American Healthcare REIT(AHR) - 2025 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Unaudited financial statements for Q2 2025 show total assets at $4.51 billion, equity at $2.46 billion, and net income attributable to controlling interest at $9.9 million Condensed Consolidated Balance Sheets As of June 30, 2025, total assets increased slightly to $4.51 billion from $4.49 billion at year-end 2024, primarily due to a rise in cash and cash equivalents, while total liabilities decreased to $2.04 billion, leading to total equity growth to $2.46 billion | Financial Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Real estate investments, net | $3,346,121 | $3,366,648 | | Cash and cash equivalents | $133,494 | $76,702 | | Total assets | $4,506,650 | $4,488,057 | | Liabilities | | | | Mortgage loans payable, net | $983,510 | $982,071 | | Lines of credit and term loan, net | $549,632 | $688,534 | | Total liabilities | $2,044,006 | $2,183,895 | | Equity | | | | Total stockholders' equity | $2,420,997 | $2,261,231 | | Total equity | $2,462,644 | $2,303,942 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) For Q2 2025, total revenues increased to $542.5 million, driving net income attributable to controlling interest to $9.9 million, and for the six-month period, the company reported net income of $3.1 million | Metric (in thousands, except EPS) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $542,503 | $504,581 | $1,083,106 | $1,004,114 | | Net income (loss) | $10,079 | $2,926 | $3,239 | $(78) | | Net income (loss) attributable to controlling interest | $9,908 | $1,979 | $3,104 | $(1,913) | | Diluted EPS | $0.06 | $0.01 | $0.02 | $(0.02) | Condensed Consolidated Statements of Equity Total equity grew from $2.30 billion at year-end 2024 to $2.46 billion by June 30, 2025, primarily due to $236.3 million from common stock issuance and $3.1 million in net income, partially offset by $81.3 million in distributions - For the six months ended June 30, 2025, the company issued 7,028,690 shares of common stock in an offering, raising gross proceeds of $236.3 million[18] - Distributions declared for the first six months of 2025 amounted to $81.3 million, or $0.50 per share[18] Condensed Consolidated Statements of Cash Flows Net cash from operating activities significantly increased to $132.1 million for H1 2025, while net cash used in investing activities rose to $94.9 million, and net cash from financing activities decreased to $9.3 million | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $132,091 | $53,448 | | Net cash used in investing activities | $(94,862) | $(65,534) | | Net cash provided by financing activities | $9,348 | $18,935 | Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, business segments, real estate transactions, debt structure, and equity offerings, highlighting the ISHC segment as a key contributor - The company operates through four reportable business segments: Integrated Senior Health Campuses (ISHC), Outpatient Medical (OM), Senior Housing Operating Properties (SHOP), and triple-net leased properties[32] - In the first six months of 2025, the company acquired properties for an aggregate price of $81.1 million and disposed of six properties for $43.4 million, recognizing a net loss of $3.0 million[60][61] - An impairment charge of $34.4 million was recognized for six OM buildings in the first half of 2025[62] - The company terminated its $400 million Trilogy Credit Facility on March 3, 2025[88] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved H1 2025 results to increased occupancy and billing rates, maintaining strong liquidity, and reporting significant year-over-year growth in FFO and Normalized FFO Results of Operations Revenue growth in Q2 and H1 2025 was driven by ISHC and SHOP segments due to higher occupancy and acquisitions, partially offset by property dispositions and increased operating expenses, while interest expense decreased - ISHC segment revenue increased by $30.1 million in Q2 2025 and $60.3 million in H1 2025 year-over-year, driven by higher resident occupancy and billing rates[193] - SHOP segment revenue increased by $13.2 million in Q2 2025 and $28.0 million in H1 2025, boosted by acquisitions and organic growth[194] - Total interest expense decreased in H1 2025 compared to H1 2024, primarily due to debt paydowns using net proceeds from equity offerings[201] - An aggregate impairment charge of $34.4 million was recognized in H1 2025 for six OM buildings[204] Liquidity and Capital Resources The company maintains strong liquidity through cash from operations, equity issuances, and a $600 million available credit facility, sufficient to meet future cash requirements - As of June 30, 2025, the company had $600 million available for borrowing under its 2024 Credit Facility[211] - The board has authorized a quarterly distribution of $0.25 per share[216] | Contractual Obligations as of June 30, 2025 (in thousands) | Total (in thousands) | | :--- | :--- | | Principal payments — fixed-rate debt | $1,004,016 | | Interest payments — fixed-rate debt | $452,669 | | Principal payments — variable-rate debt | $550,000 | | Interest payments — variable-rate debt | $48,857 | | Operating lease obligations | $227,111 | | Financing and other obligations | $45,927 | | Total | $2,328,580 | Funds from Operations (FFO) and Normalized Funds from Operations The company reported significant year-over-year growth in Q2 2025, with NAREIT FFO increasing to $66.8 million and Normalized FFO rising to $68.4 million, driven by higher net income and adjustments | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net income (loss) | $10,079 | $2,926 | $3,239 | $(78) | | NAREIT FFO attributable to controlling interest | $66,796 | $41,746 | $122,677 | $73,044 | | Normalized FFO attributable to controlling interest | $68,377 | $43,740 | $128,119 | $74,838 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on long-term debt, managed through interest rate swaps, resulting in a 4.33% weighted average effective interest rate and no impact from a hypothetical 0.50% rate increase - The primary market risk is interest rate risk associated with long-term debt[234][235] - As of June 30, 2025, the weighted average effective interest rate on outstanding debt, factoring in interest rate swaps, was 4.33% per annum[240] - A 0.50% increase in market interest rates would have no impact on annualized interest expense as of June 30, 2025, because all variable-rate loan balances have interest rate swap arrangements in place[240] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to 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, 2025[243] - No material changes to internal control over financial reporting occurred during the quarter ended June 30, 2025[244] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material litigation that would significantly adversely affect its financial condition or results of operations - The company is not presently subject to any material litigation[91][247] Item 1A. Risk Factors New and updated risk factors include challenges from Artificial Intelligence (AI) use, cybersecurity threats, and potential adverse impacts from federal law changes like the 'One Big Beautiful Bill Act' (OBBBA) - A new risk factor has been identified concerning the use of Artificial Intelligence (AI), which presents challenges such as potential inaccuracies, data privacy risks, and increased sophistication of cybersecurity attacks[249][250] - The newly enacted 'One Big Beautiful Bill Act' (OBBBA) increases the REIT asset test limit for taxable REIT subsidiaries (TRSs) from 20% to 25% and includes an estimated $1 trillion in cuts to Medicaid spending, which could adversely impact financial performance[254][255] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In April 2025, the company repurchased 16,708 shares of Common Stock for $513,000 to satisfy employee tax withholding obligations related to restricted stock awards - In April 2025, the company acquired 16,708 shares of its Common Stock for $513,000 to satisfy employee tax withholding requirements on vested restricted stock awards[256] Item 3. Defaults Upon Senior Securities The company reported no defaults upon its senior securities during the period - None[257] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[258] Item 5. Other Information No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the quarter - No directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement during the reporting period[259] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents and required certifications - The report includes a list of filed exhibits, such as the 2025 Manager Equity Plan and certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[260][262]