American Healthcare REIT(AHR) - 2020 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Griffin-American Healthcare REIT IV, Inc. as of June 30, 2020, and for the three and six-month periods then ended Condensed Consolidated Balance Sheets The balance sheet shows total assets increased to $1.12 billion, total liabilities rose to $551.4 million due to increased borrowings, and total equity slightly decreased to $569.0 million as of June 30, 2020 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Real estate investments, net | $944,092 | $895,060 | | Cash and cash equivalents | $20,585 | $15,290 | | Total assets | $1,122,994 | $1,068,327 | | Liabilities & Equity | | | | Line of credit and term loans | $479,500 | $396,800 | | Mortgage loans payable, net | $18,104 | $26,070 | | Total liabilities | $551,367 | $476,786 | | Total equity | $569,002 | $590,079 | Condensed Consolidated Statements of Operations For the six months ended June 30, 2020, total revenues increased to $76.2 million, and net loss attributable to controlling interest improved to $8.7 million, resulting in a net loss per share of $(0.11) Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $38,676 | $30,373 | $76,220 | $56,215 | | Total expenses | $37,006 | $29,645 | $72,832 | $62,477 | | Net loss | $(1,155) | $(5,889) | $(9,088) | $(18,250) | | Net loss attributable to controlling interest | $(946) | $(5,857) | $(8,712) | $(18,193) | | Net loss per share - basic and diluted | $(0.01) | $(0.07) | $(0.11) | $(0.24) | Condensed Consolidated Statements of Equity Total equity decreased to $569.0 million by June 30, 2020, primarily due to $20.0 million in distributions and an $8.7 million net loss, partially offset by $11.4 million from DRIP stock issuance - For the six months ended June 30, 2020, equity was impacted by $11.4 million in stock issued under the DRIP, $4.6 million in stock repurchases, $20.0 million in declared distributions, and an $8.7 million net loss attributable to stockholders[24] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2020, operating activities provided $19.0 million in cash, investing activities used $72.5 million, and financing activities provided $59.0 million, resulting in a $5.4 million increase in cash and cash equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | | Net cash provided by operating activities | $19,047 | $17,100 | | Net cash used in investing activities | $(72,548) | $(68,039) | | Net cash provided by financing activities | $58,947 | $54,878 | | Net Change in Cash | $5,446 | $3,939 | - Investing activities in H1 2020 included $67.9 million for real estate acquisitions and $4.6 million for capital expenditures[27] - Financing activities in H1 2020 were primarily driven by net borrowings of $82.7 million ($137.8 million borrowings less $55.1 million payments) under the line of credit and term loans, offset by $10.0 million in distributions paid and $4.6 million in common stock repurchases[27] Notes to Condensed Consolidated Financial Statements These notes provide detailed disclosures on the company's organization, accounting policies, and financial activities, including the impact of the COVID-19 pandemic, segment operations, and significant debt obligations Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and results, highlighting the significant impact of the COVID-19 pandemic on operations, liquidity, and non-GAAP performance measures like FFO and MFFO - The COVID-19 pandemic has significantly impacted operations, causing declines in resident occupancy in senior housing facilities and increasing costs for labor, testing, and personal protective equipment (PPE)[209][220][221] - In response to COVID-19 risks, the company postponed non-essential capital expenditures, reduced the stockholder distribution rate from an annualized $0.60 to $0.40 per share, and partially suspended its share repurchase plan[210][241][250] - As of June 30, 2020, the company had collected 100% of contractual rent from its leased, non-RIDEA senior housing and skilled nursing facility tenants, and substantially all rent from medical office building tenants[228] FFO and MFFO Reconciliation (Six Months Ended June 30, 2020, in thousands) | Metric | Amount | | :--- | :--- | | Net loss | $(9,088) | | Depreciation and amortization adjustments | $26,531 | | FFO attributable to controlling interest | $17,819 | | Acquisition related expenses | $17 | | Amortization of above/below-market leases | $59 | | Change in deferred rent | $(2,223) | | Loss in fair value of derivative instruments | $3,752 | | Adjustments for unconsolidated/noncontrolling interests | $322 | | MFFO attributable to controlling interest | $19,746 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from its $479.5 million variable-rate debt, with a 0.50% rate increase potentially raising annualized interest expense by $1.16 million, alongside ongoing monitoring of the LIBOR transition - The primary market risk exposure is interest rate risk from long-term debt used for acquisitions[288] - As of June 30, 2020, a 0.50% increase in market interest rates would increase annualized interest expense on the variable-rate line of credit and term loans by $1,163,000[296] - The company is exposed to risks from the planned transition away from LIBOR, as its variable rate debt and interest rate swaps are indexed to it, introducing uncertainty with the transition to an alternative rate like SOFR[291][292] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2020[299] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[300] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material litigation, nor is any material litigation threatened against it - There are no material legal proceedings against the company[303] Item 1A. Risk Factors This section updates risk factors, primarily focusing on the adverse impacts of the COVID-19 pandemic on business operations, financial results, and liquidity, alongside risks related to distribution funding, NAV uncertainty, and tenant concentration - The COVID-19 pandemic has adversely impacted business and financial results, leading to a decline in senior housing occupancy by approximately 9.0% since February 2020 and an increase in care costs of up to 30.0%[325] - Due to the pandemic's impact, the board reduced the annualized distribution rate from $0.60 to $0.40 per share and partially suspended the share repurchase plan for requests other than death or disability[307][312] - A significant portion of distributions have been funded from sources other than cash flow from operations, such as borrowings and offering proceeds, which may reduce capital available for investment[305][309] - The company has significant tenant concentration, with RC Tier Properties, LLC accounting for 10.2% of annualized base rent, and geographic concentration, with properties in Missouri accounting for 11.2% of annualized base rent[319][320] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In June 2020, the company issued 7,500 shares of restricted Class T common stock to independent directors and repurchased 506,560 shares for approximately $4.6 million under a plan that was subsequently partially suspended - On June 9, 2020, the company issued 7,500 shares of restricted Class T common stock to independent directors in a private transaction exempt from registration[334] Share Repurchases (Q2 2020) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 1-30, 2020 | 506,560 | $9.17 | | May 1-31, 2020 | — | $— | | June 1-30, 2020 | — | $— | | Total | 506,560 | $9.17 | Item 3. Defaults Upon Senior Securities The company reports no defaults upon its senior securities - None[338] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[339] Item 5. Other Information The company reports no other information for the period - None[340] Item 6. Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including CEO and CFO certifications and XBRL data files - Exhibits filed include Sarbanes-Oxley Act certifications (31.1, 31.2, 32.1, 32.2) and XBRL interactive data files[343] Signatures The report was duly signed on August 13, 2020, by the Chief Executive Officer and Chief Financial Officer - The report was signed by the CEO and CFO on August 13, 2020[345]