Overview of CNL Healthcare Properties

CNL Healthcare Properties, Inc. is a real estate investment trust (REIT) that owns and operates seniors housing communities across the United States. The company is externally managed by CNL Healthcare Corp. and focuses on investing in independent living, assisted living, memory care, and continuing care retirement communities.

As of March 31, 2025, CNL Healthcare Properties’ investment portfolio consisted of 69 seniors housing communities and one vacant land parcel, located across 26 states. The company’s properties are operated by a mix of national and regional operators, with the largest tenants being TSMM Management LLC and Wellmore LLC.

Financial Performance

For the three months ended March 31, 2025, CNL Healthcare Properties reported the following key financial results:

• Rental income and related revenues of $6.8 million, unchanged from the same period in 2024.
• Resident fees and services income of $88.8 million, up from $82.3 million in the prior year period, due to higher average occupancy and increased rates charged to residents.
• Property operating expenses of $64.3 million, up from $60.6 million in the prior year period, also due to the increase in average occupancy.
• Net operating income (NOI) of $27.0 million, up 10.6% from $24.4 million in the prior year period, driven by the increase in resident fees and services revenue.
• Funds from operations (FFO) of $10.1 million, up from $7.5 million in the prior year period.
• Modified funds from operations (MFFO) of $10.7 million, up from $7.8 million in the prior year period.

The improvement in financial performance was primarily due to higher average occupancy and increased rental rates at the company’s seniors housing properties, which led to growth in resident fees and services revenue. However, this was partially offset by higher property operating expenses.

Liquidity and Capital Resources

As of March 31, 2025, CNL Healthcare Properties had approximately $80.9 million in liquidity, consisting of $50.9 million in cash and $30.0 million in undrawn availability under its 2023 Revolving Credit Facility.

The company’s primary sources of liquidity are operating cash flows and borrowings. During the three months ended March 31, 2025, CNL Healthcare Properties borrowed $16.0 million from its revolving credit facility to repay $15.8 million of secured indebtedness.

Looking ahead, the company has $570.0 million in debt maturing in May 2026 under its 2023 Credit Facilities. Management believes it is probable that the company will be able to refinance this debt, given its low leverage profile and anticipated cash flows. However, if the refinancing cannot be arranged, it could impact the company’s ability to continue operations.

CNL Healthcare Properties monitors its debt maturities and engages with lenders to determine the optimal borrowing strategy in advance of scheduled maturity dates. As of March 31, 2025, the company’s aggregate debt leverage ratio was approximately 30.0% of the aggregate gross carrying value of its assets, which is below the 60% maximum allowed under its credit facility covenants.

Possible Strategic Alternatives

In 2017, CNL Healthcare Properties began evaluating possible strategic alternatives to provide liquidity to its stockholders. This process is being overseen by a special committee of the company’s independent directors, with the assistance of a financial advisor.

Possible strategic alternatives being considered include:

• Listing the company’s or a subsidiary’s common stock on a national securities exchange
• An orderly disposition of the company’s assets and distribution of net proceeds to stockholders
• A business combination or other transaction that provides stockholders with cash and/or securities of a publicly traded company

Since 2018, the company has been working with its financial advisor to carefully study market conditions and opportunities to provide liquidity to stockholders. However, economic and market uncertainty have not been conducive for large-scale strategic transactions in recent years.

The special committee continues to work closely with the financial advisor to evaluate the potential return of more constructive market conditions and remains committed to pursuing additional strategic alternatives to provide incremental liquidity to stockholders.

Strengths and Weaknesses

Strengths:

• Geographically diversified portfolio of 69 seniors housing communities across 26 states
• Experienced management team and operator relationships
• Improving financial performance, with growth in NOI, FFO, and MFFO
• Relatively low leverage, with a debt-to-asset ratio of 30.0%
• Ample liquidity, with $80.9 million in cash and available credit

Weaknesses:

• Concentration in the seniors housing sector, which can be impacted by economic conditions and demographic trends
• Reliance on third-party operators, which introduces some risk related to their performance
• Uncertainty around the company’s ability to refinance its $570.0 million in debt maturing in 2026
• Lack of a clear timeline or certainty around the successful execution of strategic alternatives to provide liquidity to stockholders

Outlook and Conclusion

CNL Healthcare Properties’ financial performance has improved in recent quarters, driven by higher occupancy and rental rates at its seniors housing properties. The company’s relatively low leverage, ample liquidity, and experienced management team are strengths that position it well to navigate the current economic environment.

However, the company faces some risks, including its concentration in the seniors housing sector and the upcoming maturity of a significant amount of debt. Additionally, the company’s efforts to provide liquidity to stockholders through strategic alternatives have not yet come to fruition, creating uncertainty around the timing and outcome of this process.

Overall, CNL Healthcare Properties appears to be a well-managed REIT with a solid portfolio of seniors housing assets. While the company faces some near-term challenges, its financial position and operational performance suggest it is well-positioned to continue executing on its strategy and potentially provide liquidity to stockholders in the future, though the timing and nature of such a transaction remains uncertain.