American Healthcare REIT’s properties “generally performed well” in the third quarter, President and CEO Danny Prosky wrote in a letter to investors that was filed Monday with the Securities and Exchange Commission.
“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,” he added.
To address these challenges, Prosky said, the Irvine, CA-based real estate investment trust took steps to sell properties and “hedge” more of its variable rate debt. As of Sept. 30, the REIT had sold more than $175 million of “predominantly non-strategic properties” this year. More than $80 million of the sales proceeds came in during the third quarter.
“The proceeds from these sales were primarily used to pay down debt and lower our interest expense,” according to Prosky. “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.”
Other third-quarter financial highlights:
- Normalized funds from operations attributable to controlling interest equaled $23.2 million, or $0.35 per common share, compared with $31 million, or $0.47 per common share, in the same quarter of 2022.
- Funds from operations attributable to controlling interest equaled $17.8 million, or $0.27 per common share, compared with $26.5 million, or $0.40 per common share, in the third quarter of 2022.
- Net operating income totaled $75.1 million for the quarter compared with $73.8 million the prior-year quarter.
- Net loss totaled $6.4 million, compared with $7.6 million, in the third quarter of 2022.
The company paid a quarterly distribution equal to an annualized distribution rate of $1 per share to its stockholders of record as of Oct. 2, according to the letter.
Since the quarter ended, the REIT announced that it has entered into a purchase agreement with NorthStar Healthcare Income that grants AHR the option to buy all of the minority membership interest held by NorthStar in Trilogy REIT Holdings, the parent organization of Trilogy Health Services.
“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,” Prosky previously said. 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.”
