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American Healthcare REIT Enters Option Agreement to Expand Ownership of its Largest Senior Care Operator

American Healthcare REIT Enters Option Agreement to Expand Ownership of its Largest Senior Care Operator. Alternative investments, American Healthcare REIT, medical office buildings, merger, MOB, NAV, real estate investment trust, REIT, Senior Housing
American Healthcare REIT Enters Option Agreement to Expand Ownership of its Largest Senior Care Operator. Alternative investments, American Healthcare REIT, medical office buildings, merger, MOB, NAV, real estate investment trust, REIT, Senior Housing

American Healthcare REIT Inc., a non-traded real estate investment trust formed by the 2021 merger of Griffin-American Healthcare REIT III, Griffin-American Healthcare REIT IV, and American Healthcare Investors, announced that it has entered into a purchase agreement with affiliates of NorthStar Healthcare Income Inc. that grants AHR the option to purchase all of the minority membership interest held by NorthStar in Trilogy REIT Holdings LLC, a subsidiary of AHR.

The company says that if AHR exercises the purchase option, the company will own 100% of Trilogy REIT Holdings and 97.4% of Trilogy Investors LLC (which is the parent company of Trilogy Health Services LLC), with the remaining 2.6% minority interest primarily owned by certain executives and employees of Trilogy’s operator, Trilogy Management Services LLC.

Founded in 1997, Trilogy is an owner-operator of purpose-built integrated senior health campuses throughout the states of Indiana, Ohio, Michigan and Kentucky.  During the course of its 26-year history, the company says they have experienced consistent growth primarily through the development of new campuses and opportunistic expansions of existing ones.

“Trilogy has been strategically built over the course of nearly three decades in select markets that have experienced growing demand for long-term care services and in which Trilogy has established an industry-leading presence,” said Danny Prosky, president and chief executive officer of AHR. “Trilogy constitutes more than a third of American Healthcare REIT’s $4.4 billion portfolio and is the strongest performing component. Trilogy is one of the nation’s finest senior care operators, as evidenced by its remarkable recovery from the COVID pandemic, which battered the senior care industry.”

As of June 30, 2023, Trilogy operates a total of 123 properties comprised of more than 13,000 beds. Trilogy’s integrated senior health campuses offer a range of care, including assisted living, memory care, independent living and skilled nursing services.

AHR reports that Trilogy has experienced impressive growth over the last year. Compared to the same period last year, same-store occupancy increased by 380 basis points to 86.0% for the three months ended June 30, 2023. Additionally, same-store net operating income increased by 16.9% for the three months ended June 30, 2023, compared to the same period last year.

Under the terms of the purchase agreement, AHR says they may exercise the option at any time on or before Sept. 30, 2025, for an all-cash purchase price ranging from $240.5 million to $260.0 million, dependent upon the date of closing of the purchase.

In addition, AHR can also elect to complete the purchase transaction by using a combination of cash and the issuance of new convertible preferred stock. AHR says they may use preferred stock for up to 90% of the purchase price, with the balance paid in cash. If issued, the preferred stock would have an initial annual dividend rate of 4.75% on the $25 per share liquidation preference of the preferred stock, with this rate increasing over time, and the preferred stock would be convertible at the holder’s option on or after July 1, 2026, into AHR common stock. AHR may also redeem the shares of preferred stock, in whole or in part, for cash at any time.

As The DI Wire previously reported, American Healthcare REIT announced that it is actively selling properties to raise funds to retire its variable rate debt. In September 2022, the company filed a Form S-11 with the SEC, with plans for a proposed underwritten public offering connected with the potential listing of its common stock on the New York Stock Exchange.

American Healthcare REIT oversees a 19.1 million-square-foot portfolio of 300 medical office buildings, skilled nursing facilities and integrated senior health campuses located in 36 states, the United Kingdom and the Isle of Man, in addition to a real estate-related investment. The gross investment value of the portfolio is approximately $4.4 billion.

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