American Healthcare REIT Touts IPO Success, Skilled Nursing Performance, Strong Trilogy Partnership

Executives for American Healthcare REIT (NYSE: AHR), which launched a public offering in February, said Friday that they were optimistic about the company’s long-term care prospects even as occupancy growth might not be as robust in 2024 as in the year prior.

During the company’s earnings call to discuss 2024 annual and 2023 fourth quarter results, executives said that Trilogy Health Services is an attractive partner for a number of reasons and they do not have any immediate plans to add new partners. The physical plant advantage over competitors, the alignment with Trilogy’s management team, and the focus on care and service contribute to the attractiveness of the investment, they said.

“And 127 assets, I think, at this point, and their business and our business are very aligned,” they said. “The management team at Trilogy makes money off of an incentive plan that incentivizes bottom-line FFO growth and economic growth. So from a broader SNF data perspective, I think if you don’t have all of those things together at the same time in an investment that is truly unique to Trilogy, you might have different concerns about entering into that type of structure.”


The real estate investment trust (REIT) based in Irvine, California posted a strong fourth quarter of 2023, with a nine and a half percent year-over-year growth in same-store NOI, with Trilogy’s occupancy increasing by roughly 300 basis points compared to 2022, Willhite said.

This growth was attributed to the company’s active asset management strategies and strong operator relationships, he said.

“Our portfolio continues to recover since the onset of the pandemic, with the trajectory of revenue growth drivers all heading in the right direction,” Gabe Willhite, the company’s chief operating officer, said in a press release.


Willhite also discussed the company’s focus on expense management, particularly regarding agency labor usage, which resulted in a significant reduction in costs. He also mentioned the completion of operator transitions within their shop segment, which is expected to unlock more value in 2024.

Success of IPO launch

At its IPO launch, the REIT fell short of its expected target by raising $672 million instead of the anticipated $840 million. American Healthcare sold 56 million shares at $12 each at the time, which was at the lower end of the expected range of $12 to $15.

However, company executives expressed satisfaction with the equity raised overall.

Willhite said the recent public equity offering raised significant funds to improve the balance sheet and reduce interest expenses. Executives plan to maintain a conservative leverage profile for American Healthcare and expect earnings growth from their portfolio to continue improving their balance sheet.

Regarding the skilled nursing portfolio, he noted that their Trilogy facilities, which include a mix of senior housing beds and skilled nursing beds, performed well with a 14% same-store NOI growth for the year and a 16.7% NOI margin expansion in the fourth quarter.

“To put that margin in context, our Trilogy facilities generally comprised 45% senior housing beds, with the balance predominantly being skilled nursing beds,” he said.

This performance was particularly notable given that a good skilled nursing margin is approximately 10% to 12%, he said.

The REIT currently owns and manages a portfolio of properties including skilled nursing facilities, medical offices, senior housing, and hospitals across 36 states. Its assets are valued at approximately $4.6 billion, and the IPO is managed by Bank of America and Morgan Stanley, with Trilogy Health Services as its primary operating partner.

As for assets in senior housing, the company expects continued occupancy growth.

“We believe 2024 should be another year of occupancy gains within our [senior housing operating portfolio] segment that should support NOI growth and margin expansion,” said Danny Prosky, President, and CEO of American Healthcare REIT.

Subsequent to the IPO, American Healthcare REIT paid down approximately $721 million of outstanding debt obligations, significantly improving leverage metrics and enhancing financial flexibility.

Transactional activity within the skilled nursing sector included the completion of a campus acquisition and three lease buyouts within its Integrated Senior Health Campus. Additionally, the company sold several outpatient medical facilities and SHOP facilities during the year, generating approximately $195 million in gross proceeds.

In terms of capital markets and balance sheet activity, the company entered into a swap agreement to fix the interest rate on its variable-rate debt and completed a public offering of common stock, raising gross proceeds of $772.8 million.

“As we look ahead, we will maintain a conservative approach to leverage, while being selective regarding external growth opportunities,” said Brian Peay, the company’s chieffFinancial officer, in a press release.

Debt and leverage

The recent offerings and debt repayments have significantly improved the company’s leverage profile and are expected to result in approximately $54 million in interest expense savings on an annualized basis, Prosky said.

Additionally, Prosky said the company has introduced many new investors to HR over the past year and a half.

“In 2023, we entered into an agreement that provides us with the option to purchase the portion of our Trilogy joint venture that we do not own at a specified price through September 30, 2025,” he said. “We believe that this is a tremendous growth opportunity with limited operating risks. As we know the assets well, they are already fully consolidated in our financial statements.”

Prosky said the company’s integrated senior health campuses contribute significantly to its NOI, making up about 49% of the total NOI.

“Our outpatient medical buildings span the country and our wealth is located with roughly 75% of them classified as on- campus adjacent or affiliated with the broader health system,” he said. “90% of the segment is multi-tenant, which we believe mitigates our exposure to tenant concentration risk in our triple net lease segment we own and Net Lease senior housing facilities, skilled nursing facilities and hospitals.”

Prosky said American Healthcare REIT’s Senior Housing Operating Property segment (SHOP) offers significant upside potential due to its ability to capture further occupancy and rental rate growth.

The company is optimistic about the long-term care prospects in the coming years, citing strong demand growth coupled with limited new supply. SHOP makes up the balance of the company’s NOI, spread across various properties in 14 states, he said.

Additionally, American Healthcare REIT’s balance of NOI is split between outpatient medical buildings and triple-net leased assets, with outpatient medical buildings making up approximately 27% and triple-net leased assets around 13% as of the fourth quarter.

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