financial instruments in our accompanying condensed consolidated balance sheets as either an asset or a liability measured at fair value. The following table lists the derivative financial instruments held by us as of March 31, 2020 and December 31, 2019, which are included in other assets, net, or security deposits, prepaid rent and other liabilities in our accompanying condensed consolidated balance sheets:
 
 
 
 
 
 
 
 
 
 
Fair Value
Instrument
 
Notional Amount
 
Index
 
Interest Rate
 
Maturity Date
 
March 31,
2020
 
December 31,
2019
Cap
 
$
20,000,000

 
one month LIBOR
 
3.00%
 
09/23/21
 
$
3,000

 
$

Swap
 
250,000,000

 
one month LIBOR
 
2.10%
 
01/25/22
 
(8,184,000
)
 
(2,821,000
)
Swap
 
130,000,000

 
one month LIBOR
 
1.98%
 
01/25/22
 
(3,973,000
)
 
(1,150,000
)
 
 


 
 
 
 
 
 
 
$
(12,154,000
)

$
(3,971,000
)
As of March 31, 2020 and December 31, 2019, none of our derivative financial instruments were designated as hedges. For the three months ended March 31, 2020 and 2019, we recorded $8,183,000 and $560,000, respectively, as an increase to interest expense in our accompanying condensed consolidated statements of operations and comprehensive income (loss) related to the change in the fair value of our derivative financial instruments.
See Note 15, Fair Value Measurements, for a further discussion of the fair value of our derivative financial instruments.
10. Identified Intangible Liabilities, Net
As of March 31, 2020 and December 31, 2019, identified intangible liabilities, net consisted of below-market leases of $570,000 and $663,000, respectively, net of accumulated amortization of $1,353,000 and $1,342,000, respectively. Amortization expense on below-market leases for the three months ended March 31, 2020 and 2019 was $93,000 and $105,000, respectively, which is recorded to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
The weighted average remaining life of below-market leases was 2.8 years and 4.3 years as of March 31, 2020 and December 31, 2019, respectively. As of March 31, 2020, estimated amortization expense on below-market leases for the nine months ending December 31, 2020 and for each of the next four years ending December 31 and thereafter was as follows:
Year
 
Amount
2020
 
$
203,000

2021
 
180,000

2022
 
89,000

2023
 
71,000

2024
 
27,000

Thereafter
 

 
 
$
570,000

11. Commitments and Contingencies
Litigation
We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Environmental Matters
We follow a policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or

19


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.
Other
Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, which include calls/puts to sell/acquire properties. In our view, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.
Impact of the COVID-19 Pandemic
The COVID-19 pandemic is dramatically impacting the United States and has resulted in an aggressive worldwide effort to contain the spread of the virus. These efforts have significantly and adversely disrupted economic markets and impacted commercial activity worldwide, including markets in which we own and/or operate properties, and the prolonged economic impact is uncertain. Considerable uncertainty still surrounds the COVID-19 pandemic and its effects on the population, as well as the effectiveness of any responses taken on an international, national and local level by government authorities and businesses. In addition, the rapidly evolving nature of the COVID-19 pandemic makes it difficult to ascertain the long-term impact it will have on real estate markets and our portfolio of investments. We are continuously monitoring the impact of the COVID-19 pandemic on our business, residents, tenants, operating partners, managers, portfolio of investments and on the United States and global economies. While the results of our current analyses did not result in any material adjustments to our condensed consolidated financial statements as of and during the three months ended March 31, 2020, the prolonged duration and impact of the COVID-19 pandemic could materially disrupt our business operations and impact our financial performance.
12. Redeemable Noncontrolling Interests
As of both March 31, 2020 and December 31, 2019, our advisor owned all of the 222 limited partnership units outstanding in our operating partnership. As of both March 31, 2020 and December 31, 2019, we owned greater than a 99.99% general partnership interest in our operating partnership, and our advisor owned less than a 0.01% limited partnership interest in our operating partnership. Our advisor is entitled to special redemption rights of its limited partnership units. The noncontrolling interest of our advisor in our operating partnership that has redemption features outside of our control is accounted for as a redeemable noncontrolling interest and is presented outside of permanent equity in our accompanying condensed consolidated balance sheets. See Note 14, Related Party Transactions — Liquidity Stage — Subordinated Participation Interest — Subordinated Distribution Upon Listing and Note 14, Related Party Transactions — Subordinated Distribution Upon Termination, for a further discussion of the redemption features of the limited partnership units.
As of both March 31, 2020 and December 31, 2019, we, through Trilogy REIT Holdings, LLC, or Trilogy REIT Holdings, in which we indirectly hold a 70.0% ownership interest, owned 96.6% of the outstanding equity interests of Trilogy. As of both March 31, 2020 and December 31, 2019, certain members of Trilogy’s management and certain members of an advisory committee to Trilogy’s board of directors owned approximately 3.4% of the outstanding equity interests of Trilogy. The noncontrolling interests held by such members have redemption features outside of our control and are accounted for as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets.
We record the carrying amount of redeemable noncontrolling interests at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interests consisted of the following for the three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31,
 
2020
 
2019
Beginning balance
$
44,105,000

 
$
38,245,000

Reclassification from equity
195,000

 
195,000

Distributions

 
(485,000
)
Repurchase of redeemable noncontrolling interests

 
(3,000
)
Fair value adjustment to redemption value
15,000

 
(253,000
)
Net income attributable to redeemable noncontrolling interests
228,000

 
140,000

Ending balance
$
44,543,000

 
$
37,839,000


20


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

13. Equity
Preferred Stock
Our charter authorizes us to issue 200,000,000 shares of our preferred stock, par value $0.01 per share. As of both March 31, 2020 and December 31, 2019, no shares of preferred stock were issued and outstanding.
Common Stock
Our charter authorizes us to issue 1,000,000,000 shares of our common stock, par value $0.01 per share. As of both March 31, 2020 and December 31, 2019, our advisor owned 22,222 shares of our common stock, which our advisor acquired on January 15, 2013. On March 12, 2015, we terminated the primary portion of our initial public offering. We continued to offer shares of our common stock in our initial offering pursuant to the Initial DRIP, until the termination of the DRIP portion of our initial offering and deregistration of our initial offering on April 22, 2015.
On March 25, 2015, we filed a Registration Statement on Form S-3 under the Securities Act to register a maximum of $250,000,000 of additional shares of our common stock pursuant to the 2015 DRIP Offering. We commenced offering shares pursuant to the 2015 DRIP Offering following the deregistration of our initial offering. We continued to offer shares of our common stock pursuant to the 2015 DRIP Offering until the termination and deregistration of the 2015 DRIP Offering on March 29, 2019.
On January 30, 2019, we filed a Registration Statement on Form S-3 under the Securities Act to register a maximum of $200,000,000 of additional shares of our common stock to be issued pursuant to the 2019 DRIP Offering. We commenced offering shares pursuant to the 2019 DRIP Offering on April 1, 2019, following the deregistration of the 2015 DRIP Offering.
Through March 31, 2020, we had issued 184,930,598 shares of our common stock in connection with the primary portion of our initial public offering and 34,131,715 shares of our common stock pursuant to our DRIP Offerings. We also repurchased 23,846,540 shares of our common stock under our share repurchase plan and granted an aggregate of 127,500 shares of our restricted common stock to our independent directors through March 31, 2020. As of March 31, 2020 and December 31, 2019, we had 195,365,495 and 193,967,474 shares of our common stock issued and outstanding, respectively.
Accumulated Other Comprehensive Loss
The changes in accumulated other comprehensive loss, net of noncontrolling interests, by component consisted of the following for the three months ended March 31, 2020 and 2019:
 
Three Months Ended March 31,
 
2020
 
2019
Beginning balance — foreign currency translation adjustments
$
(2,255,000
)
 
$
(2,560,000
)
Net change in current period
(533,000
)
 
219,000

Ending balance — foreign currency translation adjustments
$
(2,788,000
)
 
$
(2,341,000
)
Noncontrolling Interests
As of both March 31, 2020 and December 31, 2019, Trilogy REIT Holdings owned approximately 96.6% of Trilogy. We are the indirect owner of a 70.0% interest in Trilogy REIT Holdings pursuant to an amended joint venture agreement with an indirect, wholly-owned subsidiary of NorthStar Healthcare Income, Inc., or NHI, and a wholly-owned subsidiary of the operating partnership of Griffin-American Healthcare REIT IV, Inc., or GAHR IV. Both GAHR IV and us are sponsored by American Healthcare Investors. We serve as the sole manager of Trilogy REIT Holdings. As of both March 31, 2020 and December 31, 2019, NHI and GAHR IV indirectly owned a 24.0% and 6.0% membership interest in Trilogy REIT Holdings, respectively. For both the three months ended March 31, 2020 and 2019, 30.0% of the net earnings of Trilogy REIT Holdings were allocated to noncontrolling interests.
In connection with our acquisition and operation of Trilogy, profit interest units in Trilogy, or the Profit Interests, were issued to Trilogy Management Services, LLC and an independent director of Trilogy, both unaffiliated third parties that manage or direct the day-to-day operations of Trilogy. The Profit Interests consist of time-based or performance-based commitments. The time-based Profit Interests were measured at their grant date fair value and vest in increments of 20.0% on each anniversary of the respective grant date over a five-year period. We amortize the time-based Profit Interests on a straight-line basis over the vesting periods, which are recorded to general and administrative in our accompanying condensed consolidated

21


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

statements of operations and comprehensive income (loss). The performance-based Profit Interests are subject to a performance commitment and vest upon liquidity events as defined in the Profit Interests agreements. The performance-based Profit Interests were measured at their grant date fair value and immediately expensed. The performance-based Profit Interests are subject to fair value measurements until vesting occurs with changes to fair value recorded to general and administrative in our accompanying condensed consolidated statements of operations and comprehensive income (loss). For both the three months ended March 31, 2020 and 2019, we recognized stock compensation expense related to the Profit Interests of $195,000.
There were no canceled, expired or exercised Profit Interests during the three months ended March 31, 2020 and 2019. The nonvested awards are presented as noncontrolling interests and are re-classified to redeemable noncontrolling interests upon vesting as they have redemption features outside of our control similar to the common stock units held by Trilogy’s pre-closing management. See Note 12, Redeemable Noncontrolling Interests, for a further discussion.
On January 6, 2016, one of our consolidated subsidiaries issued non-voting preferred shares of beneficial interests to qualified investors for total proceeds of $125,000. These preferred shares of beneficial interests are entitled to receive cumulative preferential cash dividends at the rate of 12.5% per annum. We classify the value of the subsidiary’s preferred shares of beneficial interests as noncontrolling interests in our accompanying condensed consolidated balance sheets and the dividends of the preferred shares of beneficial interests as net income attributable to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
In addition, as of both March 31, 2020 and December 31, 2019, we owned an 86.0% interest in a consolidated limited liability company that owns Lakeview IN Medical Plaza, which we acquired on January 21, 2016. As such, 14.0% of the net earnings of Lakeview IN Medical Plaza were allocated to noncontrolling interests for both the three months ended March 31, 2020 and 2019.
Distribution Reinvestment Plan
We had registered and reserved $35,000,000 in shares of our common stock for sale pursuant to the Initial DRIP in our initial offering, which we deregistered on April 22, 2015. We continued to offer shares of our common stock pursuant to the 2015 DRIP Offering, which commenced offering shares following the deregistration of our initial offering, until the deregistration of the 2015 DRIP Offering on March 29, 2019. We continue to offer up to $200,000,000 of additional shares of our common stock pursuant to the 2019 DRIP Offering, which commenced offering shares on April 1, 2019, following the deregistration of the 2015 DRIP Offering.
Effective October 5, 2016, we amended and restated the Initial DRIP to amend the price at which shares of our common stock are issued pursuant to such distribution reinvestment plan. Pursuant to the Amended and Restated DRIP, shares are issued at a price equal to the most recently estimated net asset value, or NAV, of one share of our common stock, as approved and established by our board. The Amended and Restated DRIP became effective with the distribution payments to stockholders paid in the month of November 2016. In all other material respects, the terms of the 2015 DRIP Offering remained unchanged by the Amended and Restated DRIP.
Since October 5, 2016, our board has approved and established an estimated per share NAV on at least an annual basis. Commencing with the distribution payment to stockholders paid in the month following such board approval, shares of our common stock issued pursuant to the Amended and Restated DRIP were or will be issued at the current estimated per share NAV until such time as our board determines an updated estimated per share NAV. The following is a summary of our historical and current estimated per share NAV:
Approval Date by our Board
 
Estimated Per Share NAV
(Unaudited)
10/05/16
 
$
9.01

10/04/17
 
$
9.27

10/03/18
 
$
9.37

10/03/19
 
$
9.40


22


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

For the three months ended March 31, 2020 and 2019, $13,141,000 and $14,196,000, respectively, in distributions were reinvested and 1,398,021 and 1,515,098 shares of our common stock, respectively, were issued pursuant to our DRIP Offerings. As of March 31, 2020 and December 31, 2019, a total of $318,292,000 and $305,151,000, respectively, in distributions were reinvested that resulted in 34,131,715 and 32,733,694 shares of our common stock, respectively, being issued pursuant to our DRIP Offerings.
Share Repurchase Plan
Our share repurchase plan, as amended, allows for repurchases of shares of our common stock by us when certain criteria are met. Share repurchases will be made at the sole discretion of our board. Subject to the availability of the funds for share repurchases, we will generally limit the number of shares of our common stock repurchased during any calendar year to 5.0% of the weighted average number of shares of our common stock outstanding during the prior calendar year. Additionally, effective with respect to share repurchase requests submitted for repurchase during the second quarter 2019, the number of shares that we will repurchase during any fiscal quarter will be limited to an amount equal to the net proceeds that we received from the sale of shares issued pursuant to our DRIP Offerings during the immediately preceding completed fiscal quarter; provided however, that shares subject to a repurchase requested upon the death or “qualifying disability,” as defined in our share repurchase plan, of a stockholder will not be subject to this quarterly cap or to our existing cap on repurchases of 5.0% of the weighted average number of shares outstanding during the calendar year prior to the repurchase date. Funds for the repurchase of shares of our common stock will come from the cumulative proceeds we receive from the sale of shares of our common stock pursuant to our DRIP Offerings. Furthermore, our share repurchase plan provides that if there are insufficient funds to honor all repurchase requests, pending requests may be honored among all requests for repurchase in any given repurchase period as follows: first, repurchases in full as to repurchases that would result in a stockholder owning less than $2,500 of shares; and, next, pro rata as to other repurchase requests.
The Repurchase Amount, as such term is defined in our share repurchase plan, is equal to the lesser of (i) the amount per share that a stockholder paid for their shares of our common stock, or (ii) the most recent estimated value of one share of our common stock, as determined by our board. For requests submitted pursuant to a death or a qualifying disability of a stockholder, the Repurchase Amount will be 100% of the amount per share the stockholder paid for their shares of common stock. Since October 5, 2016, our board has approved and established an estimated per share NAV on at least an annual basis. See the “Distribution Reinvestment Plan” section above for a summary of our historical and current estimated per share NAV. Accordingly, commencing with share repurchase requests submitted during the quarter that our board has approved and established an estimated per share NAV, such per share NAV served or will serve as the Repurchase Amount for stockholders who purchased their shares at a price equal to or greater than such per share NAV in our initial offering, until such time as our board determines an updated estimated per share NAV.
Due to the impact the COVID-19 pandemic has had on the United States and globally, and the uncertainty of the severity and duration of the COVID-19 pandemic and its effects, our board decided to take steps to protect our capital and maximize our liquidity in an effort to strengthen our long-term financial prospects by partially suspending our share repurchase plan. As a result, effective with respect to share repurchase requests submitted for repurchase during the second quarter 2020, on March 31, 2020, our board suspended our share repurchase plan with respect to all repurchase requests other than repurchases resulting from the death or qualifying disability of stockholders. Repurchase requests resulting from the death or qualifying disability of stockholders are not suspended, but shall remain subject to all terms and conditions of our share repurchase plan, including our board’s discretion to determine whether we have sufficient funds available to repurchase any shares. Our board shall determine if and when it is in the best interest of our company and stockholders to reinstate our share repurchase plan for additional stockholders.
For the three months ended March 31, 2020, we did not repurchase any shares. For the three months ended March 31, 2019, we repurchased 3,883,716 shares of our common stock, for an aggregate of $36,486,000, at an average repurchase price of $9.39 per share. As of both March 31, 2020 and December 31, 2019, we repurchased 23,846,540 shares of our common stock, for an aggregate of $221,823,000, at an average repurchase price of $9.30. In April 2020, we repurchased 1,893,413 shares of our common stock, under our share repurchase plan, for an aggregate of $17,986,000, at an average purchase price of $9.50 per share. Shares were repurchased using proceeds we received from the cumulative sale of shares of our common stock pursuant to our DRIP Offerings.

23


GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

2013 Incentive Plan
We adopted the 2013 Incentive Plan, or our incentive plan, pursuant to which our board, or a committee of our independent directors, may make grants of options, shares of our common stock, stock purchase rights, stock appreciation rights or other awards to our independent directors, employees and consultants. The maximum number of shares of our common stock that may be issued pursuant to our incentive plan is 2,000,000 shares. For the three months ended March 31, 2020 and 2019, we did not issue any shares of our common stock pursuant to our incentive plan and none of the previously issued shares of our restricted common stock were vested. For both the three months ended March 31, 2020 and 2019, we recognized stock compensation expense related to the independent director grants of $43,000. Such stock compensation expense is included in general and administrative in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
14. Related Party Transactions
Fees and Expenses Paid to Affiliates
All of our executive officers and our non-independent directors are also executive officers and employees and/or holders of a direct or indirect interest in our advisor, one of our co-sponsors or other affiliated entities. We are affiliated with our advisor, American Healthcare Investors and AHI Group Holdings; however, we are not affiliated with Griffin Capital, our dealer manager, Colony Capital or Mr. Flaherty. We entered into the Advisory Agreement, which entitles our advisor and its affiliates to specified compensation for certain services, as well as reimbursement of certain expenses. Our board, including a majority of our independent directors, has reviewed the material transactions between our affiliates and us during the three months ended March 31, 2020. Set forth below is a description of the transactions with affiliates. We believe that we have executed all of the transactions set forth below on terms that are fair and reasonable to us and on terms no less favorable to us than those available from unaffiliated third parties. In the aggregate, for the three months ended March 31, 2020 and 2019, we incurred $6,175,000 and $6,241,000, respectively, in fees and expenses to our affiliates as detailed below.
Acquisition and Development Stage
Acquisition Fee
We pay our advisor or its affiliates an acquisition fee of up to 2.25% of the contract purchase price, including any contingent or earn-out payments that may be paid, for each property we acquire or 2.00% of the origination or acquisition price, including any contingent or earn-out payments that may be paid, for any real estate-related investment we originate or acquire. Our advisor or its affiliates are entitled to receive these acquisition fees for properties and real estate-related investments we acquire with funds raised in our initial offering including acquisitions completed after the termination of the Advisory Agreement, or funded with net proceeds from the sale of a property or real estate-related investment, subject to certain conditions.
For the three months ended March 31, 2020 and 2019, we incurred $36,000 and $358,000, respectively, in acquisition fees to our advisor. Acquisition fees in connection with the acquisition of properties accounted for as asset acquisitions or the acquisition of real estate-related investments are capitalized as part of the associated investments in our accompanying condensed consolidated balance sheets.
Development Fee
In the event our advisor or its affiliates provide development-related services, our advisor or its affiliates receive a development fee in an amount that is usual and customary for comparable services rendered for similar projects in the geographic market where the services are provided; however, we will not pay a development fee to our advisor or its affiliates if our advisor or its affiliates elect to receive an acquisition fee based on the cost of such development.
For the three months ended March 31, 2020 and 2019, we incurred $48,000 and $150,000, respectively, in development fees to our advisor or its affiliates, which are capitalized as part of the associated investments in our accompanying condensed consolidated balance sheets.

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GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Operational Stage
Asset Management Fee
We pay our advisor or its affiliates a monthly fee for services rendered in connection with the management of our assets equal to one-twelfth of 0.75% of average invested assets, subject to our stockholders receiving distributions in an amount equal to 5.0% per annum, cumulative, non-compounded, of invested capital. For such purposes, average invested assets means the average of the aggregate book value of our assets invested in real estate and real estate-related investments, before deducting depreciation, amortization, bad debt and other similar non-cash reserves, computed by taking the average of such values at the end of each month during the period of calculation; and invested capital means, for a specified period, the aggregate issue price of shares of our common stock purchased by our stockholders, reduced by distributions of net sales proceeds by us to our stockholders and by any amounts paid by us to repurchase shares of our common stock pursuant to our share repurchase plan.
For the three months ended March 31, 2020 and 2019, we incurred $5,105,000 and $4,977,000, respectively, in asset management fees to our advisor or its affiliates. Asset management fees are included in general and administrative in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
Property Management Fee
Our advisor or its affiliates may directly serve as property manager of our properties or may sub-contract their property management duties to any third party and provide oversight of such third-party property manager. We pay our advisor or its affiliates a monthly management fee equal to a percentage of the gross monthly cash receipts of such property as follows: (i) a property management oversight fee of 1.0% of the gross monthly cash receipts of any stand-alone, single-tenant, net leased property; (ii) a property management oversight fee of 1.5% of the gross monthly cash receipts of any property that is not a stand-alone, single-tenant, net leased property and for which our advisor or its affiliates provide oversight of a third party that performs the duties of a property manager with respect to such property; or (iii) a fair and reasonable property management fee that is approved by a majority of our directors, including a majority of our independent directors, that is not less favorable to us than terms available from unaffiliated third parties for any property that is not a stand-alone, single-tenant, net leased property and for which our advisor or its affiliates will directly serve as the property manager without sub-contracting such duties to a third party.
For the three months ended March 31, 2020 and 2019, we incurred $653,000 and $619,000, respectively, in property management fees to our advisor or its affiliates. Property management fees are included in property operating expenses and rental expenses in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
Lease Fees
We pay our advisor or its affiliates a separate fee for any leasing activities in an amount not to exceed the fee customarily charged in arm’s-length transactions by others rendering similar services in the same geographic area for similar properties as determined by a survey of brokers and agents in such area. Such fee is generally expected to range from 3.0% to 6.0% of the gross revenues generated during the initial term of the lease.
For the three months ended March 31, 2020 and 2019, we incurred $203,000 and $24,000, respectively, in lease fees to our advisor or its affiliates. Lease fees are capitalized as lease commissions and included in other assets, net in our accompanying condensed consolidated balance sheets.
Construction Management Fee
In the event that our advisor or its affiliates assist with planning and coordinating the construction of any capital or tenant improvements, our advisor or its affiliates are paid a construction management fee of up to 5.0% of the cost of such improvements. For the three months ended March 31, 2020 and 2019, we incurred $69,000 and $37,000, respectively, in construction management fees to our advisor or its affiliates.
Construction management fees are capitalized as part of the associated asset and included in real estate investments, net in our accompanying condensed consolidated balance sheets or are expensed and included in our accompanying condensed consolidated statements of operations and comprehensive income (loss), as applicable.

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GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Operating Expenses
We reimburse our advisor or its affiliates for operating expenses incurred in rendering services to us, subject to certain limitations. However, we cannot reimburse our advisor or its affiliates at the end of any fiscal quarter for total operating expenses that, in the four consecutive fiscal quarters then ended, exceed the greater of: (i) 2.0% of our average invested assets, as defined in the Advisory Agreement; or (ii) 25.0% of our net income, as defined in the Advisory Agreement, unless our independent directors determined that such excess expenses were justified based on unusual and nonrecurring factors which they deem sufficient.
For the 12 months ended March 31, 2020 and 2019, our operating expenses did not exceed the aforementioned limitations. The following table reflects our operating expenses as a percentage of average invested assets and as a percentage of net income for the 12 month periods then ended:
 
12 months ended March 31,
 
2020
 
2019
Operating expenses as a percentage of average invested assets
0.9
%
 
0.9
%
Operating expenses as a percentage of net income
21.5
%
 
19.2
%
For the three months ended March 31, 2020 and 2019, our advisor or its affiliates incurred operating expenses on our behalf of $61,000 and $76,000, respectively. Operating expenses are generally included in general and administrative in our accompanying condensed consolidated statements of operations and comprehensive income (loss).
Compensation for Additional Services
We pay our advisor and its affiliates for services performed for us other than those required to be rendered by our advisor or its affiliates under the Advisory Agreement. The rate of compensation for these services has to be approved by a majority of our board, including a majority of our independent directors, and cannot exceed an amount that would be paid to unaffiliated third parties for similar services. For the three months ended March 31, 2020 and 2019, our advisor and its affiliates were not compensated for any additional services.
Liquidity Stage
Disposition Fees
For services relating to the sale of one or more properties, we pay our advisor or its affiliates a disposition fee of up to the lesser of 2.0% of the contract sales price or 50.0% of a customary competitive real estate commission given the circumstances surrounding the sale, in each case as determined by our board, including a majority of our independent directors, upon the provision of a substantial amount of the services in the sales effort. The amount of disposition fees paid, when added to the real estate commissions paid to unaffiliated third parties, will not exceed the lesser of the customary competitive real estate commission or an amount equal to 6.0% of the contract sales price.
For the three months ended March 31, 2020 and 2019, we did not incur any disposition fees to our advisor or its affiliates.
Subordinated Participation Interest
Subordinated Distribution of Net Sales Proceeds
In the event of liquidation, we will pay our advisor a subordinated distribution of net sales proceeds. The distribution will be equal to 15.0% of the remaining net proceeds from the sales of properties, after distributions to our stockholders, in the aggregate, of: (i) a full return of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan); plus (ii) an annual 7.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock, as adjusted for distributions of net sales proceeds. Actual amounts to be received depend on the sale prices of properties upon liquidation. For the three months ended March 31, 2020 and 2019, we did not pay any such distributions to our advisor.

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GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Subordinated Distribution Upon Listing
Upon the listing of shares of our common stock on a national securities exchange, in redemption of our advisor’s limited partnership units, we will pay our advisor a distribution equal to 15.0% of the amount by which: (i) the market value of our outstanding common stock at listing plus distributions paid prior to listing exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the amount of cash that, if distributed to stockholders as of the date of listing, would have provided them an annual 7.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the date of listing. Actual amounts to be paid depend upon the market value of our outstanding stock at the time of listing, among other factors. For the three months ended March 31, 2020 and 2019, we did not pay any such distributions to our advisor.
Subordinated Distribution Upon Termination
Pursuant to the Agreement of Limited Partnership, as amended, of our operating partnership, upon termination or non-renewal of the Advisory Agreement, our advisor will also be entitled to a subordinated distribution in redemption of its limited partnership units from our operating partnership equal to 15.0% of the amount, if any, by which: (i) the appraised value of our assets on the termination date, less any indebtedness secured by such assets, plus total distributions paid through the termination date, exceeds (ii) the sum of the total amount of capital raised from stockholders (less amounts paid to repurchase shares of our common stock pursuant to our share repurchase plan) and the total amount of cash equal to an annual 7.0% cumulative, non-compounded return on the gross proceeds from the sale of shares of our common stock through the termination date. In addition, our advisor may elect to defer its right to receive a subordinated distribution upon termination until either a listing or other liquidity event, including a liquidation, sale of substantially all of our assets or merger in which our stockholders receive in exchange for their shares of our common stock, shares of a company that are traded on a national securities exchange.
As of March 31, 2020 and December 31, 2019, we did not have any liability related to the subordinated distribution upon termination.
Accounts Payable Due to Affiliates
The following amounts were outstanding to our affiliates as of March 31, 2020 and December 31, 2019:
Fee
 
March 31,
2020
 
December 31,
2019
Asset and property management fees
 
$
1,956,000

 
$
1,991,000

Construction management fees
 
181,000

 
175,000

Lease commissions
 
88,000

 
143,000

Operating expenses
 
13,000

 
12,000

 
 
$
2,238,000

 
$
2,321,000


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GRIFFIN-AMERICAN HEALTHCARE REIT III, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

15. Fair Value Measurements
Assets and Liabilities Reported at Fair Value
The table below presents our assets and liabilities measured at fair value on a recurring basis as of March 31, 2020, aggregated by the level in the fair value hierarchy within which those measurements fall:
 
Quoted Prices in
Active Markets for
Identical Assets
and Liabilities
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable
Inputs
(Level 3)
 
Total
Assets:
 
 
 
 
 
 
 
Derivative financial instrument
$

 
$
3,000

 
$

 
$
3,000

Total assets at fair value
$

 
$
3,000

 
$

 
$
3,000

Liabilities:
 
 
 
 
 
 
 
Derivative financial instruments
$

 
$
12,157,000

 
$

 
$
12,157,000

Warrants