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American Healthcare REIT CEO Explains Public Pricing, Future Opportunities

American Healthcare REIT CEO Explains Public Pricing, Future Opportunities. AHR, American Healthcare REIT, REIT, real estate investment trust, NYSE, webcast, webinar, Prosky, Peay

American Healthcare REIT (NYSE: AHR) – formerly a publicly registered, non-traded real estate investment trust – hosted a webcast this week to discuss their recent listing on the New York Stock Exchange, the discount to net asset value at which the stock traded, and the addition of new institutional capital partners.

As The DI Wire previously reported, AHR debuted on the New York Stock Exchange on Jan. 29 with a public offering of 56 million shares of its common stock. AHR also granted the underwriters a 30-day option to purchase up to an additional 8.4 million shares of its common stock to cover overallotments, if any.

After pricing its public offering at $12 per share, AHR started Feb. 7, its first trading day – at $12.85. At the close of day, shares finished at $13.22, up 10.17%. On Feb. 9, AHR closed the offering, issuing 64.4 million shares and raising approximately $772.8 million of gross proceeds from new capital sources. AHR stock closed yesterday at $13.35, up 1.52%.

We believe this “is a great start to our journey as a publicly listed company,” said Danny Prosky, president and chief executive officer of AHR, who discussed the positives of investing in healthcare real estate. “Because healthcare real estate is needs-based and the population in the country will continue to get older, there will be a wave of demand from baby boomers that continue to get into later stages of life … When you couple this demand with recent supply dynamics that have changed as a result of higher borrowing costs, we expect demand to outstrip supply over the next 3 to 5 years.”

AHR is a diversified healthcare REIT with approximately $4 billion of real estate assets based on the pro rata purchase price. Its portfolio is primarily comprised of three major segments: medical office buildings, senior housing facilities, and integrated senior health campuses.

AHR was formed by the 2021 merger of Griffin-American Healthcare REIT III, Griffin-American Healthcare REIT IV, and American Healthcare Investors. Investors in those non-traded REITs typically paid $10 per share of common stock, the equivalent of $40 per share after the company executed a one-for-four reverse stock split in November 2021. Last March AHR adopted an updated estimated per share net asset value of the company’s common stock of $31.40, calculated as of Dec. 31, 2022.

Brian Peay, chief financial officer, discussed the considerations that went into the common stock’s public pricing. “Since September of 2022, the capital markets have faced headwinds from higher interest rates, which directly impacted the pricing of both private and public real estate. In recent months and with the help of our lead underwriters … we determined that it was the right time to proceed with the offering and listing.”

The bottom line, stressed Peay, is the IPO provides a path forward for the company to be able to grow accretively by accessing institutional capital to pursue “attractive growth opportunities.”

“The board determined that a $12 to $15 range was an appropriate price range to generate interest, which is what you need. We need to achieve interest from institutional investors in order to invest into an IPO of this size,” said Prosky.

In a rundown of some of the frequently asked questions AHR had been receiving over the last few weeks, Prosky also pressed that previous stockholders that own Class T or Class I shares have the same economic ownership interests as the new common stockholders. Class T and Class I shares will automatically convert into common stock 180 days after the company’s Feb. 7 listing, at which time those legacy shares will become liquid. All will be treated the same with respect to distributions, which Prosky said would likely remain at $1.00 per share, barring an unanticipated change by the company’s board of directors.

Peay also discussed the external opportunities for additional growth since completing the offering and listing.

“First and foremost, we hope to buy out the remaining 26% of Trilogy that we do not currently own,” said Peay, noting that Trilogy is AHR’s largest and best operator. Additionally, Peay hopes AHR can expand with existing regional operators, use the net proceeds received from the offering to repay approximately $623.1 million of the amount outstanding under its credit facility, and strengthen its balance sheet.

“The offering and listing began a new chapter for American Healthcare REIT stockholders, providing the opportunity for liquidity after the 180-day period lockout expires. This has long been a priority for us,” said Peay.

“Additionally, it positions AHR to be able to access the public markets with new sources of institutional equity capital,” he added.

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