American Healthcare REIT Aims For U.S. IPO (Pending:AHR)


Building with large H sign for hospital

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A quick look at the American healthcare REIT

American Healthcare REIT (AHR) has filed to raise an undisclosed amount in an initial public offering of its common stock, according to an S-11 registration statement.

The company acquires, develops and operates a large Number of health-related properties in the United States.

I will provide an update when we get more details on the IPO.

American health care overview

Based in Irvine, California, American Healthcare was formed and expanded through a series of merger transactions with Griffin Capital (among others) to operate a growing portfolio of medical and healthcare facilities nationwide across the United States

Management is led by Chief Executive Officer Daniel Prosky, who has been with the Company since January 2015 and was previously President and COO of Grubb & Ellis Healthcare REIT Advisor, now known as Healthcare Trust of America, and has extensive business experience in the healthcare facility industry .

The company’s main offerings include:

  • Doctor’s office building

  • senior apartment

  • Integrated health campus for seniors

  • hospitals

  • SHOP – commercial real estate for senior citizens’ apartments

  • SNFs – Qualified care facilities

As of June 30, 2022, American Healthcare has booked a fair market value investment of $2.5 billion as of June 30, 2022 from investors.

Management believes it has extensive industry experience identifying and acquiring quality healthcare and medical properties throughout the United States at low cost.

American Healthcare Market and Competition

According to a 2022 market research report by Grand View Research, the US hospital equipment market was estimated at $1.3 trillion in 2021 and is projected to reach $2.55 trillion by 2030.

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This equates to a projected CAGR of 7.62% from 2022 to 2030.

The main drivers for this expected growth are an increasing demand from US patients for well-equipped hospitals and an increasing number of older people due to the retirement of the “baby boom” generation.

Also, below is a historical and forecast future growth chart for the US Hospital Market:

Hospital Equipment Market in the United States

Hospital Equipment Market in the United States (Grand View Research)

Key contestants or other industry participants include:

  • Community Healthcare Trust

  • CareTrust REIT

  • Medical Properties REIT

  • Diversified Healthcare Trust

  • Universal Health Realty Income Trust

  • Sabra Healthcare REIT

  • Ventas

  • fountain tower

  • National Health Investors

  • Other

AHR operates facilities in other healthcare and medical-related markets in the United States

Financial performance of the American Healthcare REIT

AHR’s recent financial results can be summarized as follows:

  • Increasing topline earnings

  • Variable modified FFO

  • Appropriate leverage ratio

Below are the Company’s operating results for the last five and a half years:

Company operating results

Company operating results (SEC EDGAR)

(Source – SEC)

total revenue

Period

total revenue

% variance vs. before

Six months ended June 30, 2022

$764,430,000

27.5%

2021

$1,282,254,000

3.1%

2020

$1,244,301,000

Operating Profit (Loss)

Period

% variance vs. before

Six months ended June 30, 2022

$151,261,000

72.6%

2021

$213,336,000

-2.3%

2020

$218,276,000

Modified FFO

Period

Modified FFO

% variance vs. before

Six months ended June 30, 2022

$73,926,000

153.00%

2021

$77,642,000

-19.7%

2020

$96,672,000

EBITDA

Period

EBITDA

% variance vs. before

Six months ended June 30, 2022

$105,686,000

48.0%

2021

$160,859,000

-10.1%

2020

$178,999,000

Comprehensive Income

Period

Comprehensive Income

% variance vs. before

Six months ended June 30, 2022

$(16,439,000)

-32.2%

2021

$(53,334,000)

-685.4%

2020

$9,110,000

(Glossary of terms)

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(Source – SEC)

Leverage ratio (net debt/EBITDA)

On Jun 30, 2022: 14.3x

As of June 30, 2022, the Company had $59.1 million in cash and $2.8 billion in total debt.

American Healthcare REIT IPO details

American Healthcare intends to raise undisclosed gross proceeds from an initial public offering of its common stock.

No existing shareholder has expressed an interest in buying shares at the IPO price.

Management says it will use the net proceeds from the IPO as follows:

We will contribute the net proceeds from this offering to the Operating Partnership in exchange for surgical units. We expect that the Operating Partnership will use the net proceeds received from us for repayment [an undisclosed amount] outstanding under our credit facility to fund external growth with potential future real estate acquisitions and for other general corporate purposes.

(Source – SEC)

Management’s presentation of the company’s roadshow is not available.

With respect to pending legal proceedings, management said that the company is not facing any legal proceedings that would materially adversely affect it.

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The listed bookrunners of the IPO are BofA Securities, Citigroup and KeyBanc Capital Markets.

Commentary on American Healthcare’s IPO

AHR is seeking investments in the US public capital market to reduce debt and support its corporate expansion plans.

The company’s financials have resulted in increasing revenues, variable modified FFO and a reasonable leverage ratio.

The company currently plans to pay out dividends equal to at least 90% of its taxable REIT income, but hasn’t announced an exact target amount yet.

The market opportunity for healthcare facilities in the US is large and is expected to grow significantly in the coming years due to an aging population and increasing demand for quality healthcare services.

BofA Securities is the leading underwriter and the IPOs it has managed over the past 12 months have generated an average negative return (49.5%) since its IPO. This is a lower performance for all major underwriters over the period.

The main risk to the company’s prospects is rising capital costs, which increase debt servicing costs while reducing the present value of its cash flows.

In an inflationary era, however, real estate investments tend to appreciate as a hedge against inflation as rents rise, so well-managed REITs can be an interesting place to allocate capital for investors who expect rising inflation in the future.

I will provide a final opinion when we hear more about the IPO from management.

Estimated IPO Price Date: To be announced.



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