American Healthcare REIT Reports Higher NOI, Lower FFO in Third Quarter
American Healthcare REIT Inc. reported mixed financial results for the third quarter of 2023, while indicating that property level performance continued an impressive post-COVID recovery.
“While performance at the property level has been solid, those gains have been largely offset at the bottom line by elevated interest expense throughout 2023, due primarily to the impact of rising interest rates on our variable rate debt. We took additional steps to strengthen our balance sheet and address our variable rate debt in the third quarter through continued execution of property sales and hedging more of our variable rate debt,” explained AHR CEO Danny Prosky in a letter to stockholders. “Year-to-date through September 30, 2023, we sold over $175 million of predominantly non-strategic properties, with over $80 million of proceeds coming in the third quarter. The proceeds from these sales were primarily used to pay down debt and lower our interest expense. Also in the third quarter 2023, we hedged an additional $275 million in variable rate debt, converting floating and uncertain interest costs to a known and fixed rate.Net operating income totaled $75.1 million, an increase of 1.7% compared to the third quarter of 2022’s NOI of $73.8 million.”
The company reported that normalized funds from operations equaled $23.2 million, or $0.35 per share, compared to $31.0 million, or $0.47 per share, during the third quarter of 2022.
Year-over-year funds from operations similarly declined to $17.8 million from $26.5 million during the third quarter of 2022.
Net loss for the quarter totaled $6.4 million, compared to a net loss of $7.6 during the third quarter 2022.
As of March 31, 2023, the company’s property portfolio (excluding senior housing operating properties and integrated senior health campuses), achieved a leased percentage of 92.6% and weighted average remaining lease term of 6.2 years. The company’s portfolio of integrated senior health campuses and senior housing operating properties achieved leased percentages of 80.7% and 85.5%. Portfolio leverage was 53.2%.
“We continue to pursue the goal of creating liquidity for our stockholders, and, to that end, we filed an amended Registration Statement on Form S-11 with the SEC in November,” said Prosky. “The amended Registration Statement is another important step in a proposed underwritten public offering in conjunction with a listing of our common stock on the New York Stock Exchange and, most importantly, helps us preserve maximum optionality. Capital markets are experiencing continued volatility, but we continue to seek to be well-positioned as markets improve. We, of course, cannot make any assurances as to if or when a liquidity event might occur, or what type of event it will be should it occur, but we remain diligent in preparing the company for the opportunity.”
In September 2022, AHR 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.
As The DI Wire previously reported, AHR recently 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.
American Healthcare REIT oversees an 18.9 million-square-foot portfolio of 298 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 $4.3 billion.
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