American Healthcare REIT(AHR) - 2024 Q3 - Quarterly Results

Executive Summary & Key Highlights Third Quarter 2024 Performance Highlights American Healthcare REIT reported a GAAP net loss and positive NFFO for Q3 2024, with total portfolio Same-Store NOI growing 17.0% from strong SHOP and ISHC performance Q3 2024 Key Financial Performance | Metric | Value | | :------------------------------------------------------------------ | :---------------- | | GAAP Net Loss | $(3.1) million | | GAAP Net Loss Attributable to Common Stockholders (per diluted share) | $(0.03) | | Normalized FFO Attributable to Common Stockholders (per diluted share) | $0.36 | | Total Portfolio Same-Store NOI Growth (YoY) | 17.0% | | SHOP Same-Store NOI Growth (YoY) | 61.8% | | ISHC Same-Store NOI Growth (YoY) | 22.6% | Full Year 2024 Guidance Update The company increased its full-year 2024 guidance for total portfolio Same-Store NOI growth and NFFO per diluted share, reflecting improved performance and strategic transactions Revised Full Year 2024 Guidance | Metric | Prior Guidance Range | Revised Guidance Range | | :-------------------------------------- | :------------------- | :--------------------- | | Total Portfolio Same-Store NOI Growth | 12.0% to 14.0% | 15.0% to 17.0% | | NFFO per Diluted Share | $1.23 to $1.27 | $1.40 to $1.43 | Strategic and Capital Activities American Healthcare REIT completed a follow-on equity offering, acquired the remaining minority interest in Trilogy Holdings, and improved its Net-Debt-to-Annualized Adjusted EBITDA ratio - Completed a follow-on equity offering for approximately 20.0 million shares, raising gross proceeds of approximately $471.2 million[5] - Acquired its joint venture partner's remaining 24% minority membership interest in Trilogy REIT Holdings, becoming Trilogy's sole owner for approximately $258.0 million cash[6] - Acquired a senior housing portfolio in Washington for approximately $36.2 million of assumed debt, plus closing costs[4] Leverage Improvement | Metric | As of June 30, 2024 | As of September 30, 2024 | | :-------------------------------------- | :------------------ | :----------------------- | | Net-Debt-to-Annualized Adjusted EBITDA | 5.9x | 5.1x | Management Commentary Management expressed confidence in the Trilogy acquisition and continued growth in the ISHC and SHOP segments, attributing improved guidance to strategic actions and property performance - CEO Danny Prosky: Expects to expand ISHC segment as sole owner of Trilogy and pursue external growth in SHOP segment, seeing best risk-adjusted returns in healthcare real estate there[8] - COO Gabe Willhite: Notes strong property performance in ISHC and SHOP, climbing occupancy, and mid-single-digit Same-Store RevPOR growth in SHOP[10] - CFO Brian Peay: Attributes increased NFFO and Same-Store NOI guidance to accretive Trilogy purchase, equity offering proceeds used for debt paydown, and improved property performance, leading to better liquidity and lower leverage[19] Financial Performance and Outlook Third Quarter and Year-to-Date 2024 Results The company demonstrated robust Same-Store NOI growth across its portfolio for Q3 and year-to-date 2024, primarily driven by strong ISHC and SHOP segment performance Same-Store NOI Growth by Segment (Q3 2024 vs. Q3 2023) | Segment | NOI Growth | | :------------------------- | :--------- | | ISHC | 22.6% | | Outpatient Medical | 0.1% | | SHOP | 61.8% | | Triple-Net Leased Properties | 3.0% | | Total Portfolio | 17.0% | Same-Store NOI Growth by Segment (Nine Months Ended Sep 30, 2024 vs. 2023) | Segment | NOI Growth | | :------------------------- | :--------- | | ISHC | 22.2% | | Outpatient Medical | 0.2% | | SHOP | 48.0% | | Triple-Net Leased Properties | 3.4% | | Total Portfolio | 15.9% | - Property performance in ISHC and SHOP segments remains strong, with occupancy continuing to climb and mid-single-digit Same-Store RevPOR growth realized within the SHOP segment[10] Full Year 2024 Guidance The company has increased its full-year 2024 guidance for key financial metrics, including NAREIT FFO per share, NFFO per share, and total portfolio Same-Store NOI growth, reflecting an improved outlook Revised Full Year 2024 Guidance Ranges | Metric | Midpoint | Revised FY 2024 Range | Prior FY 2024 Range | | :-------------------------------------- | :------- | :-------------------- | :------------------ | | NAREIT FFO per share | $1.30 | $1.28 to $1.31 | $1.17 to $1.22 | | NFFO per share | $1.42 | $1.40 to $1.43 | $1.23 to $1.27 | | Total Portfolio SS NOI Growth | 16.0% | 15.0% to 17.0% | 12.0% to 14.0% | | Segment-Level SS NOI Growth / (Decline):| | | | | ISHC | 22.0% | 21.0% to 23.0% | 18.0% to 20.0% | | Outpatient Medical | (0.3)% | (0.5)% to 0.0% | (0.5)% to 0.0% | | SHOP | 52.5% | 51.5% to 53.5% | 45.0% to 50.0% | | Triple-Net Leased Properties | 3.0% | 2.0% to 4.0% | 1.0% to 3.0% | Non-GAAP Measures Disclosure The company's 2024 guidance includes Non-GAAP financial measures, with forward-looking GAAP reconciliations not provided due to the unpredictability of non-recurring items - Guidance for 2024 includes Non-GAAP financial measures such as NAREIT FFO, NFFO, and Same-Store NOI growth[12] - Reconciliation of forward-looking Non-GAAP financial measures to comparable GAAP measures cannot be provided without unreasonable effort due to the inability to predict non-recurring and infrequent items[12] Business Operations and Capital Management Transactional Activity American Healthcare REIT completed strategic acquisitions, including a senior housing portfolio and the remaining interest in Trilogy Holdings, while continuing its disposition strategy - Acquired a senior housing portfolio in Washington (242 units across five properties) for approximately $36.2 million of assumed debt, with operations transitioned to existing regional operators[13] - Acquired the remaining 24% minority membership interest in Trilogy Holdings for approximately $258 million cash, becoming the sole owner of Trilogy[14] - Subsequent to quarter end, acquired a SHOP asset in the Atlanta MSA (90 units) for approximately $7.5 million[15] - Subsequent to quarter end, sold one Outpatient Medical building for approximately $19.4 million. Year-to-date sales of Non-Core Properties totaled approximately $35.0 million[16] Capital Markets and Balance Sheet Activity The company's total indebtedness as of September 30, 2024, was $1.90 billion, with total liquidity of $1.07 billion, following a follow-on equity offering that reduced debt and improved leverage Balance Sheet Snapshot (as of September 30, 2024) | Metric | Value | | :----------------- | :---------------- | | Total Indebtedness | $1.90 billion | | Total Liquidity | $1.07 billion | | Net-Debt-to-Annualized Adjusted EBITDA | 5.1x | - Completed an offering for approximately 20.0 million shares of common stock, raising gross proceeds of approximately $471.2 million[18] - Net proceeds from the equity offering were used to acquire the Trilogy minority interest and pay down approximately $194.0 million on the Company's lines of credit, improving liquidity and decreasing leverage[18][19] Distributions The Board of Directors declared a cash distribution of $0.25 per share of common stock for Q3 2024, paid on October 18, 2024 - Declared a cash distribution of $0.25 per share of common stock for Q3 2024, paid on October 18, 2024[20] Corporate Information & Investor Resources Supplemental Information & Conference Call Supplemental financial information for Q3 2024 is available online, and a webcast and conference call were held to discuss results and recent events - Supplemental information regarding portfolio, financial position, and results of operations for Q3 2024 is available on the Investor Relations section of the Company's website[21] - A webcast and conference call were scheduled for November 13, 2024, at 1:00 p.m. Eastern Time to review Q3 2024 results[22] Forward-Looking Statements The press release contains forward-looking statements subject to known and unknown risks and uncertainties, and readers are cautioned against undue reliance - Statements regarding interest expense savings, balance sheet, per share metrics (net income/loss, FFO, NFFO), Same-Store NOI growth, occupancy, revenue growth, margin expansion, asset transactions, and plans for Trilogy are considered forward-looking[24] - Forward-looking statements are based on current expectations and involve known and unknown risks and uncertainties that could cause actual results to differ materially[24] About American Healthcare REIT, Inc. American Healthcare REIT, Inc. is a self-managed REIT that acquires, owns, and operates a diversified portfolio of clinical healthcare real estate properties across multiple geographies - American Healthcare REIT is a self-managed REIT that acquires, owns, and operates a diversified portfolio of clinical healthcare real estate properties[31] - Primary focus areas include senior housing, skilled nursing facilities, outpatient medical buildings, and other healthcare-related facilities[31] - Properties are located in the United States, the United Kingdom, and the Isle of Man[31] Non-GAAP Financial Measures - Definitions Overview of Non-GAAP Measures The company uses various Non-GAAP financial measures to supplement GAAP results, aiding in evaluating operating performance and peer comparisons by excluding non-operating or non-recurring items - Non-GAAP financial measures are used as supplemental measures of operating performance and for comparisons between periods and to other REITs[25] - These measures exclude differences caused by unanticipated and/or incalculable items[25] EBITDA and Adjusted EBITDA Definitions EBITDA and Adjusted EBITDA are Non-GAAP measures used for internal and external comparisons, excluding specific non-cash or non-recurring items to clarify core operating performance, but are not GAAP alternatives - EBITDA is defined as earnings before interest, taxes, depreciation, and amortization[26][50] - Adjusted EBITDA excludes items such as gain/loss from unconsolidated entities, non-cash stock-based compensation, business acquisition expenses, and changes in fair value of derivative financial instruments[50] - Neither EBITDA nor Adjusted EBITDA represents net income (loss) or cash flow from operating activities as determined by GAAP and should not be considered alternatives to profitability or liquidity[26] Funds from Operations (FFO) and Normalized FFO (NFFO) Definitions FFO and NFFO are supplemental Non-GAAP measures that adjust GAAP net income for real estate-related non-cash items, providing insight into operating performance but not replacing GAAP net income or cash flows - NAREIT FFO is defined as GAAP net income (loss) excluding gains/losses from sales of certain real estate assets, consolidation gains, impairment write-downs, plus real estate-related depreciation and amortization, with adjustments for unconsolidated entities[50] - Normalized FFO (NFFO) further adjusts FFO for expensed acquisition fees, changes in deferred rent, non-cash impact of equity instruments, and other non-cash or non-recurring income/expense items[50][51] - FFO and NFFO should not be construed as more relevant or accurate than GAAP net income (loss) for operating performance or GAAP cash flows from operations for liquidity[27] Net Operating Income (NOI) Definitions NOI, Cash NOI, Pro-Rata Cash NOI, and Same-Store NOI are supplemental measures reflecting property operating performance by excluding non-operational items, with Same-Store NOI focusing on consistent property populations - NOI is defined as GAAP net income (loss) generated from properties before general and administrative expenses, business acquisition expenses, depreciation and amortization, interest expense, and other non-operating income/expense items[50] - Cash NOI excludes non-cash items like straight-line rent and amortization of lease intangibles, and third-party facility rent payments[50] - Same-Store NOI is Cash NOI for properties owned or consolidated for the full year in both comparison years, excluding properties sold, held for sale, or impacted by disruptive events or major renovations/transitions[51] - NOI and related measures are not equivalent to GAAP net income (loss) and should not be considered alternatives to operating performance or liquidity indicators[30] Other Key Definitions The report defines various industry-specific and company-specific terms to ensure clarity, covering property types, financial structures, and asset classifications - ISHC (Integrated senior health campuses) include independent living, assisted living, memory care, skilled nursing, and ancillary businesses, predominantly utilizing a RIDEA structure[50] - RIDEA structure allows the company to lease properties to a wholly-owned taxable REIT subsidiary (TRS), which contracts an eligible independent contractor (EIK) to operate them, allowing the TRS to retain after-tax profit from operations[51] - Non-Core Properties are assets deemed not essential to future economic benefit or value, and/or are projected to be sold[50] - Net Debt is total long-term debt (excluding operating lease liabilities) less cash, cash equivalents, and restricted cash related to debt[50] Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets As of September 30, 2024, total assets slightly increased to $4.68 billion, while total liabilities significantly decreased to $2.42 billion, leading to a substantial rise in total equity to $2.26 billion Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2024 | Dec 31, 2023 | | :-------------------------------------- | :----------- | :----------- | | Total Assets | $4,677,012 | $4,577,933 | | Real Estate Investments, net | $3,535,943 | $3,425,438 | | Cash and Cash Equivalents | $67,850 | $43,445 | | Total Liabilities | $2,419,828 | $3,118,755 | | Lines of Credit and Term Loan, net | $595,970 | $1,223,967 | | Total Equity | $2,256,964 | $1,425,335 | | Additional Paid-in Capital | $3,594,917 | $2,548,307 | Condensed Consolidated Statements of Operations and Comprehensive Loss For Q3 2024, the company reported a net loss of $(3.09) million, an improvement from the prior year, driven by increased revenues from resident fees and services, despite other financial impacts Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | | Total Revenues and Grant Income | $523,814 | $464,240 | | Resident Fees and Services | $476,834 | $416,206 | | Total Expenses | $489,982 | $450,816 | | Interest Expense | $(30,395) | $(42,005) | | (Loss) Gain in Fair Value of Derivative Financial Instruments | $(8,967) | $3,402 | | (Loss) Gain on Dispositions of Real Estate Investments, net | $(4) | $31,981 | | Net Loss | $(3,093) | $(6,446) | | Net Loss Attributable to Controlling Interest (per diluted share) | $(0.03) | $(0.09) | Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | Total Revenues and Grant Income | $1,527,928 | $1,384,037 | | Resident Fees and Services | $1,386,965 | $1,235,458 | | Total Expenses | $1,437,627 | $1,338,777 | | Interest Expense | $(97,429) | $(122,006) | | (Loss) Gain in Fair Value of Derivative Financial Instruments | $(2,162) | $8,200 | | (Loss) Gain on Dispositions of Real Estate Investments, net | $2,257 | $29,777 | | Net Loss | $(3,171) | $(45,928) |\ | Net Loss Attributable to Controlling Interest (per diluted share) | $(0.05) | $(0.67) | Non-GAAP Financial Reconciliations FFO and Normalized FFO Reconciliation The reconciliation shows positive NAREIT FFO and NFFO despite a GAAP net loss, reflecting adjustments for non-cash items, with NFFO per diluted share increasing to $0.36 for Q3 2024 FFO and NFFO Reconciliation Highlights (in thousands, except per share) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | | Net Loss | $(3,093) | $(6,446) | | Depreciation and Amortization related to real estate | $44,208 | $49,235 | | NAREIT FFO attributable to controlling interest | $35,640 | $17,810 | | Normalized FFO attributable to controlling interest | $47,688 | $23,173 | | NAREIT FFO per common share attributable to controlling interest – diluted | $0.27 | $0.27 | | Normalized FFO per common share attributable to controlling interest – diluted | $0.36 | $0.35 | FFO and NFFO Reconciliation Highlights (in thousands, except per share) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :----------------------------- | :----------------------------- |\ | Net Loss | $(3,171) | $(45,928) | | Depreciation and Amortization related to real estate | $132,163 | $138,530 | | NAREIT FFO attributable to controlling interest | $108,684 | $57,075 | | Normalized FFO attributable to controlling interest | $122,526 | $67,549 | | NAREIT FFO per common share attributable to controlling interest – diluted | $0.88 | $0.86 | | Normalized FFO per common share attributable to controlling interest – diluted | $1.00 | $1.02 | Adjusted EBITDA Reconciliation For Q3 2024, the company's Adjusted EBITDA was $87.01 million, derived from a GAAP net loss after adding back interest, taxes, depreciation, amortization, and other non-cash or non-recurring items Adjusted EBITDA Reconciliation (in thousands) | Metric | Three Months Ended Sep 30, 2024 | | :------------------------------------------------------------------ | :------------------------------ | | Net Loss | $(3,093) | | Interest expense | $30,395 | | Income tax expense | $263 | | Depreciation and amortization | $44,742 | | EBITDA | $72,307 | | Loss from unconsolidated entities | $2,123 | | Non-cash stock-based compensation expense | $2,630 | | Business acquisition expenses | $3,537 | | Loss in fair value of derivative financial instruments | $8,967 | | Adjusted EBITDA | $87,013 | NOI and Cash NOI Reconciliation The company's Net Operating Income (NOI) for Q3 2024 was $93.54 million, increasing to Cash NOI of $100.53 million after adjustments, reflecting improved property performance year-over-year NOI and Cash NOI Reconciliation (in thousands) | Metric | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :------------------------------ | :------------------------------ | | Net Loss | $(3,093) | $(6,446) | | General and administrative | $11,921 | $11,342 | | Depreciation and amortization | $44,246 | $49,273 | | Interest expense | $30,395 | $42,005 | | Net Operating Income (NOI) | $93,536 | $75,063 | | Total NOI (excluding Grant Income) | $93,536 | $73,999 | | Cash NOI | $100,528 | $84,829 | NOI and Cash NOI Reconciliation (in thousands) | Metric | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------------------------------------------------ | :----------------------------- | :----------------------------- | | Net Loss | $(3,171) | $(45,928) | | General and administrative | $35,495 | $36,169 | | Depreciation and amortization | $132,277 | $138,644 | | Interest expense | $97,429 | $122,006 | | Net Operating Income (NOI) | $264,407 | $222,317 | | Total NOI (excluding Grant Income) | $264,407 | $214,872 | | Cash NOI | $286,476 | $251,745 | Same-Store NOI Reconciliation The company reported strong Same-Store NOI growth across all segments for Q3 2024 and year-to-date, with SHOP and ISHC segments showing particularly high growth rates, contributing to a 17.0% total portfolio increase Same-Store NOI by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :------------------------- | :------------------------------ | :------------------------------ | | ISHC Same-Store NOI | $48,454 | $39,530 | | Outpatient Medical Same-Store NOI | $20,183 | $20,167 | | SHOP Same-Store NOI | $9,113 | $5,632 | | Triple-Net Leased Properties Same-Store NOI | $9,453 | $9,174 | | Total Same-Store NOI | $87,203 | $74,503 | Same-Store NOI by Segment (in thousands) | Segment | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------- | :----------------------------- | :----------------------------- | | ISHC Same-Store NOI | $140,042 | $114,582 | | Outpatient Medical Same-Store NOI | $60,366 | $60,220 | | SHOP Same-Store NOI | $25,700 | $17,365 | | Triple-Net Leased Properties Same-Store NOI | $28,026 | $27,103 | | Total Same-Store NOI | $254,134 | $219,270 | Same-Store Revenue Reconciliation Total Same-Store revenue for Q3 2024 increased to $358.16 million, primarily driven by improved operational performance in the ISHC and SHOP segments Same-Store Revenue by Segment (in thousands) | Segment | Three Months Ended Sep 30, 2024 | Three Months Ended Sep 30, 2023 | | :------------------------- | :------------------------------ | :------------------------------ | | ISHC Same-Store revenue | $272,169 | $254,733 | | Outpatient Medical Same-Store revenue | $32,149 | $32,428 | | SHOP Same-Store revenue | $43,996 | $38,905 | | Triple-Net Leased Properties Same-Store revenue | $9,844 | $9,671 | | Total Same-Store revenue | $358,158 | $335,737 | Same-Store Revenue by Segment (in thousands) | Segment | Nine Months Ended Sep 30, 2024 | Nine Months Ended Sep 30, 2023 | | :------------------------- | :----------------------------- | :----------------------------- | | ISHC Same-Store revenue | $809,426 | $754,026 | | Outpatient Medical Same-Store revenue | $96,475 | $96,193 | | SHOP Same-Store revenue | $129,517 | $115,771 | | Triple-Net Leased Properties Same-Store revenue | $29,493 | $28,603 | | Total Same-Store revenue | $1,064,911 | $994,593 | Earnings Guidance Reconciliation The earnings guidance reconciliation for full year 2024 shows increased ranges for NAREIT FFO and Normalized FFO per common share, and for Total Portfolio Same-Store NOI growth, reflecting an improved outlook Full Year 2024 Earnings Guidance Reconciliation (in millions, except per share) | Metric | Revised Full Year 2024 Guidance (Low) | Revised Full Year 2024 Guidance (High) | Previous Full Year 2024 Guidance (Low) | Previous Full Year 2024 Guidance (High) | | :------------------------------------------------------------------ | :------------------------------------ | :------------------------------------- | :------------------------------------- | :-------------------------------------- | | Net (loss) income attributable to common stockholders | $7.84 | $11.76 | $(8.80) | $(3.05) | | NAREIT FFO attributable to common stockholders | $166.24 | $170.16 | $147.30 | $151.30 | | Normalized FFO attributable to common stockholders | $182.44 | $186.36 | $154.20 | $158.20 | | Net income (loss) per common share – diluted | $0.06 | $0.09 | $(0.07) | $(0.02) | | NAREIT FFO per common share – diluted | $1.28 | $1.31 | $1.17 | $1.22 | | Normalized FFO per common share – diluted | $1.40 | $1.43 | $1.23 | $1.27 | | Total Portfolio Same-Store NOI growth | 15.0% | 17.0% | 12.0% | 14.0% |