AHR Shares Fall Nearly 3% as Lock-Up Period Ends for Legacy Non-Traded REIT Shareholders
American Healthcare REIT Inc. (NYSE: AHR) reported its second quarter 2024 results yesterday, the same day in which legacy investors in the non-traded companies that formed AHR became first eligible to trade their shares on the exchange. AHR was formed by the 2021 merger of several real estate investment trusts: Griffin-American Healthcare REIT III, Griffin-American Healthcare REIT IV, and American Healthcare Investors.
AHR debuted on the New York Stock Exchange on Feb. 7 following an initial public offering of 56 million shares of its common stock priced at $12 per share. These shares were sold primarily to institutional buyers.
Using the net proceeds from its IPO, AHR paid down approximately $721 million of its outstanding debt obligations carrying a weighted average interest rate of approximately 7.5%. The company said this meaningfully improved leverage metrics and provided it with additional capacity and flexibility.
Legacy retail investors – owners of approximately 66 million shares purchased for the equivalent of $40 per share (adjusted for a one-for-four reverse stock split executed in 2021) – had their illiquid shares converted to tradeable shares prior to the market open yesterday. At the close of trading, AHR stock finished at $15.67, down 2.91% over the course of a day which saw the Dow Jones Industrial Average fall over 1,000 points and the Nasdaq Composite and S&P 500 each sink 3%. More than three million shares traded, nearly three times the normal volume.
The stock price had rebounded to $15.83, up more than 1%, in after-hours trading. Following the close of the market, the company distributed its second quarter earnings release in which it reported net income attributable to common stockholders of $0.01 per diluted share and positively revised its 2024 guidance.
The company reported normalized funds from operations attributable to stockholders equal to $0.33 per diluted share, as compared to $0.37 per share at the end of June 2023. It had a GAAP net income of $2.9 million compared to a GAAP net loss of $11.9 million for the same period in 2023.
“Our first year as a listed company is off to a great start. Demand for healthcare real estate is evident in our portfolio performance. Growth in the first half of 2024 is exceeding the expectations we set at the beginning of the year prompting our upward revisions to same-store NOI growth guidance and NFFO guidance,” said Danny Prosky, the company’s president and chief executive officer.
The company reported same store net operating income of approximately $74 million for the recent quarter, a 15.7% year-over-year improvement; the NOI was approximately $64 million in June 2023. The improvement was largely driven by occupancy gains in the company’s senior housing operating properties, or SHOP, and integrated senior health campuses, i.e., ISHC, which experienced 49.1% and 24.1% same-store NOI growth, respectively.
“As we plan for the balance of the year and into 2025, we expect the elevated levels of same-store NOI growth to persist due to the demand-supply imbalance present in long-term care,” said Prosky.
In terms of transactions during the quarter, the company exercised the purchase options on three previously leased ISHC properties for approximately $45.8 million. The lease rate on such leases was approximately 9.1%. AHR said it continues to market assets for sale and is not changing sales proceed expectations of approximately $65 million for the full year ending Dec. 31, 2024. The company has sold approximately $15.6 million of non-core properties during the six months ended June 30.
As of June 30, AHR’s total pro-rata indebtedness was $1.8 billion, and the company had approximately $863.1 million of total consolidated liquidity comprised of cash and undrawn capacity on its lines of credit. Its net-debt-to-annualized adjusted earnings before interest, taxes, depreciation, and amortization as of the end of June was 5.9x.
“We are increasing our full year 2024 same-store NOI growth and earnings guidance to reflect the occupancy gains and results we have achieved in 2024,” explained Brian Peay, chief financial officer. “The robust organic earnings growth thus far has allowed us to further improve our company’s leverage profile with improving net-debt-to-annualized-adjusted EBITDA and we anticipate continuing to improve with disposition proceeds and incremental earnings growth.”
AHR will host a webcast and conference call at 1 pm ET today to discuss their quarterly results. Investors may join the webcast, or register for the conference call.
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