S-11/A: American Healthcare REIT, Inc. Announces IPO, Plans to List on NYSE

American Healthcare REIT, Inc., a self-managed real estate investment trust, has announced an initial public offering of 56,000,000 shares of common stock and plans to list on the New York Stock Exchange under the ticker symbol AHR.

Summary

• American Healthcare REIT, Inc. (AHR) is a self-managed real estate investment trust (REIT) that focuses on acquiring, owning, and operating a diverse portfolio of clinical healthcare real estate properties.
• AHR's portfolio primarily includes medical office buildings (MOBs), senior housing, skilled nursing facilities (SNFs), hospitals, and other healthcare-related facilities.
• As of September 30, 2023, AHR had approximately $4.6 billion in total assets and was the ninth largest public reporting healthcare REIT (based on total assets).
• The company owned and/or operated 298 properties, representing approximately 18,875,000 square feet of gross leasable area (GLA).
• AHR is offering 56,000,000 shares of common stock in an initial public offering (IPO), with an expected price range of $12.00 to $15.00 per share.
• The company has been approved to list its common stock on the New York Stock Exchange (NYSE) under the ticker symbol AHR.
• AHR intends to use the net proceeds from the offering to repay $703.8 million of the amount outstanding under its credit facility.
• The company plans to maintain its intended distributions for the 12 months following the completion of this offering unless its results of operations, FFO, Normalized FFO, EBITDA, Adjusted EBITDA, liquidity, cash flows, financial condition or prospects, economic conditions or other factors differ materially from the assumptions used in calculating its intended distribution rate.
• AHR's management team has experience in overseeing the acquisition of approximately $9.6 billion in healthcare real estate investments over the last 17 years.
• The company believes it is well-positioned for growth due to favorable industry tailwinds, a diversified portfolio, and a strong management team.

Sentiment

Score: 7

Explanation: The document presents a generally positive outlook for American Healthcare REIT, Inc., highlighting its strong portfolio, experienced management team, and favorable industry trends. However, the company also faces risks related to the ongoing impact of the COVID-19 pandemic, competition, and potential future losses. The overall sentiment is cautiously optimistic, warranting a score of 7.

Positives

• AHR has a diversified portfolio of clinical healthcare real estate properties across multiple asset classes, geographies, and tenants.
• The company benefits from favorable industry tailwinds driven by an aging U.S. population and increasing healthcare expenditures.
• AHR's portfolio includes a significant number of MOBs, which provide stable and reliable cash flows.
• The company's SHOP and integrated senior health campus segments have shown steady recovery from the impact of the COVID-19 pandemic and offer potential for growth.
• AHR has a cohesive management team with an average of 27 years of experience in the healthcare and real estate industries.
• The company has deep operator, tenant, and industry relationships, providing access to attractive investment opportunities.
• AHR's investment in Trilogy provides exposure to unique integrated senior health campuses with demonstrated post-pandemic growth.
• The company has a robust operating platform and a proactive approach to asset and property management.
• Upon completion of the offering, AHR will have a flexible balance sheet with significant liquidity to pursue external growth opportunities.

Negatives

• The COVID-19 pandemic has adversely impacted, and continues to adversely impact, AHR's business and financial results.
• The company has experienced net losses in the past and may experience additional losses in the future.
• AHR faces significant competition for acquisitions and dispositions of healthcare real estate properties.
• The company is dependent on tenants for revenue, and lease terminations could reduce its ability to make distributions to stockholders.
• Adverse developments in the Trilogy Manager's business or financial strength could materially and adversely affect AHR.
• The financial deterioration, insolvency, or bankruptcy of one or more of AHR's major tenants, operators, borrowers, or other obligors could materially and adversely affect the company.
• AHR may incur additional costs in re-leasing properties with specialized uses.
• The company may be unable to secure funds for future tenant or other capital improvements.
• A breach of information technology systems on which AHR relies could materially and adversely impact the company.

Risks

• The ultimate long-term impact of the COVID-19 pandemic is uncertain and cannot be predicted with accuracy.
• AHR's prior performance may not be an accurate predictor of its ability to achieve its business objectives or of its future results.
• The company's success is dependent on the performance and continued contributions of certain key personnel.
• AHR's financial results, ability to make distributions, and ability to dispose of investments are subject to international, national, and local market conditions.
• Uncertain market conditions could lead to a decrease in the value of AHR's real estate investments or cause the company to sell properties at a loss.
• Most of AHR's costs are subject to inflation and may not be recoverable.
• High concentrations of properties in particular geographic areas magnify the effects of negative conditions affecting those areas.
• AHR's real estate investments may be concentrated in specific healthcare-related asset classes, making it more vulnerable to negative factors affecting those classes.
• The company, its tenants, residents, and operators may face litigation and experience rising liability and insurance costs.
• Unfavorable real estate market conditions and delays in liquidating defaulted mortgage loan investments may negatively impact mortgage loans in which AHR has invested.
• A portion of AHR's real estate-related investments are expected to be illiquid.
• The healthcare industry is heavily regulated, and changes in laws or regulations could adversely affect AHR's tenants and operators.
• Reductions in reimbursement from third-party payors could adversely affect the operations of AHR's tenants and operators.
• If seniors delay moving to senior housing facilities or forgo moving altogether, it could materially and adversely affect AHR.
• Adverse trends in healthcare provider operations may materially and adversely affect the company.
• AHR, its tenants, and operators may be subject to government reviews, audits, and investigations that could materially and adversely affect the company.
• Property ownership through joint ventures could limit AHR's control of those investments or its decisions with respect to other investments, restrict its ability to operate and finance properties on its terms and reduce their expected return.
• If AHR serves as a managing member, general partner, or controlling party with respect to investments or joint ventures, it may be subject to additional risks and liabilities.
• AHR has substantial indebtedness and may incur additional indebtedness in the future, which could materially and adversely affect the company.
• To the extent AHR borrows funds at floating interest rates, it will be adversely affected by rising interest rates unless fully hedged.
• Lenders may require AHR to enter into restrictive covenants that could adversely affect its business.
• The limit on the percentage of shares of common stock or capital stock that any person may own may discourage a takeover or business combination.
• Stockholders' ability to control AHR's operations is severely limited.
• Conflicts of interest could arise as a result of officers' other positions and/or interests outside of the company.
• Certain provisions of Maryland law may make it more difficult for AHR to be acquired and may limit or delay stockholders' ability to dispose of their shares.
• The MGCL and AHR's organizational documents limit stockholders' right to bring claims against officers and directors.
• AHR's stockholders' investment return may be reduced if it is required to register as an investment company under the Investment Company Act.
• Failure to maintain REIT qualification would subject AHR to U.S. federal income tax at the regular corporate rate.
• AHR may be subject to adverse legislative or regulatory tax changes.
• If the Merger does not qualify as a tax-free reorganization, there may be adverse tax consequences to AHR.
• There is currently no public trading market for shares of AHR's common stock, and an active trading market may not develop, be maintained, or be liquid.
• The estimated per share NAV of AHR's common stock may not be an accurate reflection of fair value and likely will not represent the amount of net proceeds from a liquidation, dissolution, merger, or sale.
• The market price and trading volume of shares of AHR's common stock may be volatile and decline significantly.
• There may be significant pent-up demand to sell shares of AHR's common stock, which could cause the price to decline significantly.
• Future offerings of debt or equity securities may adversely affect AHR's stockholders.
• AHR may be unable to raise additional capital on favorable terms, or at all, needed to grow its business.

Future Outlook

AHR plans to maintain its intended distributions for the 12 months following the completion of this offering unless its results of operations, FFO, Normalized FFO, EBITDA, Adjusted EBITDA, liquidity, cash flows, financial condition or prospects, economic conditions or other factors differ materially from the assumptions used in calculating its intended distribution rate.

Industry Context

AHR operates in the healthcare real estate industry, which is expected to benefit from favorable demographic trends, including an aging U.S. population and increasing healthcare expenditures. The company's focus on MOBs, senior housing, and SNFs positions it to capitalize on the growing demand for these types of properties. AHR's diversified portfolio and experienced management team differentiate it from competitors.

Comparison to Industry Standards

• AHR is the ninth largest public reporting healthcare REIT based on total assets as of September 30, 2023.
• AHR's management team has experience at two of the three largest publicly traded healthcare REITs, Healthpeak Properties, Inc. (NYSE: PEAK) and Ventas, Inc. (NYSE: VTR).
• AHR's MOB occupancy was 89.7% as of September 30, 2023, compared to the historical average of 91.0% to 93.0% for the MOB asset class.
• AHR's Trilogy portfolio has newer buildings with an average age of 8.9 years, compared to the industry average of 42.1 years for SNFs and 21.2 years for senior housing, according to JLL Research, NIC Map Data Services.
• AHR's price per bed for the Oregon Senior Housing Portfolio acquisition is approximately $110,000, which the company believes is an attractive basis.
• AHR's leverage profile, with 11.4% unsecured debt on a pro forma basis as of September 30, 2023, positions it to pursue external growth opportunities.

Corporate Governance

Stakeholder Impact

• Shareholders: Potential for increased value through growth strategies and distributions, but also exposure to risks associated with the healthcare real estate market and the company's leverage.
• Employees: Continued employment opportunities with a focus on diversity, equity, and inclusion, as well as competitive compensation and benefits.
• Customers: Continued access to healthcare services through AHR's properties, with a focus on quality of care and resident experience.
• Suppliers: Ongoing business relationships with suppliers of goods and services to AHR and its properties.
• Creditors: Repayment of debt obligations, including the use of IPO proceeds to repay a portion of the outstanding credit facility balance.

Next Steps

• Complete the initial public offering and list shares of common stock on the NYSE.
• Use the net proceeds from the offering to repay outstanding debt.
• Continue to execute the company's business objectives and growth strategies, including capturing growth from COVID-19 recovery, pursuing disciplined and targeted acquisitions, developing integrated senior health campuses, and actively positioning the balance sheet for growth.
• Monitor the impact of the COVID-19 pandemic, inflation, and other market conditions on the company's business and financial results.
• Evaluate the potential exercise of the option to acquire the remaining minority interest in Trilogy Holdings.
• Close the acquisition of the Oregon Senior Housing Portfolio.

Key Dates

Keywords

REIT, real estate investment trust, healthcare real estate, medical office buildings, MOB, senior housing, skilled nursing facilities, SNF, hospitals, integrated senior health campuses, ISHC, RIDEA, triple-net lease, healthcare industry, IPO, initial public offering, NYSE, listing, underwriting, joint venture, Trilogy, Trilogy Manager, COVID-19, pandemic, demographics, aging population, healthcare expenditures, Medicaid, Medicare, occupancy, NOI, FFO, Normalized FFO, EBITDA, Adjusted EBITDA, debt, leverage, liquidity, distributions, dividends, capital expenditures, acquisitions, development, redevelopment, dispositions, leases, tenants, operators, management, corporate governance, ESG, risk management, compliance, regulation, litigation, insurance, taxation, underwriting, lock-up agreement, prospectus