10-Q 1 nshi-20240331.htm 10-Q nshi-20240331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2024
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 000-55190
NORTHSTAR HEALTHCARE INCOME, INC.
(Exact Name of Registrant as Specified in its Charter)
Maryland27-3663988
(State or Other Jurisdiction of(IRS Employer
Incorporation or Organization)Identification No.)
575 Lexington Avenue, 14th Floor, New York, NY 10022
(Address of Principal Executive Offices, Including Zip Code)
(929777-3135
(Registrant’s Telephone Number, Including Area Code)

16 East 34th Street, 18th Floor,
New York, NY 10016
(Former name or former address, 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
Common stock, par value $0.01 per shareNoneNone
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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. Yes ý   No o
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). Yes ý   No o
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 filerýSmaller 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes    No ý



Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date:
The Company has one class of common stock, $0.01 par value per share, 185,712,103 shares outstanding as of May 7, 2024.


NORTHSTAR HEALTHCARE INCOME, INC.
FORM 10-Q
TABLE OF CONTENTS

IndexPage












2

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. Forward-looking statements are generally identifiable by use of forward-looking terminology such as “may,” “will,” “should,” “potential,” “intend,” “expect,” “seek,” “anticipate,” “estimate,” “believe,” “could,” “project,” “predict,” “continue,” “future” or other similar words or expressions. Forward-looking statements are not guarantees of performance and are based on certain assumptions, discuss future expectations, describe plans and strategies, contain projections of results of operations or financial condition or state other forward-looking information. Such statements include, but are not limited to, those relating to our ability to make distributions to our stockholders; our ability to retain our senior executives and other sufficient personnel to manage our business; our ability to realize substantial efficiencies as well as anticipated strategic and financial benefits of the internalization of our management function; the operating performance of our investments; our financing needs; the effects of our current strategies and investment activities; and our ability to effectively deploy capital. Our ability to predict results or the actual effect of plans or strategies is inherently uncertain. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements and you should not unduly rely on these statements. These forward-looking statements involve risks, uncertainties and other factors that may cause our actual results in future periods to differ materially from those forward-looking statements.
All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date hereof and we are under no duty to update any of the forward-looking statements after the date of this report to conform these statements to actual results.
Factors that could have a material adverse effect on our operations and future prospects are set forth in our filings with the U.S. Securities and Exchange Commission, or the SEC, including Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 and in Part II, Item 1A of this Quarterly Report on Form 10-Q under the heading “Risk Factors.” The risk factors set forth in our filings with the SEC could cause our actual results to differ significantly from those contained in any forward-looking statement contained in this report.



3

PART I—Financial Information
Item 1. Financial Statements
NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands, Except Per Share Data)
March 31, 2024 (Unaudited)
December 31, 2023
Assets 
Cash and cash equivalents$80,989 $85,037 
Restricted cash6,191 7,906 
Operating real estate, net815,400 821,270 
Investments in unconsolidated ventures ($142 held at fair value as of March 31, 2024 and December 31, 2023)
123,963 122,949 
Assets held for sale495 11,611 
Receivables, net1,857 1,558 
Intangible assets, net1,832 1,916 
Other assets6,404 7,172 
Total assets(1)
$1,037,131 $1,059,419 
Liabilities
Mortgage notes payable, net$883,839 $898,154 
Due to related party 121 
Escrow deposits payable874 507 
Accounts payable and accrued expenses27,271 27,502 
Other liabilities1,483 1,455 
Total liabilities(1)
913,467 927,739 
Commitments and contingencies (Note 12)
Equity
NorthStar Healthcare Income, Inc. Stockholders’ Equity
Preferred stock, $0.01 par value, 50,000,000 shares authorized, no shares issued and outstanding as of March 31, 2024 and December 31, 2023
  
Common stock, $0.01 par value, 400,000,000 shares authorized, 185,712,103 shares issued and outstanding as of March 31, 2024 and December 31, 2023
1,857 1,857 
Additional paid-in capital1,716,813 1,716,757 
Retained earnings (accumulated deficit)(1,593,657)(1,585,725)
Total NorthStar Healthcare Income, Inc. stockholders’ equity125,013 132,889 
Non-controlling interests(1,349)(1,209)
Total equity123,664 131,680 
Total liabilities and equity$1,037,131 $1,059,419 
_______________________________________
(1)Includes $107.6 million and $174.9 million of assets and liabilities, respectively, of certain VIEs that are consolidated by the Operating Partnership as of March 31, 2024. Refer to Note 2, “Summary of Significant Accounting Policies.”












Refer to accompanying notes to consolidated financial statements (unaudited).



4

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in Thousands, Except Per Share Data)
(Unaudited)
Three Months Ended March 31,
20242023
Property and other revenues
Resident fee income$12,296 $11,850 
Rental income35,559 36,999 
Other revenue897 719 
Total property and other revenues48,752 49,568 
Expenses
Property operating expenses33,381 35,077 
Interest expense12,862 11,359 
Transaction costs16 97 
General and administrative expenses3,327 3,910 
Depreciation and amortization8,901 9,649 
Impairment loss456  
Total expenses58,943 60,092 
Other income (loss)
Other income, net1,000 132 
Gain (loss) on investments and other150 332 
Income (loss) before equity in earnings (losses) of unconsolidated ventures and income tax expense(9,041)(10,060)
Equity in earnings (losses) of unconsolidated ventures1,014 (3,922)
Income tax expense(20)(15)
Net income (loss) (8,047)(13,997)
Net (income) loss attributable to non-controlling interests115 71 
Net income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders$(7,932)$(13,926)
Net income (loss) per share of common stock, basic/diluted(1)
$(0.04)$(0.07)
Weighted average number of shares of common stock outstanding, basic/diluted(1)
185,712,103 195,421,656 
Distributions declared per share of common stock$ $ 
_______________________________________
(1)     The Company had issued 203,742 and 116,712 restricted stock units as of March 31, 2024 and 2023, respectively. The restricted stock units have been excluded from the diluted earnings per share calculation as their impact is anti-dilutive due to the net loss generated during the three months ended March 31, 2024 and 2023.



















Refer to accompanying notes to consolidated financial statements (unaudited).



5

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Dollars in Thousands)
(Unaudited)

Three Months Ended March 31,
20242023
Net income (loss)$(8,047)$(13,997)
Other comprehensive income (loss)
Foreign currency translation adjustments related to investment in unconsolidated venture 1,248 
Total other comprehensive income (loss) 1,248 
Comprehensive income (loss)(8,047)(12,749)
Comprehensive (income) loss attributable to non-controlling interests115 71 
Comprehensive income (loss) attributable to NorthStar Healthcare Income, Inc. common stockholders$(7,932)$(12,678)








































Refer to accompanying notes to consolidated financial statements (unaudited).



6

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EQUITY
(Dollars and Shares in Thousands)

Common StockAdditional Paid-in CapitalRetained Earnings (Accumulated Deficit)Accumulated Other Comprehensive Income (Loss)Total Company’s Stockholders’ EquityNon-controlling InterestsTotal Equity
SharesAmount
Balance as of December 31, 2022195,422 $1,954 $1,729,589 $(1,428,840)$(3,679)$299,024 $2,048 $301,072 
Non-controlling interests - contributions— — — — — — 45 45 
Non-controlling interests - distributions— — — — — — (22)(22)
Other comprehensive income (loss)— — — — 1,248 1,248 — 1,248 
Net income (loss)— — — (13,926)— (13,926)(71)(13,997)
Balance as of March 31, 2023 (Unaudited)195,422 $1,954 $1,729,589 $(1,442,766)$(2,431)$286,346 $2,000 $288,346 
Balance as of December 31, 2023185,712 $1,857 $1,716,757 $(1,585,725)$ $132,889 $(1,209)$131,680 
Amortization of equity-based compensation— — 56 — — 56 — 56 
Non-controlling interests - contributions— — — — — — 13 13 
Non-controlling interests - distributions— — — — — — (38)(38)
Net income (loss)— — — (7,932)— (7,932)(115)(8,047)
Balance as of March 31, 2024 (Unaudited)185,712 $1,857 $1,716,813 $(1,593,657)$ $125,013 $(1,349)$123,664 


























Refer to accompanying notes to consolidated financial statements (unaudited).



7

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
(Unaudited)

Three Months Ended March 31,
20242023
Cash flows from operating activities:
Net income (loss)$(8,047)$(13,997)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Equity in (earnings) losses of unconsolidated ventures(1,014)3,922 
Depreciation and amortization8,901 9,649 
Impairment loss456  
Amortization of below market debt844 824 
Amortization of deferred financing costs140 155 
Amortization of equity-based compensation56 57 
(Gain) loss on investments and other178 (332)
Change in allowance for uncollectible accounts 139 167 
Changes in assets and liabilities:
Receivables(438)587 
Other assets628 (374)
Due to related party(121)(208)
Escrow deposits payable 367 330 
Accounts payable and accrued expenses(1,203)(4,445)
Other liabilities 41 129 
Net cash provided by (used in) operating activities927 (3,536)
Cash flows from investing activities:
Capital expenditures for operating real estate(2,926)(3,810)
Sales of real estate11,573 135 
Distributions from unconsolidated ventures 2,334 
Sales of other assets  523 
Net cash provided by (used in) investing activities8,647 (818)
Cash flows from financing activities:
Repayments of mortgage notes (15,299)(4,819)
Payments on financing and other obligations (13)(32)
Contributions from non-controlling interests13 45 
Distributions to non-controlling interests(38)(22)
Net cash provided by (used in) financing activities(15,337)(4,828)
Net increase (decrease) in cash, cash equivalents and restricted cash(5,763)(9,182)
Cash, cash equivalents and restricted cash-beginning of period92,943 115,660 
Cash, cash equivalents and restricted cash-end of period$87,180 $106,478 


Three Months Ended March 31,
20242023
Supplemental disclosure of cash flow information:
Cash paid for interest$8,673 $10,434 
Supplemental disclosure of non-cash investing and financing activities:
Accrued capital expenditures$972 $1,071 
Reclassification of assets held for sale 534  








Refer to accompanying notes to consolidated financial statements (unaudited).



8

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Business and Organization
NorthStar Healthcare Income, Inc., together with its consolidated subsidiaries (the “Company”), owns a diversified portfolio of seniors housing properties, including independent living facilities (“ILF”), assisted living facilities (“ALF”) and memory care facilities (“MCF”) located throughout the United States. In addition, the Company has an investment through a non-controlling interest in a joint venture that invests in integrated senior health campuses, which provide services associated with ILFs, ALFs, MCFs and skilled nursing facilities (“SNF”), across the Midwest region of the United States.
The Company was formed in October 2010 as a Maryland corporation and commenced operations in February 2013. The Company elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2013. The Company has conducted its operations, and intends to do so in the future, so as to continue to qualify as a REIT for U.S. federal income tax purposes.
Substantially all of the Company’s business is conducted through NorthStar Healthcare Income Operating Partnership, LP (the “Operating Partnership”). The Company is the sole general partner of the Operating Partnership. The limited partners of the Operating Partnership are NorthStar Healthcare Income Advisor, LLC and NorthStar Healthcare Income OP Holdings, LLC (the “Special Unit Holder”), which became indirect subsidiaries of the Company on June 9, 2023. NorthStar Healthcare Income Advisor, LLC invested $1,000 in the Operating Partnership in exchange for common units and the Special Unit Holder invested $1,000 in the Operating Partnership and was issued a separate class of limited partnership units (the “Special Units”), which were collectively recorded as non-controlling interests on the accompanying consolidated balance sheets prior to June 9, 2023. As the Company issued shares, it contributed substantially all of the proceeds from its continuous, public offerings to the Operating Partnership as a capital contribution. As of March 31, 2024, the Company’s limited partnership interest in the Operating Partnership, directly or indirectly, was 100%.
The Company’s charter authorizes the issuance of up to 400.0 million shares of common stock with a par value of $0.01 per share and up to 50.0 million shares of preferred stock with a par value of $0.01 per share. The board of directors of the Company is authorized to amend its charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue.
The Company raised $2.0 billion in total gross proceeds from the sale of shares of common stock in its continuous, public offerings (the “Offering”), including $232.6 million pursuant to its distribution reinvestment plan (the “DRP”).
The Internalization
From inception through October 21, 2022, the Company was externally managed by CNI NSHC Advisors, LLC or its predecessor (the “Former Advisor”), an affiliate of NRF Holdco, LLC (the “Former Sponsor”). The Former Advisor was responsible for managing the Company’s operations, subject to the supervision of the Company’s board of directors, pursuant to an advisory agreement. On October 21, 2022, the Company completed the internalization of the Company’s management function (the “Internalization”). In connection with the Internalization, the Company agreed with the Former Advisor to terminate the advisory agreement and arranged for the Former Advisor to continue to provide certain services for a transition period.
2. Summary of Significant Accounting Policies
Basis of Accounting
The accompanying consolidated financial statements and related notes of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim financial reporting and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and note disclosures normally included in the consolidated financial statements prepared under U.S. GAAP have been condensed or omitted. In the opinion of management, all adjustments considered necessary for a fair presentation of the Company’s financial position, results of operations and cash flows have been included and are of a normal and recurring nature. The operating results presented for interim periods are not necessarily indicative of the results that may be expected for any other interim period or for the entire year. These consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, which was filed with the U.S. Securities and Exchange Commission on March 22, 2024.



9

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, the Operating Partnership and their consolidated subsidiaries. The Company consolidates entities in which it has a controlling financial interest by first considering if an entity meets the definition of a variable interest entity (“VIE”) for which the Company is deemed to be the primary beneficiary or if the Company has the power to control an entity through majority voting interest or other arrangements. All significant intercompany balances are eliminated in consolidation.
Variable Interest Entities
A VIE is an entity that lacks one or more of the characteristics of a voting interest entity. A VIE is defined as an entity in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. The determination of whether an entity is a VIE includes both a qualitative and quantitative analysis. The Company bases its qualitative analysis on its review of the design of the entity, its organizational structure including decision-making ability and relevant financial agreements and the quantitative analysis on the forecasted cash flow of the entity. The Company reassesses its initial evaluation of an entity as a VIE upon the occurrence of certain reconsideration events.
A VIE must be consolidated only by its primary beneficiary, which is defined as the party who, along with its affiliates and agents, has both the: (i) power to direct the activities that most significantly impact the VIE’s economic performance; and (ii) obligation to absorb the losses of the VIE or the right to receive the benefits from the VIE, which could be significant to the VIE. The Company determines whether it is the primary beneficiary of a VIE by considering qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of its investment; the obligation or likelihood for the Company or other interests to provide financial support; consideration of the VIE’s purpose and design, including the risks the VIE was designed to create and pass through to its variable interest holders and the similarity with and significance to the business activities of the Company and the other interests. The Company reassesses its determination of whether it is the primary beneficiary of a VIE each reporting period. Judgments related to these determinations include estimates about the current and future fair value and performance of investments held by these VIEs and general market conditions.
As of March 31, 2024, the Company has identified certain consolidated and unconsolidated VIEs. Assets of each of the VIEs may only be used to settle obligations of the respective VIE. Creditors of each of the VIEs have no recourse to the general credit of the Company.
Consolidated VIEs
The most significant VIEs of the Company are certain entities that are consolidated by the Operating Partnership. These entities are VIEs because of non-controlling interests owned by third parties, which do not have substantive kick-out or participating rights. Included in operating real estate, net and mortgage notes payable, net on the Company’s consolidated balance sheet as of March 31, 2024 is $100.3 million and $160.8 million, respectively, related to such consolidated VIEs.
Unconsolidated VIEs
As of March 31, 2024, the Company identified unconsolidated VIEs related to its investments in unconsolidated ventures with a carrying value of $124.0 million. The Company’s maximum exposure to loss as of March 31, 2024 would not exceed the carrying value of its investment in the VIEs. The Company determined that it is not the primary beneficiary of these VIEs and, accordingly, they are not consolidated in the Company’s financial statements as of March 31, 2024. The Company did not provide financial support to its unconsolidated VIEs during the three months ended March 31, 2024. As of March 31, 2024, there were no explicit arrangements or implicit variable interests that could require the Company to provide financial support to its unconsolidated VIEs.
Voting Interest Entities
A voting interest entity is an entity in which the total equity investment at risk is sufficient to enable it to finance its activities independently and the equity holders have the power to direct the activities of the entity that most significantly impact its economic performance, the obligation to absorb the losses of the entity and the right to receive the residual returns of the entity. The usual condition for a controlling financial interest in a voting interest entity is ownership of a majority voting interest. If the Company has a majority voting interest in a voting interest entity, the entity will generally be consolidated. The Company does



10

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
not consolidate a voting interest entity if there are substantive participating rights by other parties and/or kick-out rights by a single party or through a simple majority vote.
The Company performs on-going reassessments of whether entities previously evaluated under the voting interest framework have become VIEs, based on certain events, and therefore subject to the VIE consolidation framework.
Investments in Unconsolidated Ventures
A non-controlling, unconsolidated ownership interest in an entity may be accounted for using the equity method or the Company may elect the fair value option.
The Company will account for an investment under the equity method of accounting if it has the ability to exercise significant influence over the operating and financial policies of an entity, but does not have a controlling financial interest. Under the equity method, the investment is adjusted each period for capital contributions and distributions and its share of the entity’s net income (loss). Capital contributions, distributions and net income (loss) of such entities are recorded in accordance with the terms of the governing documents. An allocation of net income (loss) may differ from the stated ownership percentage interest in such entity as a result of preferred returns and allocation formulas, if any, as described in such governing documents. Equity method investments are recognized using a cost accumulation model, in which the investment is recognized based on the cost to the investor, which includes acquisition fees. The Company records as an expense certain acquisition costs and fees associated with consolidated investments deemed to be business combinations and capitalizes these costs for investments deemed to be acquisitions of an asset, including an equity method investment.
The Company may elect the fair value option of accounting for an investment that would otherwise be accounted for under the equity method. The fair value option election allows an entity to make an irrevocable election of fair value for certain financial assets and liabilities on an instrument-by-instrument basis at the initial or subsequent measurement. The decision to elect the fair value option must be applied to an entire instrument and is irrevocable once elected. Under the fair value option, the Company records its share of the changes to fair value of the investment and any unrealized gains and losses.
On June 30, 2023, the Company elected the fair value option method to account for its investment in the Espresso joint venture, which is included in investments in unconsolidated ventures on the consolidated balance sheets. The Company’s assessment for the recoverability of its investment took into consideration the joint venture’s remaining assets and estimated future cash distributions, less transaction and wind down costs. The Company will record any changes to its investment’s fair value in gain (loss) on investments and other in the consolidated statements of operations. From the date of the election of fair value through March 31, 2024, the Company did not record any changes to the fair value of its investment in the Espresso joint venture. Refer to Note 4 “Investment in Unconsolidated Ventures” and Note 10 “Fair Value” for further discussion.
Non-controlling Interests
A non-controlling interest in a consolidated subsidiary is defined as the portion of the equity (net assets) in a subsidiary not attributable, directly or indirectly, to the Company. A non-controlling interest is required to be presented as a separate component of equity on the consolidated balance sheets and presented separately as net income (loss) and comprehensive income (loss) attributable to controlling and non-controlling interests. An allocation to a non-controlling interest may differ from the stated ownership percentage interest in such entity as a result of a preferred return and allocation formula, if any, as described in the relevant governing documents.
Estimates
The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that could affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates and assumptions. Any estimates of the effects of inflation, rising interest rates, risk of recession and other economic conditions as reflected and/or discussed in these financial statements are based upon the Company's best estimates using information known to the Company as of the date of this Quarterly Report on Form 10-Q. Such estimates may change and the impact of which could be material.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly-liquid investments with an original maturity date of three months or less to be cash equivalents. Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250,000 per institution. The Company mitigates credit risk by placing cash and cash equivalents with major



11

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
financial institutions and money market funds invested in short-term U.S. government securities. To date, the Company has not experienced any losses on cash and cash equivalents.
Restricted cash consists of amounts related to operating real estate (escrows for taxes, insurance, capital expenditures, security deposits received from residents and payments required under certain lease agreements) and other escrows required by lenders of the Company’s borrowings.
The following table provides a reconciliation of cash, cash equivalents and restricted cash as reported on the consolidated balance sheets to the total of such amounts as reported on the consolidated statements of cash flows (dollars in thousands):
March 31, 2024 (Unaudited)December 31, 2023
Cash and cash equivalents$80,989 $85,037 
Restricted cash6,191 7,906 
Total cash, cash equivalents and restricted cash$87,180 $92,943 
Operating Real Estate
Operating real estate is carried at historical cost less accumulated depreciation. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their useful life. Ordinary repairs and maintenance are expensed as incurred. Operating real estate is depreciated using the straight-line method over the estimated useful life of the assets, summarized as follows:
Category:Term:
Building
39 to 49 years
Building improvementsLesser of the useful life or remaining life of the building
Land improvements
9 to 15 years
Tenant improvementsLesser of the useful life or remaining term of the lease
Furniture, fixtures and equipment
5 to 14 years
Construction costs incurred in connection with the Company’s investments are capitalized and included in operating real estate, net on the consolidated balance sheets. Construction in progress is not depreciated until the asset is available for its intended use.
Lessee Accounting
A leasing arrangement, a right to control the use of an identified asset for a period of time in exchange for consideration, is classified by the lessee either as a finance lease, which represents a financed purchase of the leased asset, or as an operating lease. For leases with terms greater than 12 months, a lease asset and a lease liability are recognized on the balance sheet at commencement date based on the present value of lease payments over the lease term.
Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend would be exercised or the option to terminate would not be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates.
Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases.
Right of Use (“ROU”) - Finance Assets
The Company has entered into finance leases for equipment which are included in operating real estate, net on the Company’s consolidated balance sheets. As of March 31, 2024, furniture, fixtures and equipment under finance leases totaled $0.2 million. The leased equipment is amortized on a straight-line basis. Payments for finance leases totaled $9,399 and $29,070 for the three months ended March 31, 2024 and 2023, respectively.



12

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the future minimum lease payments under finance leases and the present value of the minimum lease payments, which are included in other liabilities on the Company’s consolidated balance sheets (dollars in thousands):
April 1 through December 31, 2024$28 
Years Ending December 31:
2025$38 
202633 
202718 
202810 
Total minimum lease payments$127 
Less: Amount representing interest(20)
Present value of minimum lease payments$107 
The weighted average interest rate related to the finance lease obligations is 6.6% with a weighted average lease term of 3.6 years.
As of March 31, 2024, there were no leases that had yet to commence which would create significant rights and obligations to the Company as lessee.
Assets Held For Sale
The Company classifies certain long-lived assets as held for sale once the criteria, as defined by U.S. GAAP, have been met and are expected to sell within one year. Long-lived assets to be disposed of are reported at the lower of their carrying amount or fair value minus cost to sell, with any write-down recorded to impairment loss on the consolidated statements of operations. Depreciation and amortization is not recorded for assets classified as held for sale.
In March 2024, the Company entered into an agreement to sell a land parcel within the Rochester portfolio for $0.5 million, and as of March 31, 2024, has classified the property as held for sale on its consolidated balance sheets. At the time of the reclassification to held for sale, the Company recorded an impairment loss of $39,000. As of December 31, 2023, the Company had one property within the Rochester portfolio classified as held for sale, which was sold in February 2024.
Intangible Assets and Deferred Costs
Deferred Costs
Deferred costs consist of deferred financing costs. Deferred financing costs represent commitment fees, legal and other third-party costs associated with obtaining financing. These costs are recorded against the carrying value of such financing and are amortized to interest expense over the term of the financing using the effective interest method. Unamortized deferred financing costs are expensed to gain (loss) on investments and other, when the associated borrowing is repaid before maturity. Costs incurred in seeking financing transactions which do not close are expensed in the period in which it is determined that the financing will not occur.
Identified Intangibles
The Company records acquired identified intangibles, such as the value of in-place leases and other intangibles, based on estimated fair value at the acquisition date. The value allocated to the identified intangibles is amortized over the remaining lease term. In-place leases are amortized into depreciation and amortization expense.
Impairment analysis for identified intangible assets is performed in connection with the impairment assessment of the related operating real estate. An impairment establishes a new basis for the identified intangible asset and any impairment loss recognized is not subject to subsequent reversal. Refer to “—Impairment on Operating Real Estate and Investments in Unconsolidated Ventures” for additional information.



13

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Intangible assets, net, as presented on the consolidated balance sheets relate to the Company’s in-place lease values for the Company’s four net lease properties. The following table presents intangible assets, net (dollars in thousands):
March 31, 2024 (Unaudited)December 31, 2023
In-place lease value$120,149 $120,149 
Less: Accumulated amortization(118,317)(118,233)
Intangible assets, net$1,832 $1,916 
The Company recorded $0.1 million of amortization expense for in-place leases for the three months ended March 31, 2024 and 2023.
The following table presents future amortization of in-place lease value (dollars in thousands):
April 1 through December 31, 2024$253 
Years Ending December 31:
2025337 
2026337 
2027337 
2028337 
Thereafter231 
Total$1,832 
Derivative Instruments
The Company uses derivative instruments to manage its interest rate risk. The Company’s derivative instruments are recorded at fair value. The accounting for changes in fair value of derivatives depends upon whether or not the Company has elected to designate the derivative in a hedging relationship and the derivative qualifies for hedge accounting. Under hedge accounting, changes in fair value for derivatives are recorded through other comprehensive income. When hedge accounting is not elected, changes in fair value for derivatives are recorded through the income statement.
The Company has interest rate caps that have not been designated for hedge accounting. The fair value of the Company's interest rate caps totaled $0.2 million and $0.4 million as of March 31, 2024 and December 31, 2023, respectively, and are included in other assets on the consolidated balance sheets. Changes in fair value of derivatives have been recorded in gain (loss) on investments and other in the consolidated statements of operations. The Company recognized losses totaling $0.1 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.
Revenue Recognition
Operating Real Estate
Rental income from operating real estate is derived from leasing of space to operators and residents, including rent received from the Company’s net lease properties and rent, ancillary service fees and other related revenue earned from ILF residents. Rental income recognition commences when the operator takes legal possession of the leased space and the leased space is substantially ready for its intended use. The leases are for fixed terms of varying length and generally provide for rentals and expense reimbursements to be paid in monthly installments. Rental income from leases, which includes community and move-in fees, is recognized over the term of the respective leases. ILF resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice.
The Company also generates revenue from operating healthcare properties. Revenue related to operating healthcare properties includes resident room and care charges, ancillary fees and other resident service charges. Rent is charged and revenue is recognized when such services are provided, generally defined per the resident agreement as of the date upon which a resident occupies a room or uses the services. Resident agreements are generally short-term in nature and may allow for termination with 30 days’ notice. Revenue derived from our ALFs and MCFs is recorded in resident fee income in the consolidated statements of operations.
Revenue from operators and residents is recognized at lease commencement only to the extent collection is expected to be probable. This assessment is based on several qualitative and quantitative factors, including and as appropriate, the payment



14

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
history, ability to satisfy its lease obligations, the value of the underlying collateral or deposit, if any, and current economic conditions. If collection is assessed to not be probable, thereafter lease income recognized is limited to amounts collected, with the reversal of any revenue recognized to date in excess of amounts received. If collection is subsequently reassessed to be probable, revenue is adjusted to reflect the amount that would have been recognized had collection always been assessed as probable.
Beginning in February 2021, the operator of the Company’s four net lease properties failed to remit contractual monthly rent obligations and the Company deemed it not probable that these obligations will be satisfied in the foreseeable future. On March 27, 2023, the Company entered into a lease forbearance and modification agreement (the “Forbearance Agreement”) with the existing operator, pursuant to which, among other things, the Company will be entitled to receive all cash flow in excess of permitted expenses, and be required to fund any operating deficits, through 2025, subject to the terms and conditions thereof. For the three months ended March 31, 2024 and 2023, the Company did not receive any excess cash flow or fund any operating deficits and, as such, did not record any rental income related to its net lease properties.
For the three months ended March 31, 2024 and 2023, total property and other revenue includes variable lease revenue of $3.5 million and $3.4 million, respectively. Variable lease revenue includes ancillary services provided to residents, as well as non-recurring services and fees at the Company’s operating facilities.
Impairment on Operating Real Estate and Investments in Unconsolidated Ventures
Operating Real Estate and Assets Held for Sale
The Company’s real estate portfolio is reviewed on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value of its operating real estate may be impaired or that its carrying value may not be recoverable. A property’s value is considered impaired if the Company’s estimate of the aggregate expected future undiscounted cash flow generated by the property is less than the carrying value. In conducting this review, the Company considers U.S. macroeconomic factors, real estate and healthcare sector conditions, together with asset specific and other factors. To the extent an impairment has occurred, the loss is measured as the excess of the carrying value of the property over the estimated fair value and recorded in impairment loss in the consolidated statements of operations.
Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal cost, with any write-down to disposal cost recorded as an impairment loss. For any increase in fair value less disposal cost subsequent to classification as held for sale, the impairment may be reversed, but only up to the amount of cumulative loss previously recognized.
The Company considered the potential impact of the lasting effects of inflation, rising interest rates, risk of recession and other economic conditions on the future net operating income of its healthcare real estate held for investment as an indicator of impairment. Fair values were estimated based upon the income capitalization approach, using net operating income for each property and applying indicative capitalization rates.
During the three months ended March 31, 2024, the Company recorded impairment losses on its operating real estate totaling $0.5 million to reflect the market value of a land parcel within the Rochester portfolio designated as held for sale and for property damage sustained by facilities within the Winterfell and Aqua portfolios.
During the three months ended March 31, 2023, the Company did not record any impairment losses on its operating real estate.
Investments in Unconsolidated Ventures
The Company reviews its investments in unconsolidated ventures on a quarterly basis, or more frequently as necessary, to assess whether there are any indicators that the value may be impaired or that its carrying value may not be recoverable. An investment is considered impaired if the projected net recoverable amount over the expected holding period is less than the carrying value. In conducting this review, the Company considers global macroeconomic factors, including real estate sector conditions, together with investment specific and other factors. To the extent an impairment has occurred on the Company’s investment in unconsolidated ventures, and is considered to be other than temporary, the loss is measured as the excess of the carrying value of the investment over the estimated fair value and recorded in impairment loss in the consolidated statements of operations.
During the three months ended March 31, 2024 and 2023, the Company did not impair any of its investments in unconsolidated ventures, nor did the underlying joint ventures record any impairments or reserves on properties in their respective portfolios.



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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Credit Losses on Receivables
The current expected credit loss model, in estimating expected credit losses over the life of a financial instrument at the time of origination or acquisition, considers historical loss experiences, current conditions and the effects of reasonable and supportable expectations of changes in future macroeconomic conditions. The Company assesses the estimate of expected credit losses on a quarterly basis or more frequently as necessary. The Company considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts.
The Company measures expected credit losses of receivables on a collective basis when similar risk characteristics exist. If the Company determines that a particular receivable does not share risk characteristics with its other receivables, the Company evaluates the receivable for expected credit losses on an individual basis.
When developing an estimate of expected credit losses on receivables, the Company considers available information relevant to assessing the collectability of cash flows. This information may include internal information, external information, or a combination of both relating to past events, current conditions, and reasonable and supportable forecasts. The Company considers relevant qualitative and quantitative factors that relate to the environment in which the Company operates and are specific to the borrower.
Further, the fair value of the collateral, less estimated costs to sell, may be used when determining the allowance for credit losses for a receivable for which the repayment is expected to be provided substantially through the sale of the collateral when the borrower is experiencing financial difficulty.
As of March 31, 2024, the Company has not recorded an allowance for credit losses on its receivables.
Acquisition Fees and Expenses
The Company recorded an expense for certain acquisition costs and fees associated with transactions deemed to be business combinations in which it consolidated the asset and capitalized these costs for transactions deemed to be acquisitions of an asset, including an equity investment.
Equity-Based Compensation
The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant. All fixed equity-based awards to directors, which have no vesting conditions other than time of service, are amortized to compensation expense over the awards’ vesting period on a straight-line basis. Equity-based compensation is classified within general and administrative expenses in the consolidated statements of operations.
Income Taxes
The Company elected to be taxed as a REIT and to comply with the related provisions of the Internal Revenue Code beginning in its taxable year ended December 31, 2013. Accordingly, the Company will generally not be subject to U.S. federal income tax to the extent of its distributions to stockholders as long as certain asset, gross income and share ownership tests are met. To maintain its qualification as a REIT, the Company must annually distribute dividends equal to at least 90.0% of its REIT taxable income (with certain adjustments) to its stockholders and meet certain other requirements. The Company believes that all of the criteria to maintain the Company’s REIT qualification have been met for the applicable periods.
For the taxable year ended December 31, 2023, the Company anticipates that its REIT taxable income, if any, will be offset by its net operating loss carry-forward and as such, the Company will not be subject to the distribution requirements. The Company’s most recently filed tax return is for the year ended December 31, 2022 and includes a net operating loss carry-forward of $248.5 million.
If the Company were to fail to meet these requirements, it would be subject to U.S. federal income tax and potential interest and penalties, which could have a material adverse impact on its results of operations and amounts available for distributions to its stockholders. The Company’s accounting policy with respect to interest and penalties is to classify these amounts as a component of income tax expense, where applicable. The Company has assessed its tax positions for all open tax years, which include 2019 to 2023, and concluded there were no material uncertainties to be recognized. The Company may also be subject to certain state, local and franchise taxes. Under certain circumstances, federal income and excise taxes may be due on its undistributed taxable income.



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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company made a joint election to treat certain subsidiaries as taxable REIT subsidiaries (“TRS”) which may be subject to U.S. federal, state and local income taxes. In general, a TRS of the Company may perform services for managers/operators/residents of the Company, hold assets that the Company cannot hold directly and may engage in any real estate or non-real estate related business.
Certain subsidiaries of the Company are subject to taxation by federal and state authorities for the periods presented. Income taxes are accounted for by the asset/liability approach in accordance with U.S. GAAP. Deferred taxes, if any, represent the expected future tax consequences when the reported amounts of assets and liabilities are recovered or paid. Such amounts arise from differences between the financial reporting and tax bases of assets and liabilities and are adjusted for changes in tax laws and tax rates in the period which such changes are enacted. A provision for income tax represents the total of income taxes paid or payable for the current period, plus the change in deferred taxes. Current and deferred taxes are provided on the portion of earnings (losses) recognized by the Company with respect to its interest in the TRS.
The Company recorded an income tax expense of $20,000 and $15,000 for the three months ended March 31, 2024 and 2023, respectively.
Deferred income tax assets and liabilities are calculated based on temporary differences between the Company’s U.S. GAAP consolidated financial statements and the federal and state income tax basis of assets and liabilities as of the consolidated balance sheet date. The Company evaluates the realizability of its deferred tax assets (e.g., net operating loss and capital loss carryforwards) and recognizes a valuation allowance if, based on the available evidence, it is more likely than not that some portion or all of its deferred tax assets will not be realized. When evaluating the realizability of its deferred tax assets, the Company considers estimates of expected future taxable income, existing and projected book/tax differences, tax planning strategies available and the general and industry specific economic outlook. This realizability analysis is inherently subjective, as it requires the Company to forecast its business and general economic environment in future periods. Changes in estimate of deferred tax asset realizability, if any, are included in provision for income tax expense in the consolidated statements of operations. The Company has a deferred tax asset and continues to have a full valuation allowance recognized, as there are no changes in the facts and circumstances to indicate that the Company should release the valuation allowance.
The components of the Company’s deferred tax assets as of March 31, 2024 and December 31, 2023 are as follows (in thousands):
March 31, 2024 (Unaudited)December 31, 2023
Fixed assets and other$634 $656 
Net operating losses16,079 15,827 
Total deferred tax assets$16,713 $16,483 
Valuation allowance(16,713)(16,483)
Net deferred income tax assets$ $ 
Comprehensive Income (Loss)
The Company reports consolidated comprehensive income (loss) in separate statements following the consolidated statements of operations. Comprehensive income (loss) is defined as the change in equity resulting from net income (loss) and other comprehensive income (loss) (“OCI”). The only component of OCI for the Company was foreign currency translation adjustments related to its investment in an unconsolidated venture.
Foreign Currency
The Company is no longer exposed to foreign currency as a result of the Sale of Minority Interests (as defined in Note 4, “Investments in Unconsolidated Ventures”). Prior to the Sale of Minority Interests on June 9, 2023, the Company had exposure to foreign currency through an investment in an unconsolidated venture, the effects of which were recorded as a component of accumulated OCI in the consolidated statements of equity and in equity in earnings (losses) in the consolidated statements of operations. Upon the Sale of Minority Interests, the accumulated foreign currency losses were reclassified to gain (loss) on investments and other on the consolidated statements of operations.



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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Recent Accounting Pronouncements
Accounting Standards Adopted in 2024
None.
Future Application of Accounting Standards
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires disclosure of incremental segment information on an annual and interim basis, primarily through enhanced disclosures of significant segment expenses. ASU No. 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 and requires retrospective application to all periods presented upon adoption. Early adoption is permitted. The Company plans to adopt ASU No. 2023-07 on its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and does not anticipate the application of the accounting standards will have a material impact on the Company’s financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disclosure of incremental income tax information within the rate reconciliation and expanded disclosures of income taxes paid, among other disclosure requirements. ASU No. 2023-09 is effective for fiscal years beginning after December 15, 2024. Early adoption is permitted. The Company plans to adopt ASU No. 2023-09 on its Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and does not anticipate the application of the accounting standards will have a material impact on the Company’s financial statements.
3. Operating Real Estate
The following table presents operating real estate, net (dollars in thousands):
March 31, 2024 (Unaudited)December 31, 2023
Land$115,225 $115,758 
Land improvements12,819 12,705 
Buildings and improvements865,304 861,452 
Tenant improvements372 372 
Construction in progress3,635 5,493 
Furniture, fixtures and equipment94,746 93,373 
Subtotal$1,092,101 $1,089,153 
Less: Accumulated depreciation(276,701)(267,883)
Operating real estate, net$815,400 $821,270 
For the three months ended March 31, 2024 and 2023, depreciation expense was $8.8 million and $9.6 million, respectively.
Within the table above, operating real estate has been reduced by accumulated impairment losses of $163.3 million and $162.9 million as of March 31, 2024 and December 31, 2023, respectively. Impairment losses, as presented on the consolidated statements of operations, for the Company’s operating real estate and properties held for sale totaled $0.5 million for the three months ended March 31, 2024. There were no impairment losses recorded for the three months ended March 31, 2023. Refer to Note 2, “Summary of Significant Accounting Policies” for further discussion.



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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The following table presents the operators and managers of the Company’s operating real estate (dollars in thousands):
As of March 31, 2024Three Months Ended March 31, 2024
Operator / ManagerProperties Under Management
Units Under Management(1)
Property and Other Revenues(2)
% of Total Property and Other Revenues
Solstice Senior Living(3)
32 3,969 $33,695 69.1 %
Watermark Retirement Communities(4)
6 723 7,346 15.1 %
Avamere Health Services5 453 5,690 11.7 %
Integral Senior Living1 40 1,141 2.3 %
Arcadia Management(5)
4 564   %
Other(6)
  880 1.8 %
Total48 5,749 $48,752 100.0 %
______________________________________
(1)Represents rooms for ALFs, ILFs and MCFs.
(2)Includes rental income received from the Company’s net lease properties, rental income, ancillary service fees and other related revenue earned from ILF residents and resident fee income derived from the Company’s ALFs and MCFs, which includes resident room and care charges, ancillary fees and other resident service charges.
(3)Solstice is a joint venture of which affiliates of Integral Senior Living own 80%.
(4)Property count and units exclude the properties within the Rochester Sub-Portfolio, which were placed into a receivership in October 2023.
(5)During the three months ended March 31, 2024, the Company did not record any rental income from its net lease operator.
(6)Consists primarily of interest income earned on corporate-level cash and cash equivalents.
Rochester Sub-Portfolio
As a result of the mortgage loan payment defaults in July 2023, on October 30, 2023, the Rochester Sub-Portfolio (as defined in Note 5, “Borrowings”) was placed into a receivership. The receiver now has effective control of the properties until ownership of the properties transfers to the lender or its designee.
As a result of the loss of control, the Company discontinued recognizing revenues and expenses related to the Rochester Sub-Portfolio as of October 30, 2023 and derecognized the properties and related assets from the Company’s financial statements, which resulted in a $59.0 million loss recognized in accordance with ASC 610-20, “Gains and Losses from the Derecognition of Nonfinancial Assets.”
Arbors Portfolio
Beginning in February 2021, Arcadia Management, the operator of the Company’s four net lease properties in the Arbors portfolio, failed to remit contractual monthly rent obligations. The Company deemed it not probable that these obligations will be satisfied in the foreseeable future and began recognizing rental income as received on a cash basis. During the three months ended March 31, 2024, the Company did not record any rental income related to its net lease properties.
4. Investments in Unconsolidated Ventures
The Company’s investments in unconsolidated ventures are accounted for under the equity method or fair value option. The following table presents the Company’s investments in unconsolidated ventures (dollars in thousands):
Carrying Value
PortfolioAcquisition DateOwnershipMarch 31, 2024 (Unaudited)December 31, 2023
TrilogyDec-201523.8 %$123,391 $122,339 
SolsticeJul-201720.0 %430 468 
EspressoJul-201536.7 %142 142 
Investments in Unconsolidated Ventures$123,963 $122,949 
Trilogy
Trilogy Investors, LLC (“Trilogy”) indirectly owns 126 integrated senior health campuses located in the Midwest, which are all operating properties managed pursuant to a management agreement with Trilogy Management Services, as well as ancillary services businesses, including a therapy business and a pharmacy business. Affiliates of American Healthcare REIT, Inc.(“AHR”) own approximately 75.4% of Trilogy, with management of Trilogy owning the remaining 0.8%.



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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In November 2023, the Company entered into an agreement giving AHR the right to purchase the Company’s ownership interests in Trilogy at any time prior to September 30, 2025, assuming AHR exercises all of its extension options and subject to satisfaction of certain closing conditions, ranging from $240.5 million to up to $260 million depending upon the purchase price consideration, timing of the closing and certain additional fees that AHR may pay us in the interim.
Solstice
Solstice Senior Living, LLC (“Solstice”), the manager of the Winterfell portfolio, is a joint venture between affiliates of Integral Senior Living, LLC (“ISL”), a management company of ILF, ALF and MCF founded in 2000, which owns 80.0%, and the Company, which owns 20.0%.
Espresso
During the year ended December 31, 2023, the Espresso joint venture completed the sale of its remaining sub-portfolios. The Company’s elected the fair value option method to account for its investment in the Espresso joint venture on June 30, 2023. As of March 31, 2024, the remaining carrying value represents the Company’s proportionate share of available cash, less wind down costs and other expenses.
The following table presents the results of the Company’s investment in unconsolidated ventures (dollars in thousands):
Three Months Ended March 31,
20242023
PortfolioEquity in Earnings (Losses)Cash DistributionEquity in Earnings (Losses)Cash Distribution
Trilogy$1,052 $ $(309)$2,334 
Solstice(38) (29) 
Espresso(1)
  109  
Investments sold  (3,693) 
Total$1,014 $ $(3,922)$2,334 
_______________________________________
(1) The Company elected to the fair value option method to account for the joint venture on June 30, 2023, which resulted in no equity in earnings (losses) recorded subsequent to the accounting policy election.
Investments Sold
In June 2023, the Company sold its 14% interest in Healthcare GA Holdings, General Partnership, which indirectly owned 48 care homes across the United Kingdom (the “Diversified US/UK Portfolio”), and its 6% interest in Eclipse Health, General Partnership, which indirectly owned 34 seniors housing facilities (the “Eclipse Portfolio”), together with $1.1 million in cash, to its Former Sponsor, who is affiliated with the majority partner of each joint venture, for all of the Company’s equity securities held by the Former Sponsor and its affiliates, including 9,709,553 shares of common stock of the Company, 100 common units in the Operating Partnership and 100 special units in the Operating Partnership (the “Sale of Minority Interests”). Upon completion of the Sale of Minority Interests, the Company retired all of the shares of common stock acquired.



20

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Borrowings
The following table presents the Company’s mortgage notes payable (dollars in thousands):
March 31, 2024 (Unaudited)December 31, 2023
Recourse vs. Non-Recourse(1)
Initial
Maturity
Contractual
Interest Rate(2)
Principal
Amount(3)
Carrying
Value(3)
Principal
Amount
(3)
Carrying
Value
(3)
Aqua Portfolio
Frisco, TXNon-recourseFeb 2026
SOFR + 2.91%
$26,000 $25,728 $26,000 $25,694 
Milford, OHNon-recourseSep 2026
SOFR + 2.79%
18,133 17,992 18,173 18,015 
Rochester Portfolio
Rochester, NYNon-recourseFeb 20254.25%17,282 17,263 17,470 17,448 
Rochester, NY(4)
Non-recourseJul 2023
SOFR + 2.45%
99,786 99,786 99,786 99,786 
Rochester, NY(5)
Non-recourseRepaid
SOFR + 2.93%
  10,874 10,853 
Arbors Portfolio(6)
Various locationsNon-recourseFeb 20253.99%80,874 80,732 81,397 81,209 
Winterfell Portfolio(7)
Various locationsNon-recourseJun 20254.17%580,135 576,202 583,471 578,694 
Avamere Portfolio(8)
Various locationsNon-recourseFeb 20274.66%66,353 66,136 66,691 66,455 
Mortgage notes payable, net$888,563 $883,839 $903,862 $898,154 
_______________________________________
(1)Subject to non-recourse carve-outs.
(2)Floating-rate borrowings total $143.9 million of principal outstanding and reference one-month of the Secured Overnight Financing Rate (“SOFR”).
(3)The difference between principal amount and carrying value of mortgage notes payable is attributable to deferred financing costs, net for all borrowings, other than the Winterfell portfolio which is attributable to below market debt intangibles.
(4)Composed of seven individual mortgage notes payable secured by the Rochester Sub-Portfolio (as defined below), cross-collateralized and subject to cross-default.
(5)Upon the sale of the underlying collateral property, the mortgage note was repaid in full in February 2024.
(6)Composed of four individual mortgage notes payable secured by four healthcare real estate properties, cross-collateralized and subject to cross-default.
(7)Composed of 32 individual mortgage notes payable secured by 32 healthcare real estate properties, cross-collateralized and subject to cross-default.
(8)Composed of five individual mortgage notes payable secured by five healthcare real estate properties, cross-collateralized and subject to cross-default.
The following table presents future scheduled principal payments on mortgage notes payable based on initial maturity as of March 31, 2024 (dollars in thousands):
April 1 through December 31, 2024(1)
$113,275 
Years Ending December 31:
2025667,741 
202645,151 
202762,396 
Total$888,563 
_______________________________________
(1)Includes the outstanding principal of the Rochester Sub-Portfolio Loan (as defined below), which is in default.
Rochester Sub-Portfolio Loan
In July 2023, the Company elected not to use cash reserves to pay July debt service on seven cross-defaulted and cross-collateralized mortgage notes with an aggregate principal amount outstanding of $99.8 million (the “Rochester Sub-Portfolio Loan") secured by seven healthcare real estate properties (the “Rochester Sub-Portfolio") that did not generate sufficient cash flow to pay debt service in full. The Rochester Sub-Portfolio Loan is non-recourse to the Company, subject to limited customary exceptions.



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NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As a result of the payment default, on October 25, 2023, the lender filed a complaint seeking the appointment of a receiver and foreclosure on the underlying properties and to enforce its rights in its collateral under the loan documents and, on October 30, 2023, the Rochester Sub-Portfolio was placed into a receivership to facilitate an orderly transition of the operations, and eventually ownership, of the properties.
Once legal ownership of the Rochester Sub-Portfolio transfers and the obligations under the Rochester Sub-Portfolio Loan are extinguished, the Company expects to recognize a gain related to the debt extinguishment in accordance with ASC 470, “Debt.” However, until the extinguishment occurs, default interest expense and any other expenses related to the Rochester Sub-Portfolio Loan will continue to accrue. As of March 31, 2024, $99.8 million of outstanding mortgage debt and $11.0 million of accrued interest expense were included on the Company's consolidated balance sheets related to the Rochester Sub-Portfolio Loan.
Arbors Portfolio
Beginning in February 2021, the operator of the four net lease properties in the Arbors portfolio was unable to satisfy its obligations under its leases and began remitting rent based on its available cash after satisfying property-level expenses, which resulted in a default under the four cross-defaulted and cross-collateralized mortgage notes secured by the Arbor portfolio (the “Arbors Loan”). On March 27, 2023, with consent of the lender, the Company entered into a forbearance agreement relating to the lease defaults. During the three months ended March 31, 2024, cash flow, net of expenses, paid by the operator of the Arbors portfolio to the Company in accordance with the forbearance agreement was not sufficient to cover related debt service on the Arbors Loan and the Company used $1.5 million of cash reserves to pay contractual debt service on the Arbors Loan. As of March 31, 2024, the Company is current with all payment obligations under the Arbors Loan. The Arbors Loan matures in February 2025 and is non-recourse to the Company, subject to limited customary exceptions. The Company will continue to monitor the operator of the Arbors portfolio’s performance and cash flows closely, as well as evaluate options for this portfolio.
6. Related Party Arrangements
Former Advisor
In connection with the Internalization, on October 21, 2022, the advisory agreement was terminated and, along with the Operating Partnership and the Former Advisor, the Company entered into a Transition Services Agreement (the “TSA”) to facilitate an orderly transition of the Company’s management of its operations. As of December 31, 2023, the TSA was effectively terminated.
Prior to the Internalization, the Former Advisor was responsible for managing the Company’s affairs on a day-to-day basis and for identifying, acquiring, originating and asset managing investments on behalf of the Company. For such services, to the extent permitted by law and regulations, the Former Advisor received fees and reimbursements from the Company. Pursuant to the advisory agreement, the Former Advisor could defer or waive fees in its discretion.
Investments in Unconsolidated Ventures
Solstice, the manager of the Winterfell portfolio, is a joint venture between affiliates of ISL, which owns 80.0%, and the Company, which owns 20.0%. For the three months ended March 31, 2024, the Company recognized property management fee expense of $1.7 million payable to Solstice related to the Winterfell portfolio.
7. Equity-Based Compensation
The Company adopted a long-term incentive plan, as amended (the “Plan”), which it may use to attract and retain qualified officers, directors, employees and consultants, as well as an independent directors compensation plan, which is a component of the Plan. Under the Plan, 2.0 million shares of restricted common stock were eligible to be issued for any equity-based awards granted under the Plan.
Pursuant to the Plan, as of March 31, 2024, the Company’s independent directors were granted a total of 159,932 shares of restricted common stock and 203,742 restricted stock units totaling $1.3 million and $0.7 million, respectively, based on the share price on the date of each grant.
The restricted common stock and restricted stock units granted generally vest quarterly over two years in equal installments and will become fully vested on the earlier occurrence of: (i) the termination of the independent director’s service as a director due to his or her death or disability; or (ii) a change in control of the Company. The restricted stock units are convertible, on a one-for-one basis, into shares of the Company’s common stock upon the earlier occurrence of: (i) the termination of the independent director’s service as a director; or (ii) a change in control of the Company.



22

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company recognized equity-based compensation expense of $56,250 and $56,875 for the three months ended March 31, 2024 and 2023, respectively. Equity-based compensation expense is recorded in general and administrative expenses in the consolidated statements of operations.
Unrecognized expense related to unvested restricted stock units totaled $183,750 and $240,000 as of March 31, 2024 and December 31, 2023, respectively. Unvested restricted stock units totaled 60,628 and 77,741 as of March 31, 2024 and December 31, 2023, respectively.
8. Stockholders’ Equity
Common Stock
The Company stopped accepting subscriptions for its Offering on December 17, 2015 and all of the shares initially registered for its Offering were issued on or before January 19, 2016. The Company issued 173.4 million shares of common stock generating gross proceeds of $1.7 billion, excluding proceeds from the DRP.
Distribution Reinvestment Plan
The Company adopted the DRP through which common stockholders were able to elect to reinvest an amount equal to the distributions declared on their shares in additional shares of the Company’s common stock in lieu of receiving cash distributions. Since inception, the Company issued 25.7 million shares of common stock, generating gross offering proceeds of $232.6 million pursuant to the DRP. No selling commissions or dealer manager fees were paid on shares issued pursuant to the DRP. In April 2022, the Company’s board of directors elected to end the DRP, effective April 30, 2022.
Distributions
Effective February 1, 2019, the Company’s board of directors determined to stop recurring distributions in order to preserve capital and liquidity.
On April 20, 2022, the Company’s board of directors declared a special distribution of $0.50 per share (the “Special Distribution”) for each stockholder of record on May 2, 2022 totaling approximately $97.0 million.
Share Repurchase Program
The Company adopted a share repurchase program that enabled stockholders to sell their shares to the Company in limited circumstances and could be amended, suspended, or terminated at any time. The Company previously funded repurchase requests with cash on hand, borrowings or other available capital. In April 2020, the Company’s board of directors determined to suspend all repurchases under the share repurchase program effective April 30, 2020 in order to preserve capital and liquidity and does not currently anticipate resuming the share repurchase program.
9. Non-controlling Interests
Operating Partnership
Non-controlling interests included the aggregate limited partnership interests in the Operating Partnership held by limited partners, other than the Company. Income (loss) attributable to the non-controlling interests was based on the limited partners’ ownership percentage of the Operating Partnership. As a result of the Sale of Minority Interests on June 9, 2023, the Company’s limited partnership interest in the Operating Partnership, directly or indirectly, is 100% as of March 31, 2024. Income (loss) allocated to the Operating Partnership non-controlling interests for the period prior to June 9, 2023 was de minimis.
Other
Other non-controlling interests represent third-party equity interests in ventures that are consolidated with the Company’s financial statements. Net loss attributable to the other non-controlling interests was $114,761 and $71,242 for the three months ended March 31, 2024 and 2023, respectively.



23

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
10.    Fair Value
Fair Value Measurement
The fair value of financial instruments is categorized based on the priority of the inputs to the valuation technique and categorized into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
Financial assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:
Level 1.Quoted prices for identical assets or liabilities in an active market.
Level 2.Financial assets and liabilities whose values are based on the following:
a)Quoted prices for similar assets or liabilities in active markets.
b)Quoted prices for identical or similar assets or liabilities in non-active markets.
c)Pricing models whose inputs are observable for substantially the full term of the asset or liability.
d)Pricing models whose inputs are derived principally from or corroborated by observable market data for substantially the full term of the asset or liability.
Level 3.Prices or valuation techniques based on inputs that are both unobservable and significant to the overall fair value measurement.



24

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Derivative Instruments
Derivative instruments consist of interest rate contracts and foreign exchange contracts that are generally traded over-the-counter, and are valued using a third-party service provider. Quotations on over-the-counter derivatives are not adjusted and are generally valued using observable inputs such as contractual cash flows, yield curve, foreign currency rates and credit spreads, and are classified as Level 2 of the fair value hierarchy. Although credit valuation adjustments, such as the risk of default, rely on Level 3 inputs, these inputs are not significant to the overall valuation of its derivatives. As a result, derivative valuations in their entirety are classified as Level 2 of the fair value hierarchy.
Fair Value Hierarchy
Financial assets recorded at fair value on a recurring basis are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table presents financial assets that were accounted for at fair value on a recurring basis as of March 31, 2024 and December 31, 2023 by level within the fair value hierarchy (dollars in thousands):
March 31, 2024 (Unaudited)December 31, 2023
Level 1Level 2Level 3Level 1Level 2Level 3
Financial assets:
Derivative assets - interest rate caps
$ $223 $ $ $433 $ 
Investment in Espresso joint venture  142   142 
Derivative Assets - Interest Rate Caps
The Company’s interest rate caps fair values are determined using models developed by the respective counterparty that use the market standard methodology of discounting the future expected cash receipts that would occur if variable interest rates rise above the strike rate of the caps. The floating interest rates used in the calculation of projected receipts on the caps are based on an expectation of future interest rates derived from observable market interest rate curves and volatilities.
Investment in Espresso Joint Venture
The Company’s assessment of fair value for its unconsolidated investment in the Espresso joint venture took into consideration its proportionate share of available cash, less wind down costs and other expenses. The Company believes the assessment of fair value to be reasonable as of March 31, 2024 and did not make any fair value adjustments during the three months ended March 31, 2024.
Fair Value of Financial Instruments
U.S. GAAP requires disclosure of fair value about all financial instruments. The following disclosure of estimated fair value of financial instruments was determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessary to interpret market data and develop estimated fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on estimated fair value.
The following table presents the principal amount, carrying value and fair value of certain financial assets and liabilities (dollars in thousands):
March 31, 2024 (Unaudited)December 31, 2023
Principal AmountCarrying ValueFair ValuePrincipal AmountCarrying ValueFair Value
Financial liabilities:(1)
Mortgage notes payable, net$888,563 $883,839 $831,911 $903,862 $898,154 $842,559 
_______________________________________
(1)The fair value of other financial instruments not included in this table is estimated to approximate their carrying value.
Disclosure about fair value of financial instruments is based on pertinent information available to management as of the reporting date. Although management is not aware of any factors that would significantly affect fair value, such amounts have not been comprehensively revalued for purposes of these consolidated financial statements since that date and current estimates of fair value may differ significantly from the amounts presented herein.



25

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Mortgage Notes Payable
The Company primarily uses rates currently available with similar terms and remaining maturities to estimate fair value. These measurements are determined using comparable U.S. Treasury and SOFR rates as of the end of the reporting period. These fair value measurements are based on observable inputs, and as such, are classified as Level 2 of the fair value hierarchy.
Nonrecurring Fair Values
The Company measures fair value of certain assets on a nonrecurring basis when events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Adjustments to fair value generally result from the application of lower of amortized cost or fair value accounting for assets held for sale or otherwise or write-down of asset values due to impairment.
The following table summarizes the fair value and impairment losses of Level 3 assets which have been measured at fair value on a nonrecurring basis at the time of impairment during the periods presented (dollars in thousands):
Three Months EndedYear Ended
March 31, 2024 (Unaudited)December 31, 2023
Fair Value
Impairment Losses(1)
Fair Value
Impairment Losses(1)
Operating real estate, net$ $ $56,718 $44,294 
Investments in unconsolidated ventures  3,075 4,728 
Assets held for sale495 39 11,611 355 
_______________________________________
(1)Excludes impairment losses for property damage sustained by facilities.
Operating Real Estate, Net
Operating real estate that is impaired is carried at fair value at the time of impairment. Impairment was driven by various factors that impacted undiscounted future net cash flows, including declines in operating performance, market growth assumptions and expected margins to be generated by the properties. Fair value of impaired operating real estate was estimated based upon various approaches including discounted cash flow analysis using terminal capitalization rates ranging from 6.25% to 8.50% and discount rates ranging from 7.75% to 10.50%, third party appraisals and offer prices.
Investments in Unconsolidated Ventures
In June 2023, the Company impaired its investment in the Espresso joint venture by $4.7 million, which reduced the carrying value of its investment to $3.1 million as of June 30, 2023. The Company’s assessment of fair value at the time of impairment for its investment took into consideration the net proceeds that are estimated to be realized from the sales, under contract, of the remaining real estate owned by the joint venture as well as the Company’s proportionate share of available cash, less wind down costs and other expenses. Upon impairing its investment, the Company elected the fair value option method to account for its investment in the Espresso joint venture on June 30, 2023.
Assets Held For Sale
Assets held for sale are carried at the lower of amortized cost or fair value. Assets held for sale that were written down to fair value were generally valued using either broker opinions of value, or a combination of market information, including third-party appraisals and indicative sale prices, adjusted as deemed appropriate by management to account for the inherent risk associated with specific properties. In all cases, the fair value of assets held for sale is reduced for estimated selling costs. As of March 31, 2024, the Company classified one land parcel within the Rochester portfolio as held for sale. As of December 31, 2023, the Company classified one operating real estate property within the Rochester portfolio as held for sale, which was sold in February 2024.
11. Segment Reporting
The Company conducts its business through the following segments, which are based on how management reviews and manages its business.
Direct Operating Investments - Properties operated pursuant to management agreements with healthcare managers.



26

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Direct Net Lease Investments - Properties operated under net leases with an operator.
Unconsolidated Investments - Joint venture investments, in which the Company owns a minority, non-controlling interest.
Our chief operating decision maker (“CODM”) evaluates performance of each reportable business segment and determines how to allocate resources to those segments, in significant part, based on net operating income (“NOI”) and related measures for each segment. The Company defines NOI as property and other revenues, less property operating expenses. While the Company believes that net income (loss), as defined by GAAP, is the most appropriate earnings measurement, the Company believes that NOI provides useful information to stockholders and provides management with a performance measure to compare the Company's operating results to the operating results of other healthcare real estate companies between periods on a consistent basis.
The following tables present the NOI of the Company’s direct investments segments and the Company's proportionate share of the NOI generated by the joint ventures of its unconsolidated investments segment (dollars in thousands):
Direct Investments
Three Months Ended March 31, 2024Net LeaseOperatingUnconsolidated Investments
Non-Segment(2)
Adjustments(3)
Total(4)
Property and other revenues(1)
$ $47,872 $92,022 $880 $(92,022)$48,752 
Property operating expenses (33,381)(81,899) 81,899 (33,381)
Net operating income$ $14,491 $10,123 $880 $(10,123)$15,371 
Interest expense(12,862)
Transaction costs(16)
General and administrative expenses(3,327)
Depreciation and amortization(8,901)
Impairment loss(456)
Other income, net1,000 
Gain (loss) on investments and other150 
Equity in earnings (losses) of unconsolidated ventures1,014 
Income tax expense(20)
Net income (loss)$(8,047)
_______________________________________
(1)Includes rental income received from net lease properties, if any, as well as resident room and care charges, ancillary service fees and other related revenue earned from operating properties.
(2)Primarily consists of interest income earned on corporate cash and equivalents.
(3)Represents adjustments to eliminate the NOI presented for the unconsolidated investments segment, in order to reconcile to the Company's net income (loss) prepared in accordance with GAAP. For investments accounted for under the equity method of accounting, the Company records its proportionate share of the net income of its unconsolidated investments through equity in earnings (losses) of unconsolidated ventures as presented on its consolidated statements of operations.
(4)Non-NOI items are not allocated to individual segments for purposes of assessing segment performance.



27

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Direct Investments
Three Months Ended March 31, 2023Net LeaseOperating
Unconsolidated Investments(2)
Non-Segment(3)
Adjustments(4)
Total(5)
Property and other revenues(1)
$ $48,849 $94,655 $719 $(94,655)$49,568 
Property operating expenses (35,077)(81,615) 81,615 (35,077)
Net operating income$ $13,772 $13,040 $719 $(13,040)$14,491 
Interest expense(11,359)
Transaction costs(97)
General and administrative expenses(3,910)
Depreciation and amortization(9,649)
Other income, net132 
Gain (loss) on investments and other332 
Equity in earnings (losses) of unconsolidated ventures(3,922)
Income tax expense(15)
Net income (loss)$(13,997)
_______________________________________
(1)Includes rental income received from net lease properties, if any, as well as resident room and care charges, ancillary service fees and other related revenue earned from operating properties.
(2)Includes the Company's proportionate share of revenues and expenses of the Diversified US/UK and Eclipse Portfolios prior to the Sale of Minority Interests in June 2023.
(3)Primarily consists of interest income earned on corporate cash and equivalents.
(4)Represents adjustments to eliminate the NOI presented for the unconsolidated investments segment, in order to reconcile to the Company's net income (loss) prepared in accordance with GAAP. For investments accounted for under the equity method of accounting, the Company records its proportionate share of the net income of its unconsolidated investments through equity in earnings (losses) of unconsolidated ventures as presented on its consolidated statements of operations.
(5)Non-NOI items are not allocated to individual segments for purposes of assessing segment performance.
The following table presents total assets by segment (dollars in thousands):
Direct Investments
Total Assets:Net LeaseOperatingUnconsolidated Investments
Non-Segment(1)
Total
March 31, 2024
$73,633 $770,400 $123,963 $69,135 $1,037,131 
December 31, 202374,655 787,925 122,949 73,890 1,059,419 
______________________________________
(1)Represents primarily corporate cash and cash equivalents balances.
The following table presents capital expenditures made by the Company for each of its reportable segments (dollars in thousands):
Direct Investments
Total Capital Expenditures for the Three Months Ended:Net LeaseOperatingUnconsolidated InvestmentsNon-SegmentTotal
March 31, 2024
$ 2,926 $ $ $2,926 
March 31, 2023 3,810   3,810 
12. Commitments and Contingencies
As of March 31, 2024, the Company believes there are no material unrecorded contingencies that would affect its results of operations, cash flows or financial position.
Litigation and Claims
The Company may be involved in various litigation matters arising in the ordinary course of its business. Although the Company is unable to predict with certainty the eventual outcome of any litigation, any current legal proceedings are not expected to have a material adverse effect on its financial position or results of operations.



28

NORTHSTAR HEALTHCARE INCOME, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The Company’s operators and managers may be involved in various litigation matters arising in the ordinary course of their business. The unfavorable resolution of any such actions, investigations or claims could, individually or in the aggregate, materially adversely affect such operators’ or managers’ liquidity, financial condition or results of operations and their ability to satisfy their respective obligations to the Company, which, in turn, could have a material adverse effect on the Company.
As of March 31, 2024, the Company has an accrued reserve of $0.6 million, inclusive of legal fees, relating to a resolution of claims against a manager of one of the Company’s direct operating investments, for which the Company has indemnification obligations under the management agreement.
Environmental Matters
The Company follows a policy of monitoring its properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at its properties, the Company is not currently aware of any environmental liability with respect to its properties that would have a material effect on its consolidated financial position, results of operations or cash flows. Further, the Company is not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that it believes would require additional disclosure or the recording of a loss contingency.
General Uninsured Losses
The Company obtains various types of insurance to mitigate the impact of professional liability, property, business interruption, liability, flood, windstorm, earthquake, environmental and terrorism related losses. The Company attempts to obtain appropriate policy terms, conditions, limits and deductibles considering the relative risk of loss, the cost of such coverage and current industry practice. Disruptions in insurance markets may increase the costs of coverage and result in the Company retaining more risk, to the extent it is more commercially reasonable to do so. In addition, there are also certain types of extraordinary losses, such as those due to acts of war or other events, that may be either uninsurable or not economically insurable.
13.    Subsequent Events
There were no material events which have occurred subsequent to March 31, 2024 through the issuance of the consolidated financial statements.



29

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included in Part I, Item 1. “Financial Statements” and the risk factors in Part II, Item 1A. “Risk Factors.” References to “we,” “us,” “our,” or “NorthStar Healthcare” refer to NorthStar Healthcare Income, Inc. and its subsidiaries unless the context specifically requires otherwise.
Overview
We own a diversified portfolio of seniors housing properties, including independent living facilities, or ILFs, assisted living facilities, or ALFs, and memory care facilities, or MCFs, located throughout the United States. In addition, we have an investment through a non-controlling interest in a joint venture that invests in integrated senior health campuses, which provide services associated with ILFs, ALFs, MCFs and skilled nursing facilities, or SNFs, across the Midwest region of the United States.
We were formed in October 2010 as a Maryland corporation and commenced operations in February 2013. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, commencing with the taxable year ended December 31, 2013. We conduct our operations so as to continue to qualify as a REIT for U.S. federal income tax purposes.
We raised $2.0 billion in total gross proceeds from the sale of shares of our common stock in our continuous, public offerings, including $232.6 million pursuant to our distribution reinvestment plan, or our DRP, collectively referred to as our Offering.
The Internalization
From inception through October 21, 2022, we were externally managed by CNI NSHC Advisors, LLC or its predecessor, or the Former Advisor, an affiliate of NRF Holdco, LLC, or the Former Sponsor. The Former Advisor was responsible for managing our operations, subject to the supervision of our board of directors, pursuant to an advisory agreement. On October 21, 2022, we completed the internalization of our management function, or the Internalization. In connection with the Internalization, we agreed with the Former Advisor to terminate the advisory agreement.
Our Strategy
Our primary objective is to maximize value and generate liquidity for shareholders. The key elements of our strategy include:
Grow the Operating Income Generated by Our Portfolio. We are focused on growing the net operating income generated by our properties, through active portfolio management and selectively deploying capital expenditures to improve occupancy and resident rates while managing expenses, in an effort to enhance the overall value of our assets.
Pursue Disposition Opportunities that Maximize Value. We will pursue dispositions of assets and portfolios where we believe the disposition will achieve a desired return or strategic outcome, with the goal of maximizing value for shareholders overall.
Market Update
Seniors Housing Fundamentals
Current market conditions impacting property-level performance are generally favorable. Industry occupancy continues to grow, with an industry average of 85.6% for the first quarter of 2024, up 50 basis points from the previous quarter, but still remains below the pre-pandemic average of 87.1% in March 2020 (source: NIC MAP Vision 1Q2024 Market Fundamentals Report). The 80+ population, a key demographic for seniors housing, is expected to grow by 24% through 2028 and is forecasted to increase by 3.7% in 2024 (Source: NIC MAP Vision as of December 2023), and new supply and new construction remain low compared to historical levels, resulting in a demand and supply environment that should contribute to continued overall industry occupancy and revenue growth.
Seniors Housing Transactions
Current market conditions affecting transactions, including asset sales, remain challenging. The current state of the public and private capital markets have been affected by a general tightening of availability of credit (including the price, terms and conditions under which financing can be obtained), elevated interest rates and a general decrease in liquidity in the healthcare lending markets, which has resulted in higher capitalization rates, adversely impacting property values and limiting transaction activity.



30

Liquidity Update
We have not announced or adopted a plan for liquidation and are not required to liquidate by any specified date. We do not have a stated term for a liquidity event, as we believe setting a finite date for a possible, but uncertain, future liquidity transaction may result in actions that are not necessarily in the best interest or within the expectations of our shareholders.
Although opportunities may exist to dispose of assets in the current market environment and there are certain scenarios where a sale can generate acceptable market returns for shareholders, many opportunities in the current market may require us to take significant discounts to our view of value.
Our current focus is on growing the net operating income of our existing direct investments, including through selectively investing capital into certain properties in order to achieve a better return upon the sale of those properties. If market conditions improve, we will then proceed with a general plan to sell assets over the next 2-3 years, while also exploring potential merger transactions in which the whole company would be acquired.
Based on the current forecasted cash flow of our investments and cash needs to operate the business, we do not anticipate paying recurring dividends or resuming our share repurchase program in the near future. Although we have approximately $91.3 million of unrestricted cash as of May 7, 2024, we require capital to fund operations, capital expenditures, and other important business uses, as well as to fund our debt service obligations and potentially to refinance indebtedness. Current cash flow generated by operations is not sufficient to cover all of these obligations. If we do not have sufficient capital available to fund our obligations, we may be unable to position properties to maximize value or meet debt service obligations. Instead, the board of directors will evaluate special distributions in connection with any future sales and other realizations of investments on a case-by-case basis based on, among other factors, current and projected liquidity needs.
Business Update
Operating Performance
The following is a summary of the performance of our investment segments for the three months ended March 31, 2024 as compared to the three months ended March 31, 2023. For additional information on financial results, refer to “—Results of Operations.”
Direct Operating Investments
The following table presents a summary of average occupancy of our direct operating investments by property manager:
Average Quarterly Occupancy
ManagerUnits Under ManagementQ1 2024Q1 2023Change
Solstice Senior Living3,969 89.1 %86.7 %2.4 %
Watermark Retirement Communities(1)
723 86.3 %88.4 %(2.1)%
Avamere Health Services453 89.6 %89.8 %(0.2)%
Integral Senior Living40 76.4 %93.7 %(17.3)%
Direct Operating Investments5,185 88.7 %87.3 %1.4 %
_______________________________________
(1)Average quarterly occupancy excludes properties sold and the Rochester Sub-Portfolio (as defined in “—Results of Operations”).



31

NOI is a supplemental non-GAAP financial measure of our operating performance. The following table presents the NOI of our direct operating investments (dollars in thousands):
Three Months Ended March 31,Increase (Decrease)
20242023Amount%
Same store(1)
Property and other revenues
Resident fee income$12,296 $11,850 $446 3.8 %
Rental income35,409 32,038 3,371 10.5 %
Other revenue17 — 17 NA
Total property and other revenues47,722 43,888 3,834 8.7 %
Property operating expenses
Salaries and wages15,603 14,956 647 4.3 %
Utilities3,279 3,029 250 8.3 %
Food and beverage2,524 2,329 195 8.4 %
Repairs and maintenance3,505 2,972 533 17.9 %
Property taxes2,356 2,547 (191)(7.5)%
Property management fee2,431 2,196 235 10.7 %
Marketing 1,129 1,071 58 5.4 %
Insurance1,253 797 456 57.2 %
All other expenses1,189 903 286 31.7 %
Total property operating expenses33,269 30,800 2,469 8.0 %
Same store NOI$14,453 $13,088 $1,365 10.4 %
Non-same store NOI$38 $684 $(646)(94.4)%
Total direct operating investments NOI(2)
$14,491 $13,772 $719 5.2 %
_______________________________________
(1)Same store excludes revenues and expense of properties sold and the Rochester Sub-Portfolio (as defined in “—Results of Operations”).
(2)For a reconciliation of our direct operating investments segment NOI to segment net income (loss) as presented in accordance with U.S. GAAP in our consolidated financial statements as of March 31, 2024 and 2023, refer to “—Non-GAAP Financial Measures.”
During the three months ended March 31, 2024, the average occupancy for our direct operating investments improved by 1.4% over the prior period, to 88.7%. Our investment of capital to enhance the facilities of our properties contributed to the increase in occupancy. With the properties approaching stabilized occupancy levels, the managers of our direct operating investments have been focused on implementing resident rate increases and generating higher revenues, which outpaced the impact of inflation on variable operating costs over the same period. While certain operating expenses remain elevated, in particular, insurance costs, same store NOI continued to trend positively, increasing 10.4% over the prior period.
Direct Net Lease Investments
Beginning in February 2021, the operator of the four net lease properties in our Arbors portfolio has been unable to satisfy its obligations under its leases. In accordance with a forbearance and modification agreement entered into in March 2023, the operator remits rent based on the properties’ available cash after satisfying property-level expenses.
Despite occupancy and resident rate improvements realized in Q1 2024, the portfolio’s continued sub-optimal occupancy levels and rising operating expenses resulted in limited cash flow distributed to us in accordance with the operator’s forbearance agreement. We did not recognize rental income from the portfolio for the three months ended March 31, 2024 and 2023, and we utilized cash reserves to cover our related debt service in each period. We continue to monitor the operator’s performance and cash flows closely, as well as evaluate potential options for this portfolio.
The following table presents the cash reserves used to service the debt obligations for our Arbors portfolio, as well as the average resident occupancy of the underlying properties (dollars in thousands):
Three Months Ended March 31,
20242023
Cash reserves used to fund debt service payments, including principal amortization 1,4571,394
Average quarterly occupancy 74.4 %72.3 %



32

Unconsolidated Investments
We have made investments in minority, non-controlling interests in joint ventures, which own healthcare real estate and related assets. As of March 31, 2024, our investment in Trilogy (as defined in “—Our Investments”), is our most significant remaining unconsolidated investment. The following table presents a summary of the Trilogy joint venture’s financial results (dollars in thousands):
Trilogy
Three Months Ended March 31,Increase (Decrease)
20242023Amount%
Property and other revenues
Total property and other revenues$385,219$354,421$30,798 8.7 %
Expenses
Property operating expenses342,532321,01621,516 6.7 %
Interest expense19,60917,5592,050 11.7 %
Administrative, transaction & other21082128 156.1 %
Depreciation and amortization16,60017,559(959)(5.5)%
Total expenses378,951356,21622,735 6.4 %
Other income (loss), net(1,205)(306)(899)293.8 %
Other gains (losses)(644)785(1,429)(182.0)%
Net income (loss)$4,419$(1,316)$5,735 (435.8)%
Our ownership %23.8 %23.4 %
Equity in earnings (losses)$1,052$(309)