American Healthcare REIT, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. The unaudited results are for a healthcare-focused REIT operating across integrated senior health campuses, outpatient medical (OM), senior housing operating properties (SHOP), and triple-net leased properties. The company owned or operated 318 buildings and campuses.
Financial performance and position
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Total revenue | $499.5 million | $452.2 million; up 10.5% |
| Net loss | $3.0 million | $27.6 million loss |
| Net loss attributable to controlling interest; diluted EPS | $3.9 million loss; ($0.04) | $25.9 million loss; ($0.39) |
| NOI, a non-GAAP measure | $82.2 million; 16.5% of revenue | $66.9 million; 14.8% of revenue |
| NAREIT FFO / Normalized FFO, attributable to controlling interest | $31.3 million / $31.1 million; $0.30 per share for each | $11.7 million / $20.2 million; $0.18 / $0.31 per share |
| Net cash from operating activities | $6.0 million used | $23.9 million provided |
| Cash, cash equivalents and restricted cash | $124.5 million | $90.8 million at December 31, 2023 |
| Debt at March 31 | $1.255 billion mortgage principal and $760 million credit-facility borrowings | Book carrying amounts fell from $2.526 billion at year-end to $1.988 billion |
Resident fees and services revenue rose 10.6% to $452.1 million; real estate revenue increased 8.8% to $47.4 million. Segment NOI increased at integrated senior health campuses ($42.0 million versus $33.4 million), SHOP ($6.5 million versus $5.1 million), and triple-net leased properties ($12.7 million versus $5.3 million), but declined at OM ($21.0 million versus $23.1 million).
Material changes and capital
- Revenue growth reflected increased occupancy and billing rates, acquisitions, and transitions of certain properties from triple-net leases to RIDEA operations. Higher labor and other operating costs partially offset growth.
- On February 9, the company completed an NYSE-listed offering of 64.4 million shares for $772.8 million gross proceeds and $724.6 million net proceeds. It used proceeds primarily to repay $176.1 million of mortgage debt and $545.0 million of credit-facility borrowings.
- The February refinancing replaced the 2022 credit agreement with a $1.15 billion facility, including a $600 million revolver and $550 million term loan. Together with the Trilogy facility, total capacity was $1.55 billion; $790 million was available at quarter-end.
- In February, the company assumed approximately $94.5 million of mortgage principal to acquire 14 Oregon senior housing properties after a borrower defaulted. It also sold two OM buildings and one SHOP property, reporting a $2.3 million aggregate net gain on dispositions.
Liquidity, distributions and outlook
Management said liquidity sources should be sufficient for cash requirements over the next 12 months and thereafter. Quarter-end cash and cash equivalents were $77.0 million, with a further $47.5 million restricted. Operating cash flow was negative, which management attributed primarily to the timing of receipts and payments. The company reported compliance with its debt covenants.
The board has authorized quarterly distributions of $0.25 per share since Q1 2023, equivalent to an annualized $1.00, but the company does not guarantee the rate will continue. Q1 cash distributions were $16.6 million; the filing’s cash-flow presentation attributes 100% to borrowings, while its separate non-GAAP FFO comparison shows FFO equal to distributions. The DRIP and share repurchase plan remain suspended. No formal earnings or operating guidance is provided.
Management cited inflation-driven labor, service, energy and supply costs, and rising rates on variable-rate debt as ongoing pressures. The filing identifies Indiana and Ohio as representing 33.2% and 13.9%, respectively, of portfolio annualized base rent or NOI. A 0.50% increase in market rates was estimated to add $925,000 to annualized interest expense. New federal nursing-home staffing requirements finalized in April may raise costs for the company and its operators and tenants. The company reported no material litigation or known material environmental liability.
Other notable items include an April 2024 cash redemption of remaining Trilogy management and advisory committee interests for $10.8 million, subsequent to quarter-end. The company also has an option to acquire NHI’s 24% interest in Trilogy REIT Holdings for $247 million if completed from April through December 2024, or $260 million from January 2025 onward; it had not exercised the option as of March 31.
Most important facts for investors to verify
- Whether resident occupancy, billing rates and property-level margins continue improving enough to offset inflation and staffing-related costs.
- Cash conversion and working-capital trends, given negative Q1 operating cash flow and the increase in resident receivables.
- Debt maturities, refinancing capacity, variable-rate exposure and the availability and conditions of undrawn credit facilities.
- Distribution sustainability: cash distributions exceeded operating cash flow in Q1, notwithstanding the reported FFO coverage.
- Performance and credit risk of the Oregon properties acquired through assumed debt, and the company’s decision on the Trilogy minority-interest purchase option.
- The effects of skilled-nursing staffing rules, state-level portfolio concentration, and any changes to the stated liquidity outlook.