American Healthcare REIT Amends Credit Facility and Provides Update on Key Post-Offering Initiatives

Rhea-AI Summary

American Healthcare REIT, Inc. (AHR) extends credit facility to $1.15 billion, reducing debt and improving leverage metrics. Portfolio occupancies show growth, with a recent acquisition in Oregon. The company aims to enhance shareholder value through debt reduction and strong portfolio performance.

Positive

• Extension of credit facility to $1.15 billion provides increased flexibility for growth opportunities
• Significant reduction in outstanding debt post public offering with $54 million annualized interest expense savings
• Portfolio occupancies for Integrated Senior Health Campuses and SHOP segments show growth
• Acquisition of senior housing portfolio in Oregon adds 856 beds across 12 campuses

Negative

• None.

Financial Analyst

Amending a credit facility often signals a strategic move to optimize capital structure and financial flexibility. American Healthcare REIT, Inc.'s decision to extend the maturity date and increase the facility size to $1.15 billion is a substantial financial maneuver that could impact investor confidence and the firm's ability to pursue growth opportunities. The lower weighted average interest rate, down from 7.53% to 5.91%, suggests improved debt servicing capabilities, which could lead to enhanced credit ratings and reduced cost of capital. The anticipated $54 million annual interest savings is a significant figure that can improve net income and potentially be redirected towards accretive investments or shareholder returns.

Moreover, the repayment of high-interest debt post-offering is a prudent use of capital, especially in the current high-interest-rate environment, which could otherwise erode profitability. The company's leverage metrics improvement is also noteworthy as it may affect valuation multiples. Investors often favor REITs with stable or improving leverage ratios as it indicates a lower risk profile.

Real Estate Investment Expert

In the context of real estate investment trusts (REITs), occupancy rates are a critical measure of portfolio performance, as they directly influence revenue stability. The reported uptick in occupancies across American Healthcare REIT's Integrated Senior Health Campuses and Senior Housing Operating Portfolio (SHOP) segments is a positive indicator of operational strength. Particularly, the senior housing market has been under scrutiny post-pandemic and growth in this segment may reflect a recovery trend and an ability to attract and retain tenants.

The acquisition of the senior housing portfolio in Oregon, with a relatively low fixed interest rate of 4.54%, showcases the company's strategic investment in high-demand sectors. The RIDEA structure allows the REIT to participate in both the rental income and operational income of the facilities, potentially enhancing returns. The established relationship with Compass Senior Living, especially recognized during the challenging COVID-19 period, could mitigate operational risk and ensure stability in the newly acquired portfolio.

Market Research Analyst

Understanding the competitive landscape of healthcare real estate is crucial for assessing the potential impact of American Healthcare REIT's recent financial and operational moves. The healthcare real estate sector is known for its resilience due to the non-cyclical nature of healthcare demand. However, it is also subject to regulatory changes, reimbursement rates and demographic shifts. The company's focus on diversifying its healthcare real estate assets, particularly in the senior housing segment, aligns with demographic trends indicating an aging population and a corresponding increase in demand for senior care facilities.

The company's post-offering activities, including debt reduction and portfolio expansion, suggest a strategic positioning to capitalize on these trends. However, it is important to monitor how these moves will translate into long-term performance, considering factors such as the potential for oversupply in certain markets, shifts in healthcare policy and the broader economic climate that could affect consumer spending on healthcare services.

IRVINE, Calif., Feb. 21, 2024 /PRNewswire/ -- American Healthcare REIT, Inc. (NYSE: AHR) announced today that it has amended its existing credit facility, extending its maturity date and increasing its size to up to $1,150,000,000. The credit facility consists of an unsecured revolving credit facility in the initial aggregate amount of $600,000,000 and an unsecured term loan facility in the initial aggregate amount of $550,000,000. The revolving portion of the credit facility now matures on February 14, 2028, and may be extended for one 12-month period, subject to certain conditions, and the term loan portion of the facility matures on January 19, 2027. The amended credit facility will allow for increased flexibility as the company evaluates opportunities, while maintaining the strength of its capital structure since its recently completed underwritten public offering of common stock and the listing of its common stock on the New York Stock Exchange.

"We are pleased with the new terms of our credit facility with our lending partners," said Danny Prosky, President and Chief Executive Officer of American Healthcare REIT. "We believe this credit facility will benefit our stockholders and allow us to continue to grow our diverse portfolio of healthcare real estate assets."

Post-Offering Update
The company also announced progress it has made since its recently completed underwritten public offering of common stock and listing on the New York Stock Exchange earlier this month. Since the closing of the offering on February 9, 2024, the company has repaid approximately $721 million of outstanding debt with a weighted average interest rate of 7.53%. As of February 16, 2024, the company had $747,000,000 of outstanding balances on its lines of credit and term loan, with a weighted average interest rate of 5.91% (taking into account the effect of swap instruments), and $803,000,000 of aggregate availability under its lines of credit and term loan. This significant reduction in outstanding debt has resulted in a meaningful improvement in the company's leverage metrics and will result in approximately $54 million in interest expense savings on an annualized basis.

On portfolio performance, the company reported updated occupancies for its important Integrated Senior Health Campuses and Senior Housing Operating Portfolio (SHOP) segments that showed continued growth. As of February 9, 2024, occupancy for the company's same-store Integrated Senior Health Campuses was 87.6%, up from 86.6% for the three months ended September 30, 2023, while occupancy for the company's same-store SHOP was 82.6%, up substantially from 78.8% for the three months ended September 30, 2023. Total occupancies for the company's Integrated Senior Health Campuses and SHOP segments as of February 9, 2024 were 87.3% and 82.7%, respectively. Occupancy for the company's Medical Office Building segment was 88.9%, down slightly from 89.7% as of September 30, 2023 due to anticipated tenant vacancies.

"We have continued to make good progress on key initiatives since our recent equity offering and listing," Mr. Prosky said. "The reduction in outstanding debt not only strengthens our balance sheet but also provides substantial interest expense savings in today's heightened interest rate environment. We expect that our strengthened balance sheet coupled with strong portfolio performance, driven by our senior housing investments, will position the company well to grow value for our stockholders."

Recent Transaction Activity
In February 2024, the company closed on the acquisition of a senior housing portfolio in Oregon consisting of 856 beds across 12 campuses. The total consideration consisted of $94.5 million of assumed debt, plus closing costs, reflecting a price per bed of approximately $110,000. The assumed debt has a fixed interest rate of 4.54% and matures on January 1, 2028. The portfolio will be managed by Compass Senior Living through a RIDEA structure. The company has a longstanding relationship with Compass Senior Living in its senior housing–leased portfolio and recognized the strength of the operator through the COVID-19 pandemic. The management agreement will be the company's first with Compass Senior Living expanding the company's high-quality operator relationships.

About American Healthcare REIT, Inc.
American Healthcare REIT, Inc. is a self-managed real estate investment trust (REIT) that acquires, owns and operates a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, senior housing, skilled nursing facilities, and other healthcare-related facilities. As of September 30, 2023, its total assets of approximately $4.6 billion consisted of 298 buildings and integrated senior health campuses owned and/or operated by the company that are located in 36 states, the United Kingdom and the Isle of Man, representing approximately 18.9 million square feet of gross leasable area.

Media Contact:	Investor Contact:
Damon Elder	Alan Peterson
Spotlight Marketing Communications	VP, Investor Relations & Finance
(949) 427-1377	(949) 270-9200
damon@spotlightmarcom.com	investorrelations@ahcreit.com

 

Forward-Looking Statements
Certain statements contained in this press release, including statements relating to the company's expectations regarding its portfolio growth, interest expense savings and balance sheet, may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The company intends for all such forward-looking statements to be covered by the applicable safe harbor provisions for forward-looking statements contained in those acts. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Any such forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which the company operates, and beliefs of, and assumptions made by, the company's management and involve known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied therein, including, without limitation risks included in the company's Annual Report on Form 10-K for the year ended December 31, 2022 and other periodic reports. Except as required by law, the company does not undertake any obligation to update or revise any forward-looking statements contained in this release.

 

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SOURCE American Healthcare REIT, Inc.

FAQ

What is the new size of American Healthcare REIT, Inc.'s credit facility?

The credit facility has been extended to up to $1,150,000,000.

What is the weighted average interest rate on the company's outstanding debt post-offering?

The weighted average interest rate on outstanding debt is 5.91%.

How has the company's portfolio occupancy for Integrated Senior Health Campuses changed since September 30, 2023?

Occupancy has increased to 87.6% from 86.6%.

What was the recent acquisition by American Healthcare REIT, Inc. in February 2024?

The company acquired a senior housing portfolio in Oregon with 856 beds across 12 campuses.

Who will manage the newly acquired senior housing portfolio in Oregon?

The portfolio will be managed by Compass Senior Living through a RIDEA structure.