American Healthcare REIT, Inc. (Form: 10-Q, Received: 11/13/2023 14:16:31)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to

Commission File Number: 000-55775

AMERICAN HEALTHCARE REIT, INC.

(Exact name of registrant as specified in its charter)


Maryland						47-2887436
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

18191 Von Karman Avenue, Suite 300 Irvine, California						92612
(Address of principal executive offices)						(Zip Code)

(949) 270-9200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of November 10, 2023, there were 19,552,856 shares of Class T common stock and 46,673,320 shares of Class I common stock of American Healthcare REIT, Inc. outstanding.

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

(A Maryland Corporation)

TABLE OF CONTENTS


			Page
PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)			3
Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022			3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2023 and 2022			5
Condensed Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2023 and 2022			6
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022			9
Notes to Condensed Consolidated Financial Statements			12
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			44
Item 3. Quantitative and Qualitative Disclosures About Market Risk			60
Item 4. Controls and Procedures			62

PART II — OTHER INFORMATION

Item 1. Legal Proceedings			63
Item 1A. Risk Factors			63
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			64
Item 3. Defaults Upon Senior Securities			64
Item 4. Mine Safety Disclosures			64
Item 5. Other Information			64
Item 6. Exhibits			65
Signatures			66

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30, 2023 and December 31, 2022

(In thousands, except share and per share amounts) (Unaudited)


	September 30, 2023		December 31, 2022
ASSETS
Real estate investments, net	$	3,430,640	$	3,581,609
Debt security investment, net	85,922		83,000
Cash and cash equivalents	35,178		65,052
Restricted cash	46,978		46,854
Accounts and other receivables, net	169,484		137,501

Identified intangible assets, net	196,884		236,283
Goodwill	234,942		231,611

Operating lease right-of-use assets, net	233,955		276,342
Other assets, net	154,934		128,446
Total assets	$	4,588,917	$	4,786,698

LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgage loans payable, net(1)	$	1,221,238	$	1,229,847
Lines of credit and term loan, net(1)	1,277,076		1,281,794
Accounts payable and accrued liabilities(1)	233,925		243,831
Identified intangible liabilities, net	9,346		10,837
Financing obligations(1)	38,181		48,406
Operating lease liabilities(1)	231,148		273,075
Security deposits, prepaid rent and other liabilities(1)	44,334		49,545
Total liabilities	3,055,248		3,137,335

Commitments and contingencies (Note 10)

Redeemable noncontrolling interests (Note 11)	59,961		81,598

Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 200,000,000 shares authorized; none issued and outstanding	—		—
Class T common stock, $0.01 par value per share; 200,000,000 shares authorized; 19,562,539 and 19,535,095 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	194		194
Class I common stock, $0.01 par value per share; 800,000,000 shares authorized; 46,673,320 and 46,675,367 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	467		467
Additional paid-in capital	2,548,390		2,540,424
Accumulated deficit	(1,232,183)		(1,138,304)
Accumulated other comprehensive loss	(2,624)		(2,690)
Total stockholders’ equity	1,314,244		1,400,091
Noncontrolling interests (Note 12)	159,464		167,674
Total equity	1,473,708		1,567,765
Total liabilities, redeemable noncontrolling interests and equity	$	4,588,917	$	4,786,698

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)

As of September 30, 2023 and December 31, 2022

(In thousands) (Unaudited)

___________

(1)Such liabilities of American Healthcare REIT, Inc. represented liabilities of American Healthcare REIT Holdings, LP or its consolidated subsidiaries as of September 30, 2023 and December 31, 2022. American Healthcare REIT Holdings, LP is a variable interest entity, or VIE, and a consolidated subsidiary of American Healthcare REIT, Inc. The creditors of American Healthcare REIT Holdings, LP or its consolidated subsidiaries do not have recourse against American Healthcare REIT, Inc., except for the 2022 Credit Facility, as defined in Note 8, held by American Healthcare REIT Holdings, LP in the amount of $910,900 and $965,900 as of September 30, 2023 and December 31, 2022, respectively, which was guaranteed by American Healthcare REIT, Inc.

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three and Nine Months Ended September 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues and grant income:
Resident fees and services	$	416,206	$	368,306	$	1,235,458	$	1,013,505
Real estate revenue	46,970		51,323		141,134		154,371
Grant income	1,064		6,533		7,445		22,716
Total revenues and grant income	464,240		426,162		1,384,037		1,190,592
Expenses:
Property operating expenses	374,603		337,487		1,117,298		920,706
Rental expenses	14,574		14,850		44,422		44,800
General and administrative	11,342		9,626		36,169		31,673
Business acquisition expenses	1,024		231		2,244		2,161
Depreciation and amortization	49,273		40,422		138,644		122,704
Total expenses	450,816		402,616		1,338,777		1,122,044

Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs, debt discount/premium and loss on debt extinguishments)	(42,005)		(27,524)		(122,006)		(71,194)
Gain in fair value of derivative financial instruments	3,402		—		8,200		500
Gain on dispositions of real estate investments, net	31,981		2,113		29,777		2,796
Impairment of real estate investments	(12,510)		(21,851)		(12,510)		(39,191)

(Loss) income from unconsolidated entities	(505)		(344)		(924)		1,680
Gain on re-measurement of previously held equity interests	—		19,567		726		19,567
Foreign currency (loss) gain	(1,704)		(3,695)		372		(8,689)
Other income	1,755		670		5,952		2,399
Total net other expense	(19,586)		(31,064)		(90,413)		(92,132)
Loss before income taxes	(6,162)		(7,518)		(45,153)		(23,584)
Income tax expense	(284)		(126)		(775)		(499)
Net loss	(6,446)		(7,644)		(45,928)		(24,083)
Net loss (income) attributable to noncontrolling interests	457		(5,861)		1,884		(9,688)
Net loss attributable to controlling interest	$	(5,989)	$	(13,505)	$	(44,044)	$	(33,771)
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted	$	(0.09)	$	(0.21)	$	(0.67)	$	(0.51)
Weighted average number of Class T and Class I common shares outstanding — basic and diluted	66,048,991		65,819,808		66,036,253		65,735,176

Net loss	$	(6,446)	$	(7,644)	$	(45,928)	$	(24,083)
Other comprehensive (loss) income:
Foreign currency translation adjustments	(180)		(477)		66		(1,164)
Total other comprehensive (loss) income	(180)		(477)		66		(1,164)
Comprehensive loss	(6,626)		(8,121)		(45,862)		(25,247)
Comprehensive loss (income) attributable to noncontrolling interests	457		(5,861)		1,884		(9,688)
Comprehensive loss attributable to controlling interest	$	(6,169)	$	(13,982)	$	(43,978)	$	(34,935)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

For the Three and Nine Months Ended September 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Three Months Ended September 30, 2023
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — June 30, 2023	66,235,859	$	661	$	2,547,135	$	(1,209,578)	$	(2,444)	$	1,335,774	$	160,628	$	1,496,402





Amortization of nonvested restricted common stock and stock units	—	—		1,558		—		—		1,558		—		1,558


Stock based compensation	—	—		—		—		—		—		21		21


Distributions to noncontrolling interests	—	—		—		—		—		—		(764)		(764)


Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(21)		(21)
Adjustment to value of redeemable noncontrolling interests	—	—		(303)		—		—		(303)		(21)		(324)
Distributions declared ($0.25 per share)	—	—		—		(16,616)		—		(16,616)		—		(16,616)
Net loss	—	—		—		(5,989)		—		(5,989)		(379)		(6,368)		(1)
Other comprehensive loss	—	—		—		—		(180)		(180)		—		(180)
BALANCE — September 30, 2023	66,235,859	$	661	$	2,548,390	$	(1,232,183)	$	(2,624)	$	1,314,244	$	159,464	$	1,473,708


	Three Months Ended September 30, 2022
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — June 30, 2022	66,091,145	$	661	$	2,543,478	$	(1,024,328)	$	(2,653)	$	1,517,158	$	172,602	$	1,689,760

Issuance of common stock under the DRIP	98,794	1		3,670		—		—		3,671		—		3,671
Issuance of nonvested restricted common stock	4,965	—		—		—		—		—		—		—
Amortization of nonvested restricted common stock and stock units	—	—		914		—		—		914		—		914


Stock based compensation	—	—		—		—		—		—		20		20
Repurchase of common stock	(152,035)	(2)		(5,648)		—		—		(5,650)		—		(5,650)

Distributions to noncontrolling interests	—	—		—		—		—		—		(3,516)		(3,516)

Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(20)		(20)
Adjustment to value of redeemable noncontrolling interests	—	—		(8,394)		—		—		(8,394)		(2,367)		(10,761)
Distributions declared ($0.40 per share)	—	—		—		(26,437)		—		(26,437)		—		(26,437)
Net (loss) income	—	—		—		(13,505)		—		(13,505)		5,507		(7,998)		(1)
Other comprehensive loss	—	—		—		—		(477)		(477)		—		(477)
BALANCE — September 30, 2022	66,042,869	$	660	$	2,534,020	$	(1,064,270)	$	(3,130)	$	1,467,280	$	172,226	$	1,639,506

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)

For the Three and Nine Months Ended September 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Nine Months Ended September 30, 2023
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — December 31, 2022	66,210,462	$	661	$	2,540,424	$	(1,138,304)	$	(2,690)	$	1,400,091	$	167,674	$	1,567,765



Issuance of nonvested restricted common stock	26,156	—		—		—		—		—		—		—
Vested restricted stock units(2)	4,120	—		(72)		—		—		(72)		—		(72)
Amortization of nonvested restricted common stock and stock units	—	—		4,173		—		—		4,173		—		4,173


Stock based compensation	—	—		—		—		—		—		62		62
Repurchase of common stock	(4,879)	—		(165)		—		—		(165)		—		(165)

Distributions to noncontrolling interests	—	—		—		—		—		—		(6,958)		(6,958)


Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(62)		(62)
Adjustment to value of redeemable noncontrolling interests	—	—		4,030		—		—		4,030		68		4,098
Distributions declared ($0.75 per share)	—	—		—		(49,835)		—		(49,835)		—		(49,835)
Net loss	—	—		—		(44,044)		—		(44,044)		(1,320)		(45,364)		(1)
Other comprehensive income	—	—		—		—		66		66		—		66
BALANCE — September 30, 2023	66,235,859	$	661	$	2,548,390	$	(1,232,183)	$	(2,624)	$	1,314,244	$	159,464	$	1,473,708

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY — (Continued)

For the Three and Nine Months Ended September 30, 2023 and 2022

(In thousands, except share and per share amounts) (Unaudited)


	Nine Months Ended September 30, 2022
	Stockholders’ Equity
	Class T and Class I Common Stock
	Number of Shares	Amount		Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity		Noncontrolling Interests		Total Equity
BALANCE — December 31, 2021	65,758,004	$	658	$	2,533,904	$	(951,303)	$	(1,966)	$	1,581,293	$	175,553	$	1,756,846

Offering costs — common stock	—	—		(2)		—		—		(2)		—		(2)
Issuance of common stock under the DRIP	705,169	7		26,111		—		—		26,118		—		26,118
Issuance of nonvested restricted common stock	18,690	—		—		—		—		—		—		—
Amortization of nonvested restricted common stock and stock units	—	—		2,705		—		—		2,705		—		2,705
Stock based compensation	—	—		—		—		—		—		62		62
Repurchase of common stock	(438,994)	(5)		(16,228)		—		—		(16,233)		—		(16,233)



Distributions to noncontrolling interests	—	—		—		—		—		—		(10,568)		(10,568)
Adjustment to noncontrolling interest in connection with the Merger	—	—		(1,173)		—		—		(1,173)		1,173		—

Reclassification of noncontrolling interests to mezzanine equity	—	—		—		—		—		—		(62)		(62)
Adjustment to value of redeemable noncontrolling interests	—	—		(11,297)		—		—		(11,297)		(3,297)		(14,594)
Distributions declared ($1.20 per share)	—	—		—		(79,196)		—		(79,196)		—		(79,196)
Net (loss) income	—	—		—		(33,771)		—		(33,771)		9,365		(24,406)		(1)
Other comprehensive loss	—	—		—		—		(1,164)		(1,164)		—		(1,164)
BALANCE — September 30, 2022	66,042,869	$	660	$	2,534,020	$	(1,064,270)	$	(3,130)	$	1,467,280	$	172,226	$	1,639,506

___________

(1)For the three months ended September 30, 2023 and 2022, amounts exclude $(78) and $354, respectively, of net (loss) income attributable to redeemable noncontrolling interests. For the nine months ended September 30, 2023 and 2022, amounts exclude $(564) and $323, respectively, of net (loss) income attributable to redeemable noncontrolling interests. See Note 11, Redeemable Noncontrolling Interests, for further discussion.

(2)The amounts are shown net of common stock withheld from issuance to satisfy employee minimum tax withholding requirements in connection with the vesting of restricted stock units. See Note 12, Equity — AHR 2015 Incentive Plan, for further discussion.

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30, 2023 and 2022

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2023		2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(45,928)	$	(24,083)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	138,644		122,716
Other amortization	46,576		21,316
Deferred rent	(2,896)		(5,414)

Stock based compensation	4,235		2,658



Gain on dispositions of real estate investments, net	(29,777)		(2,796)
Impairment of real estate investments	12,510		39,191
Loss (income) from unconsolidated entities	924		(1,680)
Gain on re-measurement of previously held equity interests	(726)		(19,567)
Foreign currency (gain) loss	(351)		8,427


Loss on extinguishments of debt	345		5,038

Change in fair value of derivative financial instruments	(8,200)		(500)


Changes in operating assets and liabilities:
Accounts and other receivables	(19,997)		(8,051)
Other assets	(6,817)		(7,688)
Accounts payable and accrued liabilities	12,375		9,410
Accounts payable due to affiliates	—		(184)
Operating lease liabilities	(27,708)		(15,638)
Security deposits, prepaid rent and other liabilities	(443)		(9,714)
Net cash provided by operating activities	72,766		113,441
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from dispositions of real estate investments	167,861		25,622
Developments and capital expenditures	(74,386)		(51,358)
Acquisitions of real estate investments	(45,382)		(75,125)
Acquisitions of previously held equity interests	(335)		(13,713)



Investments in unconsolidated entities	(12,000)		(4,437)

Issuance of notes receivable	(13,778)		(3,000)
Real estate and other deposits	(1,279)		(528)


Net cash provided by (used in) investing activities	20,701		(122,539)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under mortgage loans payable	85,477		89,950
Payments on mortgage loans payable	(96,596)		(61,954)

Borrowings under the lines of credit and term loan	301,750		1,068,400
Payments on the lines of credit and term loan	(306,484)		(1,002,100)
Borrowings under financing obligation	16,283		—
Payments on financing and other obligations	(34,292)		(12,892)
Deferred financing costs	(3,418)		(5,829)
Debt extinguishment costs	(269)		(3,222)




Distributions paid to common stockholders	(59,685)		(35,391)
Repurchase of common stock	(165)		(16,233)

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AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Nine Months Ended September 30, 2023 and 2022

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2023		2022
Payments to taxing authorities in connection with common stock directly withheld from employees	$	(72)	$	—
Distributions to noncontrolling interests in total equity	(7,371)		(9,821)
Contribution from redeemable noncontrolling interest	—		273
Distributions to redeemable noncontrolling interests	(1,190)		(1,918)
Repurchase of redeemable noncontrolling interests	(15,954)		—
Payment of offering costs	(885)		(666)
Security deposits	(306)		(628)
Net cash (used in) provided by financing activities	(123,177)		7,969
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH	$	(29,710)	$	(1,129)
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH	(40)		(59)
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period	111,906		125,486
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period	$	82,156	$	124,298

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period:
Cash and cash equivalents	$	65,052	$	81,597
Restricted cash	46,854		43,889
Cash, cash equivalents and restricted cash	$	111,906	$	125,486

End of period:
Cash and cash equivalents	$	35,178	$	79,421
Restricted cash	46,978		44,877
Cash, cash equivalents and restricted cash	$	82,156	$	124,298

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	114,002	$	60,328
Income taxes	$	1,014	$	653
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued developments and capital expenditures	$	19,329	$	25,096


Capital expenditures from financing obligations	$	1,301	$	—
Tenant improvement overage	$	2,359	$	605










Issuance of common stock under the DRIP	$	—	$	26,118
Distributions declared but not paid — common stockholders	$	16,559	$	26,417
Distributions declared but not paid — limited partnership units	$	875	$	1,400
Distributions declared but not paid — restricted stock units	$	140	$	54
Accrued offering costs	$	1,685	$	1,796

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)

For the Nine Months Ended September 30, 2023 and 2022

(In thousands) (Unaudited)


	Nine Months Ended September 30,
	2023		2022
The following represents the net increase (decrease) in certain assets and liabilities in connection with our acquisitions and dispositions of investments:
Accounts and other receivables	$	(1,784)	$	2,410
Other assets, net	$	(3,211)	$	(10,967)
Mortgage loan payable, net	$	—	$	33,241

Accounts payable and accrued liabilities	$	(1,460)	$	14,828

Financing obligations	$	12	$	65
Security deposits, prepaid rent and other liabilities	$	(458)	$	15,994

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

For the Three and Nine Months Ended September 30, 2023 and 2022

The use of the words “we,” “us” or “our” refers to American Healthcare REIT, Inc. and its subsidiaries, including American Healthcare REIT Holdings, LP, except where otherwise noted.

1. Organization and Description of Business

Overview and Background

American Healthcare REIT, Inc., a Maryland corporation, is a self-managed real estate investment trust, or REIT, that owns a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, or MOBs, senior housing, skilled nursing facilities, or SNFs, hospitals and other healthcare-related facilities. We also operate healthcare-related facilities utilizing the structure permitted by the REIT Investment Diversification and Empowerment Act of 2007, which is commonly referred to as a “RIDEA” structure (the provisions of the Internal Revenue Code of 1986, as amended, or the Code, authorizing the RIDEA structure were enacted as part of the Housing and Economic Recovery Act of 2008). Our healthcare facilities operated under a RIDEA structure include our senior housing operating properties, or SHOP, and our integrated senior health campuses. We have originated and acquired secured loans and may also originate and acquire other real estate-related investments on an infrequent and opportunistic basis. We generally seek investments that produce current income; however, we have selectively developed, and may continue to selectively develop, healthcare real estate properties. We have elected to be taxed as a REIT for U.S. federal income tax purposes. We believe that we have been organized and operated, and we intend to continue to operate, in conformity with the requirements for qualification and taxation as a REIT under the Code.

On October 1, 2021, Griffin-American Healthcare REIT III, Inc., or GAHR III, merged with and into a wholly owned subsidiary, or Merger Sub, of Griffin-American Healthcare REIT IV, Inc., or GAHR IV, with Merger Sub being the surviving company, which we refer to as the REIT Merger, and our operating partnership, Griffin-American Healthcare REIT IV Holdings, LP, merged with and into Griffin-American Healthcare REIT III Holdings, LP, or the Surviving Partnership, with the Surviving Partnership being the surviving entity, which we refer to as the Partnership Merger and, together with the REIT Merger, the Merger. Following the Merger on October 1, 2021, our company was renamed American Healthcare REIT, Inc. and the Surviving Partnership was renamed American Healthcare REIT Holdings, LP, or our operating partnership.

Also on October 1, 2021, immediately prior to the consummation of the Merger, and pursuant to a contribution and exchange agreement dated June 23, 2021, GAHR III acquired a newly formed entity, American Healthcare Opps Holdings, LLC, or NewCo, which we refer to as the AHI Acquisition. Following the Merger and the AHI Acquisition, our company became self-managed.

Operating Partnership

We conduct substantially all of our operations through our operating partnership and we are the sole general partner of our operating partnership. As of both September 30, 2023 and December 31, 2022, we owned 95.0% of the partnership units, or OP units, in our operating partnership, and the remaining 5.0% limited OP units, were owned by AHI Group Holdings, LLC, which is owned and controlled by Jeffrey T. Hanson, the non-executive Chairman of our board of directors, or our board, Danny Prosky, our Chief Executive Officer and President, and Mathieu B. Streiff, one of our directors; Platform Healthcare Investor TII, LLC; Flaherty Trust; and a wholly owned subsidiary of Griffin Capital Company, LLC, or collectively, the NewCo Sellers. See Note 11, Redeemable Noncontrolling Interests, and Note 12, Equity — Noncontrolling Interests in Total Equity, for a further discussion of the ownership in our operating partnership.

Public Offerings

As of September 30, 2023, after taking into consideration the impact of the Merger and the reverse stock split as discussed in Note 2, Summary of Significant Accounting Policies, we had issued 65,445,557 shares for a total of $2,737,716,000 of common stock since February 26, 2014 in our initial public offerings and our distribution reinvestment plan, or DRIP, offerings (includes historical offering amounts sold by GAHR III and GAHR IV prior to the Merger).

On September 16, 2022, we filed with the United States Securities and Exchange Commission, or the SEC, a Registration Statement on Form S-11 (File No. 333-267464), which was last amended on November 7, 2023 upon filing with the SEC Amendment No. 2 to Registration Statement on Form S-11, with respect to a proposed public offering by us of our shares of common stock in conjunction with a contemplated listing of our common stock on the New York Stock Exchange, or the Proposed Listing. Such registration statement and contemplated listing are not yet effective.

Table of Contents

AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

See Note 12, Equity — Common Stock, and Note 12, Equity — Distribution Reinvestment Plan, for a further discussion of our public offerings.

Our Real Estate Investments Portfolio

We currently operate through six reportable business segments: integrated senior health campuses, MOBs, SHOP, SNFs, senior housing — leased and hospitals. As of September 30, 2023, we owned and/or operated 298 buildings and integrated senior health campuses, including completed development and expansion projects, representing approximately 18,875,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,485,940,000. In addition, as of September 30, 2023, we also owned a real estate-related debt investment purchased for $60,429,000.

COVID-19

Our residents, tenants, operating partners and managers, our industry and the U.S. economy have been adversely affected by the impacts of the COVID-19 pandemic, including its economic impact. While the immediate effects of the COVID-19 pandemic have subsided, the timing and extent of the economic recovery towards pre-pandemic norms is dependent upon many factors, including the emergence and severity of future COVID-19 variants, the effectiveness and frequency of booster vaccinations, the duration and implications of ongoing or future restrictions and safety measures, the availability of ongoing government financial support to our tenants, operating partners and managers and the overall pace of economic recovery, among others. As an owner and operator of healthcare facilities, we expect to continue to be adversely affected by the long-term effects of the COVID-19 pandemic for some period of time; however, it is not possible to predict the full extent of its future impact on us, including our residents, tenants, operating partners and managers, the operations of our properties or the markets in which they are located, or the overall healthcare industry.

We have evaluated such economic impacts of the COVID-19 pandemic on our business thus far and have incorporated information concerning such impacts into our assessments of liquidity, impairment and collectability from tenants and residents as of September 30, 2023. We will continue to monitor such impacts and will adjust our estimates and assumptions based on the best available information.

2. Summary of Significant Accounting Policies

The summary of significant accounting policies presented below is designed to assist in understanding our accompanying condensed consolidated financial statements. Such condensed consolidated financial statements and the accompanying notes thereto are the representations of our management, who are responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America, or GAAP, in all material respects, and have been consistently applied in preparing our accompanying condensed consolidated financial statements.

Basis of Presentation

Our accompanying condensed consolidated financial statements include our accounts and those of our operating partnership, the wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries in which we have control, as well as any VIEs in which we are the primary beneficiary. The portion of equity in any subsidiary that is not wholly owned by us is presented in our accompanying condensed consolidated financial statements as a noncontrolling interest. We evaluate our ability to control an entity, and whether the entity is a VIE and we are the primary beneficiary, by considering substantive terms of the arrangement and identifying which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance.

Our condensed consolidated financial statements have been and are prepared on the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. As of September 30, 2023, the 2019 Trilogy Credit Facility, as defined in Note 8, Lines of Credit and Term Loan, for our consolidated subsidiary of which we indirectly own approximately 74.0%, has an outstanding balance of approximately $367,000,000 and matures in less than 12 months on September 5, 2024. The 2019 Trilogy Credit Facility is secured by 28 of our integrated senior health campuses and is non-recourse to us. We also do not guarantee the 2019 Trilogy Credit Facility for any nonperformance of the principal or interest payments. Management plans to refinance the outstanding balance prior to its maturity. Management also believes that given the current value of these campuses relative to the current outstanding balance of the 2019 Trilogy Credit Facility, it is probable such loan could be refinanced under current lending conditions to extend the maturity date beyond 12 months from the filing date of our accompanying condensed consolidated financial statements.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

On November 15, 2022 we effected a one-for-four reverse stock split of our common stock and a corresponding reverse split of the OP units, or the Reverse Splits. All numbers of common shares and per share data, as well as the OP units, in our accompanying condensed consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the Reverse Splits.

We operate and intend to continue to operate in an umbrella partnership REIT structure in which our operating partnership, or wholly owned subsidiaries of our operating partnership and all non-wholly owned subsidiaries of which we have control, will own substantially all of the interests in properties acquired on our behalf. We are the sole general partner of our operating partnership and as of both September 30, 2023 and December 31, 2022, we owned a 95.0% general partnership interest therein, and the remaining 5.0% limited partnership interest was owned by the NewCo Sellers.

The accounts of our operating partnership are consolidated in our accompanying condensed consolidated financial statements because we are the sole general partner of our operating partnership and have unilateral control over its management and major operating decisions (even if additional limited partners are admitted to our operating partnership). All intercompany accounts and transactions are eliminated in consolidation.

Interim Unaudited Financial Data

Our accompanying condensed consolidated financial statements have been prepared by us in accordance with GAAP in conjunction with the rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to the SEC’s rules and regulations. Accordingly, our accompanying condensed consolidated financial statements do not include all of the information and footnotes required by GAAP for complete financial statements. Our accompanying condensed consolidated financial statements reflect all adjustments which are, in our view, of a normal recurring nature and necessary for a fair presentation of our financial position, results of operations and cash flows for the interim period. Interim results of operations are not necessarily indicative of the results to be expected for the full year; such full year results may be less favorable.

In preparing our accompanying condensed consolidated financial statements, management has evaluated subsequent events through the financial statement issuance date. We believe that although the disclosures contained herein are adequate to prevent the information presented from being misleading, our accompanying condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and the notes thereto included in our 2022 Annual Report on Form 10-K, as filed with the SEC on March 17, 2023.

Use of Estimates

The preparation of our accompanying condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities, at the date of our condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant items subject to such estimates and assumptions include, but are not limited to, the initial and recurring valuation of certain assets acquired and liabilities assumed through property acquisitions, including through business combinations, goodwill and its impairment, revenues and grant income, allowance for credit losses, impairment of long-lived and intangible assets and contingencies. These estimates are made and evaluated on an on-going basis using information that is currently available as well as various other assumptions believed to be reasonable under the circumstances. Actual results could differ from those estimates, perhaps in material adverse ways, and those estimates could be different under different assumptions or conditions.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Revenue Recognition — Resident Fees and Services Revenue

Disaggregation of Resident Fees and Services Revenue

The following tables disaggregate our resident fees and services revenue by line of business, according to whether such revenue is recognized at a point in time or over time (in thousands):


	Three Months Ended September 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Over time	$	305,379	$	42,752	$	348,131	$	265,705	$	38,740	$	304,445
Point in time	66,912		1,163		68,075		63,046		815		63,861
Total resident fees and services	$	372,291	$	43,915	$	416,206	$	328,751	$	39,555	$	368,306


	Nine Months Ended September 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Over time	$	902,836	$	134,965	$	1,037,801	$	729,079	$	113,848	$	842,927
Point in time	194,081		3,576		197,657		168,266		2,312		170,578
Total resident fees and services	$	1,096,917	$	138,541	$	1,235,458	$	897,345	$	116,160	$	1,013,505

The following tables disaggregate our resident fees and services revenue by payor class (in thousands):


	Three Months Ended September 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Private and other payors	$	177,901	$	41,296	$	219,197	$	151,296	$	36,228	$	187,524
Medicare	112,773		974		113,747		112,547		—		112,547
Medicaid	81,617		1,645		83,262		64,908		3,327		68,235
Total resident fees and services	$	372,291	$	43,915	$	416,206	$	328,751	$	39,555	$	368,306


	Nine Months Ended September 30,
	2023						2022
	Integrated Senior Health Campuses		SHOP(1)		Total		Integrated Senior Health Campuses		SHOP(1)		Total
Private and other payors	$	512,733	$	129,674	$	642,407	$	420,518	$	106,897	$	527,415
Medicare	357,238		1,753		358,991		300,744		—		300,744
Medicaid	226,946		7,114		234,060		176,083		9,263		185,346
Total resident fees and services	$	1,096,917	$	138,541	$	1,235,458	$	897,345	$	116,160	$	1,013,505

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

___________

(1)Includes fees for basic housing, as well as fees for assisted living or skilled nursing care. We record revenue when services are rendered at amounts billable to individual residents. Residency agreements are generally for a term of 30 days, with resident fees billed monthly in advance. For patients under reimbursement arrangements with Medicaid, revenue is recorded based on contractually agreed-upon amounts or rates on a per resident, daily basis or as services are rendered.

Accounts Receivable, Net — Resident Fees and Services Revenue

The beginning and ending balances of accounts receivable, net — resident fees and services are as follows (in thousands):


	Private and Other Payors		Medicare		Medicaid		Total
Beginning balance — January 1, 2023	$	55,484	$	45,669	$	20,832	$	121,985
Ending balance — September 30, 2023	58,195		46,385		29,975		134,555
Increase	$	2,711	$	716	$	9,143	$	12,570

Deferred Revenue — Resident Fees and Services Revenue

Deferred revenue is included in security deposits, prepaid rent and other liabilities in our accompanying condensed consolidated balance sheets. The beginning and ending balances of deferred revenue — resident fees and services, almost all of which relates to private and other payors, are as follows (in thousands):


	Total
Beginning balance — January 1, 2023	$	17,901
Ending balance — September 30, 2023	20,893
Increase	$	2,992

Resident and Tenant Receivables and Allowances

Resident receivables, which are related to resident fees and services revenue, are carried net of an allowance for credit losses. An allowance is maintained for estimated losses resulting from the inability of residents and payors to meet the contractual obligations under their lease or service agreements. Substantially all of such allowances are recorded as direct reductions of resident fees and services revenue as contractual adjustments provided to third-party payors or implicit price concessions in our accompanying condensed consolidated statements of operations and comprehensive loss. Our determination of the adequacy of these allowances is based primarily upon evaluations of historical loss experience, the residents’ financial condition, security deposits, cash collection patterns by payor and by state, current economic conditions, future expectations in estimating credit losses and other relevant factors. Tenant receivables, which are related to real estate revenue, and unbilled deferred rent receivables are reduced for amounts where collectability is not probable, which are recognized as direct reductions of real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss.

The following is a summary of our adjustments to allowances for the nine months ended September 30, 2023 and 2022 (in thousands):


	Nine Months Ended September 30,
	2023		2022
Beginning balance	$	14,071	$	12,378
Additional allowances	14,035		16,476
Write-offs	(7,011)		(9,120)
Recoveries collected or adjustments	(6,446)		(5,451)
Ending balance	$	14,649	$	14,283

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Accounts Payable and Accrued Liabilities

As of September 30, 2023 and December 31, 2022, accounts payable and accrued liabilities primarily include insurance reserves of $43,050,000 and $39,893,000, respectively, reimbursement of payroll-related costs to the managers of our SHOP and integrated senior health campuses of $40,650,000 and $38,624,000, respectively, accrued property taxes of $28,619,000 and $24,926,000, respectively, accrued developments and capital expenditures to unaffiliated third parties of $19,329,000 and $30,211,000, respectively, and accrued distributions to common stockholders of $16,559,000 and $26,484,000, respectively.

Recently Issued Accounting Pronouncements

In March 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, 2020-04, Facilitation of the Effects of Reference Rate Reform of Financial Reporting, or ASU 2020-04, which provides optional expedients and exceptions for applying GAAP to contract modifications, hedging relationships and other transactions, subject to meeting certain criteria. ASU 2020-04 applies to the aforementioned transactions that reference the London Inter-bank Offered Rate, or LIBOR, or another reference rate expected to be discontinued because of the reference rate reform. In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848), or ASU 2021-01, which clarifies that certain optional expedients and exceptions for contract modification and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting or contract price alignment that is modified as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform. In December 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, or ASU 2022-06, which extends the period of time entities can utilize the reference rate reform relief guidance under ASU 2020-04 from December 31, 2022 to December 31, 2024. ASU 2020-04, ASU 2021-01 and ASU 2022-06 are effective for fiscal years and interim periods beginning after March 12, 2020 and through the effective date December 31, 2024, as extended by ASU 2022-06. We adopted such accounting pronouncements on January 1, 2023, which has not had a material impact on our consolidated financial statements and disclosures as of September 30, 2023.

In July 2023, the FASB issued ASU 2023-03, Presentation of Financial Statements (Topic 205), Income Statement-Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation-Stock Compensation (Topic 718): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280-General Revision of Regulation S-X: Income or Loss Applicable to Common Stock, or ASU 2023-03. ASU 2023-03 amends the Accounting Standards Codification, or ASC, for SEC updates pursuant to SEC Staff Accounting Bulletin No. 120; SEC Staff Announcement at the March 24, 2022 Emerging Issues Task Force Meeting; and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280 - General Revision of Regulation S-X: Income or Loss Applicable to Common Stock. These updates were immediately effective and did not have a material impact on our consolidated financial statements and disclosures.

In August 2023, the FASB issued ASU 2023-05, Business Combinations — Joint Venture Formations (Subtopic 805- 60): Recognition and Initial Measurement, or ASU 2023-05. ASU 2023-05 applies to the initial formation of a “joint venture” or a “corporate joint venture” as defined in the accounting literature and requires a joint venture to apply a new basis of accounting by initially measuring and recognizing all contributions received upon its formation at fair value. In particular, a joint venture will measure its total assets and liabilities upon formation as the fair value of the joint venture as a whole, which would equal the fair value of all of the joint venture’s outstanding equity interests. The new guidance does not change the definition of a joint venture, the accounting by the investors for their investments in a joint venture (e.g., equity method accounting) or the accounting by a joint venture for contributions received after its formation. ASU 2023-05 will be applied prospectively and is effective for all newly-formed joint venture entities with a formation date on or after January 1, 2025. Early adoption is permitted. We do not expect the adoption of ASU 2023-05 on January 1, 2025 to have a material impact to our consolidated financial statements and disclosures.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

3. Real Estate Investments, Net and Business Combinations

Our real estate investments, net consisted of the following as of September 30, 2023 and December 31, 2022 (in thousands):


	September 30, 2023		December 31, 2022
Building, improvements and construction in process	$	3,588,614	$	3,670,361
Land and improvements	335,517		344,359
Furniture, fixtures and equipment	234,311		221,727
	4,158,442		4,236,447
Less: accumulated depreciation	(727,802)		(654,838)
	$	3,430,640	$	3,581,609

Depreciation expense for the three months ended September 30, 2023 and 2022 was $36,929,000 and $35,327,000, respectively, and for the nine months ended September 30, 2023 and 2022 was $109,967,000 and $104,077,000, respectively.

The following is a summary of our capital expenditures for the three and nine months ended September 30, 2023 (in thousands):


	Three Months Ended September 30, 2023		Nine Months Ended September 30, 2023
Integrated senior health campuses	$	8,806	$	37,865
MOBs	5,235		16,077
SHOP	5,006		8,935
Senior housing — leased	172		417
SNFs	—		—
Hospitals	—		—
Total	$	19,219	$	63,294

Acquisitions of Real Estate Investments and Previously Leased Real Estate Investments

Acquisitions of Real Estate Investments

For the nine months ended September 30, 2023, using cash on hand and debt financing, we, through a majority-owned subsidiary of Trilogy Investors, LLC, or Trilogy, completed the acquisition of one integrated senior health campus. The following is a summary of our property acquisition for the nine months ended September 30, 2023 (dollars in thousands):


Location	Date Acquired	Contract Purchase Price		Mortgage Loan Payable
Louisville, KY	02/15/23	$	11,000	$	7,700

In addition, on June 30, 2023, we, through a majority-owned subsidiary of Trilogy, acquired a land parcel in Ohio for a contract purchase price of $660,000, plus closing costs, for the future expansion of an existing integrated senior health campus.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Acquisitions of Previously Leased Real Estate Investments

For the nine months ended September 30, 2023, using cash and debt financing, we, through a majority-owned subsidiary of Trilogy, acquired three previously leased real estate investments located in Indiana and Ohio. The following is a summary of such acquisitions, which are included in our integrated senior health campuses segment (dollars in thousands):


Location	Date Acquired	Contract Purchase Price		Mortgage Loan Payable		Financing Obligation
Washington, IN	07/13/23	$	14,200	$	12,212	$	—
Tell City, IN	07/13/23	2,400		1,988		—
New Albany, OH	07/13/23	16,283		—		16,283
Total		$	32,883	$	14,200	$	16,283

We accounted for our acquisitions of land and real estate investments completed during the nine months ended September 30, 2023 as asset acquisitions. The following table summarizes the purchase price of such assets acquired at the time of acquisition based on their relative fair values and adjusted for $28,623,000 operating lease right-of-use assets and $30,498,000 operating lease liabilities (in thousands):


	2023 Acquisitions
Building and improvements	$	38,517
Land and improvements	4,917




Total assets acquired	$	43,434

Dispositions of Real Estate Investments

For the nine months ended September 30, 2023, we disposed of six SHOP and 14 MOBs. We recognized a total aggregate net gain on such dispositions of $30,022,000. The following is a summary of such dispositions (dollars in thousands):


Location	Number of Buildings	Type	Date Disposed	Contract Sales Price
Pinellas Park, FL(1)	1	SHOP	02/01/23	$	7,730
Olympia Fields, IL	1	MOB	04/10/23	3,750
Auburn, CA	1	MOB	04/26/23	7,050
Pottsville, PA	1	MOB	04/26/23	6,000
New London, CT	1	MOB	05/24/23	4,200
Stratford, CT	1	MOB	05/24/23	4,800
Westbrook, CT	1	MOB	05/24/23	7,250
Lakeland, FL(1)	1	SHOP	06/01/23	7,080
Winter Haven, FL(1)	1	SHOP	06/01/23	17,500
Acworth, GA	3	MOB	06/14/23	8,775
Lithonia, GA	1	MOB	06/14/23	3,445
Stockbridge, GA	1	MOB	06/14/23	2,430
Lake Placid, FL(1)	1	SHOP	06/30/23	5,620
Brooksville, FL(1)	1	SHOP	06/30/23	7,800
Spring Hill, FL(1)	1	SHOP	08/01/23	7,800
Morristown, NJ	1	MOB	08/09/23	62,210
Evendale, OH	1	MOB	08/29/23	11,900
Longview, TX	1	MOB	09/19/23	1,500
Total	20			$	176,840

___________

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

(1)As of September 30, 2023, we had disposed of all of the facilities that comprised the Central Florida Senior Housing Portfolio. See Note 11, Redeemable Noncontrolling Interests, for information about the ownership of the Central Florida Senior Housing Portfolio.

Impairment of Real Estate Investments

As we continue to evaluate additional non-strategic properties for sale, we determined that two of our SHOP were impaired and recognized an aggregate impairment charge of $12,510,000 for the three and nine months ended September 30, 2023, which reduced the total aggregate carrying value of such assets to $15,977,000. The remaining $3,477,000 carrying value of one such SHOP was then reclassified to properties held for sale, which is included in other assets, net in our accompanying condensed consolidated balance sheet. The fair value of one SHOP was based on its projected sales price from independent third-party letters of intent, which were considered Level 2 measurements within the fair value hierarchy. The fair value of the other SHOP was determined by a third-party appraiser based on the sales comparison approach with the most significant inputs based on a price per unit and price per square foot analysis within the area for similar types of assets. The ranges of these inputs were $190,000 to $200,000 per unit and $250 to $260 per square foot, which were considered Level 3 measurements within the fair value hierarchy.

In 2022, we commenced an initiative to evaluate non-strategic assets for sale. In doing so, we determined that five and eight of our SHOP, respectively, were impaired and recognized an aggregate impairment charge of $21,851,000 and $39,191,000, for the three and nine months ended September 30, 2022, respectively, which reduced the total carrying value of such eight SHOP to $63,154,000. The fair value of one SHOP was determined by the sales price from an executed purchase and sale agreement with a third-party buyer, which was considered a Level 2 measurement within the fair value hierarchy. The fair values of the remaining seven SHOP were based on their projected sales prices, which were considered Level 2 measurements within the fair value hierarchy. We disposed of three such impaired facilities during the fourth quarter of 2022, and we disposed of the remaining five such impaired facilities during the nine months ended September 30, 2023. See the “Dispositions of Real Estate Investments” section above.

Business Combinations

On February 15, 2023, we, through a majority-owned subsidiary of Trilogy, acquired from an unaffiliated third party, a 60.0% controlling interest in a privately held company, Memory Care Partners, LLC, or MCP, that operated integrated senior health campuses located in Kentucky. The contract purchase price for the acquisition of MCP was $900,000, which was acquired using cash on hand. Prior to such acquisition, we owned a 40.0% interest in MCP, which was accounted for as an equity method investment and was included in investments in unconsolidated entities within other assets, net in our accompanying condensed consolidated balance sheet as of December 31, 2022. In connection with the acquisition of the remaining interest in MCP, we now own a 100% controlling interest in MCP. As a result, we re-measured the fair value of our previously held equity interest in MCP and recognized a gain on re-measurement of $726,000 in our accompanying condensed consolidated statements of operations and comprehensive loss.

On January 3, 2022, we, through a majority-owned subsidiary of Trilogy, acquired an integrated senior health campus in Kentucky from an unaffiliated third party. The contract purchase price for such property acquisition was $27,790,000 plus immaterial transaction costs. We acquired such property using cash on hand and placed a mortgage loan payable of $20,800,000 on the property at the time of acquisition.

On April 1, 2022, we, through a majority-owned subsidiary of Trilogy, acquired a 50.0% interest in a pharmaceutical business in Florida from an unaffiliated third party and incurred transaction costs of $938,000. Prior to such pharmaceutical business acquisition, we owned the other 50.0% interest in such business, which was accounted for as an equity method investment. Therefore, through March 31, 2022, our 50.0% interest in the net earnings or losses of such unconsolidated entity was included in income or loss from unconsolidated entities in our accompanying condensed consolidated statements of operations and comprehensive loss.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

On August 1, 2022, we, through a majority-owned subsidiary of Trilogy, acquired a 50.0% controlling interest in a privately held company, RHS Partners, LLC, or RHS, that owns and/or operates 16 integrated senior health campuses located in Indiana, from an unaffiliated third party. The contract purchase price for the acquisition of RHS was $36,661,000 plus immaterial closing costs, which was primarily acquired using cash on hand. Prior to such acquisition, we owned a 50.0% interest in RHS, which was accounted for as an equity method investment and was included in investments in unconsolidated entities within other assets, net in our accompanying condensed consolidated balance sheet as of December 31, 2021. Therefore, through July 31, 2022, our 50.0% equity interest in the net earnings or losses of RHS was included in income or loss from unconsolidated entities in our accompanying condensed consolidated statements of operations and comprehensive loss. In connection with the acquisition of the remaining interest in RHS, we now own a 100% controlling interest in RHS. As a result, we re-measured the fair value of our previously held equity interest in RHS and recognized a gain on re-measurement of $19,567,000 in our accompanying condensed consolidated statements of operations and comprehensive loss.

Based on quantitative and qualitative considerations, such business combinations were not material to us individually or in the aggregate and therefore, pro forma financial information is not provided. The fair values of the assets acquired and liabilities assumed were preliminary estimates at acquisition. Any necessary adjustments are finalized within one year from the date of acquisition. The table below summarizes the acquisition date fair values of the assets acquired and liabilities assumed of our business combinations during the nine months ended September 30, 2023 and 2022 (in thousands):


	2023 Acquisition		2022 Acquisitions
Building and improvements	$	—	$	80,533
Land	—		8,755
In-place leases	—		10,330
Goodwill	3,331		44,990
Furniture, fixtures and equipment	39		1,936
Cash and restricted cash	565		9,723
Certificates of need	—		3,567
Operating lease right-of-use assets	—		153,777
Other assets	66		1,787
Accounts receivable, net	—		19,472
Total assets acquired	4,001		334,870
Security deposits and other liabilities	(812)		(15,994)
Mortgage loans payable	—		(45,300)
Accounts payable and accrued liabilities	(1,676)		(15,060)
Operating lease liabilities	—		(161,121)
Financing obligations	(12)		(65)
Total liabilities assumed	(2,500)		(237,540)
Net assets acquired	$	1,501	$	97,330

4. Debt Security Investment, Net

Our investment in a commercial mortgage-backed debt security, or debt security, bears an interest rate on the stated principal amount thereof equal to 4.24% per annum, the terms of which security provide for monthly interest-only payments. The debt security matures on August 25, 2025 at a stated amount of $93,433,000, resulting in an anticipated yield-to-maturity of 10.0% per annum. The debt security was issued by an unaffiliated mortgage trust and represents a 10.0% beneficial ownership interest in such mortgage trust. The debt security is subordinate to all other interests in the mortgage trust and is not guaranteed by a government-sponsored entity.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

As of September 30, 2023 and December 31, 2022, the carrying amount of the debt security investment was $85,922,000 and $83,000,000, respectively, net of unamortized closing costs of $563,000 and $767,000, respectively. Accretion on the debt security for the three months ended September 30, 2023 and 2022 was $1,060,000 and $960,000, respectively, and for the nine months ended September 30, 2023 and 2022 was $3,126,000 and $2,926,000, respectively, which is recorded as an increase to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss. Amortization expense of closing costs for the three months ended September 30, 2023 and 2022 was $71,000 and $60,000, respectively, and for the nine months ended September 30, 2023 and 2022 was $204,000 and $174,000, respectively, which is recorded as a decrease to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss. We evaluated credit quality indicators such as the agency ratings and the underlying collateral of such investment in order to determine expected future credit loss. We did not record a credit loss for the three and nine months ended September 30, 2023 and 2022.

5. Intangibles

Identified intangible assets, net and identified intangible liabilities, net consisted of the following as of September 30, 2023 and December 31, 2022 (dollars in thousands):


	September 30, 2023		December 31, 2022
Amortized intangible assets:
In-place leases, net of accumulated amortization of $45,275 and $38,930 as of September 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 7.5 years and 7.0 years as of September 30, 2023 and December 31, 2022, respectively)	$	47,766	$	75,580
Above-market leases, net of accumulated amortization of $6,676 and $6,360 as of September 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 7.7 years and 9.0 years as of September 30, 2023 and December 31, 2022, respectively)	16,667		30,194
Customer relationships, net of accumulated amortization of $897 and $785 as of September 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 12.9 years and 13.7 years as of September 30, 2023 and December 31, 2022, respectively)	1,943		2,055

Unamortized intangible assets:
Certificates of need	99,721		97,667
Trade names	30,787		30,787
Total identified intangible assets, net	$	196,884	$	236,283

Amortized intangible liabilities:
Below-market leases, net of accumulated amortization of $3,187 and $2,508 as of September 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 7.9 years and 8.4 years as of September 30, 2023 and December 31, 2022, respectively)	$	9,346	$	10,837
Total identified intangible liabilities, net	$	9,346	$	10,837

Amortization expense on identified intangible assets for the three months ended September 30, 2023 and 2022 was $15,351,000 and $5,534,000, respectively, which included $3,573,000 and $1,113,000, respectively, of amortization recorded as a decrease to real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations and comprehensive loss. Amortization expense on identified intangible assets for the nine months ended September 30, 2023 and 2022 was $40,133,000 and $19,894,000, respectively, which included $13,515,000 and $3,340,000, respectively, of amortization recorded as a decrease to real estate revenue for above-market leases in our accompanying condensed consolidated statements of operations and comprehensive loss. On March 1, 2023, we transitioned our SNFs within Central Wisconsin Senior Care Portfolio to a RIDEA structure, which resulted in a full amortization of $8,073,000 of above-market leases and $885,000 of in-place leases. In addition, we fully amortized $2,756,000 of above-market leases and $5,750,000 of in-place leases during the three months ended September 30, 2023 in connection with the transition of our senior housing — leased facilities within Michigan ALF Portfolio to a RIDEA structure.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Amortization expense on below-market leases for the three months ended September 30, 2023 and 2022 was $470,000 and $413,000, respectively, and for the nine months ended September 30, 2023 and 2022 was $1,282,000 and $1,436,000, respectively, which is recorded as an increase to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss. In connection with the transition of our senior housing — leased facilities within Michigan ALF Portfolio to a RIDEA structure, we fully amortized $112,000 of below-market leases during the three months ended September 30, 2023.

The aggregate weighted average remaining life of the identified intangible assets was 7.7 years as of both September 30, 2023 and December 31, 2022. The aggregate weighted average remaining life of the identified intangible liabilities was 7.9 years and 8.4 years as of September 30, 2023 and December 31, 2022, respectively. As of September 30, 2023, estimated amortization expense on the identified intangible assets and liabilities for the three months ending December 31, 2023 and for each of the next four years ending December 31, and thereafter was as follows (in thousands):


	Amortization Expense
Year	Intangible Assets		Intangible Liabilities
2023	$	5,459	$	3,252
2024	11,613		1,072
2025	8,862		956
2026	7,794		840
2027	7,270		825
Thereafter	25,378		2,401
Total	$	66,376	$	9,346

6. Other Assets, Net

Other assets, net consisted of the following as of September 30, 2023 and December 31, 2022 (dollars in thousands):


	September 30, 2023		December 31, 2022
Deferred rent receivables	$	46,944	$	46,867
Prepaid expenses, deposits, other assets and deferred tax assets, net	33,783		25,866
Inventory — finished goods	21,998		19,775
Investments in unconsolidated entities	20,807		9,580
Lease commissions, net of accumulated amortization of $6,794 and $6,260 as of September 30, 2023 and December 31, 2022, respectively	17,538		19,217

Derivative financial instrument	8,200		—
Deferred financing costs, net of accumulated amortization of $8,013 and $5,704 as of September 30, 2023 and December 31, 2022, respectively	3,120		4,334
Lease inducement, net of accumulated amortization of $2,456 and $2,193 as of September 30, 2023 and December 31, 2022, respectively (with a weighted average remaining life of 7.2 years and 7.9 years as of September 30, 2023 and December 31, 2022, respectively)	2,544		2,807
Total	$	154,934	$	128,446

Deferred financing costs included in other assets, net were related to the 2019 Trilogy Credit Facility and the senior unsecured revolving credit facility portion of the 2022 Credit Facility. See Note 8, Lines of Credit and Term Loan, for further discussion. Amortization expense on lease inducement for both the three and nine months ended September 30, 2023 and 2022 was $87,000 and $263,000, respectively, which is recorded as a decrease to real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

7. Mortgage Loans Payable, Net

Mortgage loans payable, net consisted of the following as of September 30, 2023 and December 31, 2022 (dollars in thousands):


	September 30, 2023		December 31, 2022
Total fixed-rate debt (71 loans and 68 loans as of September 30, 2023 and December 31, 2022, respectively)	$	908,000	$	885,892
Total variable-rate debt (13 loans and 11 loans as of September 30, 2023 and December 31, 2022, respectively)	335,358		368,587
Total fixed- and variable-rate debt	1,243,358		1,254,479
Less: deferred financing costs, net	(8,996)		(8,845)
Add: premium	184		237
Less: discount	(13,308)		(16,024)
Mortgage loans payable, net	$	1,221,238	$	1,229,847

Based on interest rates in effect as of September 30, 2023 and December 31, 2022, effective interest rates ranged from 2.21% to 8.44% per annum and 2.21% to 7.26% per annum, respectively, with a weighted average effective interest rate of 4.64% and 4.29%, respectively. We are required by the terms of certain loan documents to meet certain reporting requirements and covenants, such as net worth ratios, fixed charge coverage ratios and leverage ratios.

The following table reflects the changes in the carrying amount of mortgage loans payable, net for the nine months ended September 30, 2023 and 2022 (in thousands):


	Nine Months Ended September 30,
	2023		2022
Beginning balance	$	1,229,847	$	1,095,594
Additions:
Borrowings under mortgage loans payable	85,477		156,120
Assumption of mortgage loans payable due to acquisition of real estate investments, net	—		45,300
Amortization of deferred financing costs	1,690		1,701
Amortization of discount/premium on mortgage loans payable, net	2,662		1,879
Deductions:
Scheduled principal payments on mortgage loans payable	(59,931)		(53,317)
Early payoff of mortgage loans payable	(9,809)		(78,437)
Payoff of a mortgage loans payable due to disposition of real estate investment	(26,856)		(8,637)
Deferred financing costs	(1,842)		(1,044)
Ending balance	$	1,221,238	$	1,159,159

For the three and nine months ended September 30, 2023, we incurred a loss on the early extinguishment of mortgage loan payable of $345,000, which is recorded as an increase to interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss. Such loss was related to the payoff of a mortgage loan payable due to the disposition of a real estate investment in August 2023. For the three and nine months ended September 30, 2022, we incurred an aggregate loss on the early extinguishment of mortgage loans payable of $628,000 and $1,877,000, respectively, which is recorded as an increase to interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss. Such aggregate loss was primarily related to the payoff of a mortgage loan payable due to the disposition of a real estate investment in September 2022 and the write-off of unamortized loan discount related to eight mortgage loans payable that we refinanced on January 1, 2022 that were due to mature in 2044 through 2052.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

As of September 30, 2023, the principal payments due on our mortgage loans payable for the three months ending December 31, 2023 and for each of the next four years ending December 31, and thereafter were as follows (in thousands):


Year	Amount
2023	$	4,862
2024	310,860
2025	166,186
2026	170,035
2027	35,128
Thereafter	556,287
Total	$	1,243,358

8. Lines of Credit and Term Loan

2022 Credit Facility

On January 19, 2022, we, through our operating partnership, as borrower, and certain of our subsidiaries, or the subsidiary guarantors, collectively as guarantors, entered into an agreement, or the 2022 Credit Agreement, to amend and restate the credit agreement for our existing credit facility with Bank of America, N.A., or Bank of America, KeyBank National Association, Citizens Bank, National Association, and the lenders named therein. The 2022 Credit Agreement provides for a credit facility with an aggregate maximum principal amount up to $1,050,000,000, or the 2022 Credit Facility, which consists of a senior unsecured revolving credit facility in the initial aggregate amount of $500,000,000 and a senior unsecured term loan facility in the initial aggregate amount of $550,000,000. The proceeds of loans made under the 2022 Credit Facility may be used for refinancing existing indebtedness and for general corporate purposes including for working capital, capital expenditures and other corporate purposes not inconsistent with obligations under the 2022 Credit Agreement. We may also obtain up to $25,000,000 in the form of standby letters of credit pursuant to the 2022 Credit Facility. Unless defined herein, all capitalized terms under this “2022 Credit Facility” subsection are defined in the 2022 Credit Agreement.

Under the terms of the 2022 Credit Agreement, the revolving loans mature on January 19, 2026, and may be extended for one 12-month period, subject to the satisfaction of certain conditions, including payment of an extension fee. The term loan matures on January 19, 2027, and may not be extended. The maximum principal amount of the 2022 Credit Facility may be increased by an aggregate incremental amount of $700,000,000, subject to: (i) the terms of the 2022 Credit Agreement; and (ii) at least five business days’ prior written notice to Bank of America.

The 2022 Credit Facility bears interest at varying rates based upon, at our option, (i) Daily SOFR, plus the Applicable Rate for Daily SOFR Rate Loans or (ii) the Term SOFR, plus the Applicable Rate for Term SOFR Rate Loans. If, under the terms of the 2022 Credit Agreement, there is an inability to determine the Daily SOFR or the Term SOFR then the 2022 Credit Facility will bear interest at a rate per annum equal to the Base Rate plus the Applicable Rate for Base Rate Loans. The loans may be repaid in whole or in part without prepayment premium or penalty, subject to certain conditions.

The 2022 Credit Agreement requires us to add additional subsidiaries as guarantors in the event the value of the assets owned by the subsidiary guarantors falls below a certain threshold as set forth in the 2022 Credit Agreement. In the event of default, Bank of America has the right to terminate the commitment of each Lender to make Loans and any obligation of the L/C Issuer to make L/C Credit Extensions under the 2022 Credit Agreement, and to accelerate the payment on any unpaid principal amount of all outstanding loans and interest thereon. On March 1, 2023, we entered into an amendment to the 2022 Credit Agreement, or the First Amendment. The material terms of the First Amendment provided for revisions to certain financial covenants for a limited period of time. Except as modified by the terms of the First Amendment, the material terms of the 2022 Credit Agreement remain in full force and effect.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

As of both September 30, 2023 and December 31, 2022, our aggregate borrowing capacity under the 2022 Credit Facility was $1,050,000,000, excluding the $25,000,000 in standby letters of credit described above. As of September 30, 2023 and December 31, 2022, borrowings outstanding under the 2022 Credit Facility totaled $910,900,000 ($910,076,000, net of deferred financing costs related to the senior unsecured term loan facility portion of the 2022 Credit Facility) and $965,900,000 ($965,060,000, net of deferred financing costs related to the senior unsecured term loan facility portion of the 2022 Credit Facility), respectively, and the weighted average interest rate on such borrowings outstanding was 7.07% and 6.07% per annum, respectively. As of September 30, 2023, we have entered into interest rate swaps to mitigate the risk associated with the entire $550,000,000 outstanding borrowing amount of our term loan. See Note 9, Derivative Financial Instruments, for a further discussion.

In January 2022, in connection with the 2022 Credit Agreement, we incurred an aggregate $3,161,000 loss on the extinguishment of a portion of senior unsecured term loan related to former credit facilities. Such loss on extinguishment of debt is recorded as an increase to interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss, and primarily consisted of lender fees we paid to obtain the 2022 Credit Facility.

2019 Trilogy Credit Facility

We, through Trilogy RER, LLC, are party to an amended and restated loan agreement, or the 2019 Trilogy Credit Agreement, among certain subsidiaries of Trilogy OpCo, LLC, Trilogy RER, LLC, and Trilogy Pro Services, LLC; KeyBank; CIT Bank, N.A.; Regions Bank; KeyBanc Capital Markets, Inc.; Regions Capital Markets; Bank of America; The Huntington National Bank; and a syndicate of other banks, as lenders named therein, with respect to a senior secured revolving credit facility that had an aggregate maximum principal amount of $360,000,000, consisting of: (i) a $325,000,000 secured revolver supported by real estate assets and ancillary business cash flow and (ii) a $35,000,000 accounts receivable revolving credit facility supported by eligible accounts receivable, or the 2019 Trilogy Credit Facility. The proceeds of the 2019 Trilogy Credit Facility may be used for acquisitions, debt repayment and general corporate purposes. The maximum principal amount of the 2019 Trilogy Credit Facility could have been increased by up to $140,000,000, for a total principal amount of $500,000,000, subject to certain conditions.

On December 20, 2022, we entered into an amendment to the 2019 Trilogy Credit Agreement, or the 2019 Trilogy Credit Amendment. The material terms of the 2019 Trilogy Credit Amendment provided for an increase to the secured revolver amount from $325,000,000 to $365,000,000, thereby increasing our aggregate maximum principal amount under the credit facility from $360,000,000 to $400,000,000. In addition, all references to LIBOR were replaced with the Secured Overnight Financing Rate, or SOFR. On March 30, 2023, we further amended the 2019 Trilogy Credit Agreement to update the definition of Implied Debt Service, which is used to calculate the Real Estate Borrowing Base Availability, for interest rate changes and to add an annual interest-only payment calculation option. Except as modified by the terms of the amendments, the material terms of the 2019 Trilogy Credit Agreement remain in full force and effect. Unless defined herein, all capitalized terms under this “2019 Trilogy Credit Facility” subsection are defined in the 2019 Trilogy Credit Amendment.

The 2019 Trilogy Credit Facility was due to mature on September 5, 2023; however, pursuant to the terms of the 2019 Trilogy Credit Agreement, at such time we extended the maturity date for one 12-month period to mature on September 4, 2024, and paid an extension fee of $600,000. At our option, the 2019 Trilogy Credit Facility bears interest at per annum rates equal to (a) SOFR, plus 2.75% for SOFR Rate Loans and (b) for Base Rate Loans, 1.75% plus the highest of: (i) the fluctuating rate per annum of interest in effect for such day as established from time to time by KeyBank as its prime rate, (ii) 0.50% above the Federal Funds Effective Rate and (iii) 1.00% above one-month Adjusted Term SOFR.

As of both September 30, 2023 and December 31, 2022, our aggregate borrowing capacity under the 2019 Trilogy Credit Facility was $400,000,000. As of September 30, 2023 and December 31, 2022, borrowings outstanding under the 2019 Trilogy Credit Facility totaled $367,000,000 and $316,734,000, respectively, and the weighted average interest rate on such borrowings outstanding was 8.18% and 7.17% per annum, respectively.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

9. Derivative Financial Instruments

We use derivative financial instruments to manage interest rate risk associated with our variable-rate term loan pursuant to our 2022 Credit Facility and we record such derivative financial instruments in our accompanying condensed consolidated balance sheets as either an asset or a liability measured at fair value. We did not have any derivative financial instruments as of December 31, 2022. The following table provides information with respect to the derivative financial instruments held by us as of September 30, 2023, which were included in other assets, net in our accompanying condensed consolidated balance sheet (dollars in thousands):


Instrument	Notional Amount		Index	Interest Rate	Effective Date	Maturity Date	Fair Value September 30, 2023
Swap	$	275,000	one month Term SOFR	3.74%	02/01/23	01/19/26	$	6,125
Swap	275,000		one month Term SOFR	4.41%	08/08/23	01/19/26	2,075
	$	550,000					$	8,200

As of September 30, 2023, our derivative financial instruments were not designated as hedges. Derivative financial instruments not designated as hedges are not speculative and are used to manage our exposure to interest rate movements, but do not meet the strict hedge accounting requirements. For the three months ended September 30, 2023 and 2022, we recorded $3,402,000 and $0, respectively, and for the nine months ended September 30, 2023 and 2022, we recorded $8,200,000 and $500,000, respectively, as a decrease to total interest expense in our accompanying condensed consolidated statements of operations and comprehensive loss related to the change in the fair value of our derivative financial instruments.

See Note 13, Fair Value Measurements, for a further discussion of our derivative financial instruments.

10. Commitments and Contingencies

Litigation

We are not presently subject to any material litigation nor, to our knowledge, is any material litigation threatened against us, which if determined unfavorably to us, would have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Environmental Matters

We follow a policy of monitoring our properties for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist at our properties, we are not currently aware of any environmental liability with respect to our properties that would have a material effect on our consolidated financial position, results of operations or cash flows. Further, we are not aware of any material environmental liability or any unasserted claim or assessment with respect to an environmental liability that we believe would require additional disclosure or the recording of a loss contingency.

Other

Our other commitments and contingencies include the usual obligations of real estate owners and operators in the normal course of business, which include calls/puts to sell/acquire properties. In our view, these matters are not expected to have a material adverse effect on our consolidated financial position, results of operations or cash flows.

11. Redeemable Noncontrolling Interests

As of both September 30, 2023 and December 31, 2022, we, through our direct and indirect subsidiaries, owned a 95.0% general partnership interest in our operating partnership and the remaining 5.0% limited partnership interest in our operating partnership was owned by the NewCo Sellers. Some of the limited partnership units outstanding, which account for approximately 1.0% of our total operating partnership units outstanding, have redemption features outside of our control and are accounted for as redeemable noncontrolling interests presented outside of permanent equity in our accompanying condensed consolidated balance sheets.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

As of both September 30, 2023 and December 31, 2022, we, through Trilogy REIT Holdings LLC, or Trilogy REIT Holdings, in which we indirectly hold a 76.0% ownership interest, owned approximately 97.4% and 96.2%, respectively, of the outstanding equity interests of Trilogy. As of September 30, 2023 and December 31, 2022, certain members of Trilogy’s management and certain members of an advisory committee to Trilogy’s board of directors owned approximately 2.6% and 3.8%, respectively, of the outstanding equity interests of Trilogy. We account for such equity interests as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets in accordance with FASB Accounting Standards Codification Topic 480-10-S99-3A given certain features associated with such equity interests. For the nine months ended September 30, 2023, we redeemed a portion of the equity interests owned by current members of Trilogy’s management for an aggregate of $15,954,000. For the nine months ended September 30, 2022, we did not redeem any equity interests of Trilogy.

As of September 30, 2023 and December 31, 2022, we own, through our operating partnership, approximately 98.0% of the joint ventures with an affiliate of Meridian Senior Living, LLC, or Meridian, that own Central Florida Senior Housing Portfolio, Pinnacle Beaumont ALF and Pinnacle Warrenton ALF. The noncontrolling interests held by Meridian have redemption features outside of our control and are accounted for as redeemable noncontrolling interests in our accompanying condensed consolidated balance sheets. See Note 3, Real Estate Investments, Net and Business Combinations — Dispositions of Real Estate Investments, for dispositions within our Central Florida Senior Housing Portfolio in 2023.

We previously owned 90.0% of the joint venture with Avalon Health Care, Inc., or Avalon, that owned Catalina West Haven ALF and Catalina Madera ALF. The noncontrolling interests held by Avalon had redemption features outside of our control and were accounted for as redeemable noncontrolling interests until December 1, 2022, when we exercised our right to purchase the remaining 10.0% of the joint venture with Avalon for a contract purchase price of $295,000. As such, 10.0% of the net earnings of such joint venture were allocated to redeemable noncontrolling interests in our accompanying consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2022.

We record the carrying amount of redeemable noncontrolling interests at the greater of: (i) the initial carrying amount, increased or decreased for the noncontrolling interests’ share of net income or loss and distributions or (ii) the redemption value. The changes in the carrying amount of redeemable noncontrolling interests consisted of the following for the nine months ended September 30, 2023 and 2022 (in thousands):


	Nine Months Ended September 30,
	2023		2022
Beginning balance	$	81,598	$	72,725
Additional redeemable noncontrolling interest	—		273
Reclassification from equity	62		62
Distributions	(1,083)		(2,108)
Repurchase of redeemable noncontrolling interests	(15,954)		—
Adjustment to redemption value	(4,098)		14,594
Net (loss) income attributable to redeemable noncontrolling interests	(564)		323
Ending balance	$	59,961	$	85,869

12. Equity

Preferred Stock

Pursuant to our charter, we are authorized to issue 200,000,000 shares of our preferred stock, par value $0.01 per share. As of both September 30, 2023 and December 31, 2022, no shares of preferred stock were issued and outstanding.

Common Stock

Pursuant to our charter, as amended, we are authorized to issue 1,000,000,000 shares of our common stock, par value $0.01 per share, whereby 200,000,000 shares are classified as Class T common stock and 800,000,000 shares are classified as Class I common stock. As of September 30, 2023, after taking into consideration the Merger and the impact of the reverse stock split as discussed below, we had issued 65,445,557 shares for a total of $2,737,716,000 of common stock since February 26, 2014 in our initial public offerings and DRIP offerings (includes historical offering amounts sold by GAHR III and GAHR IV prior to the Merger). See “Distribution Reinvestment Plan” section below for further discussion.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

On November 15, 2022 we effected a one-for-four reverse split of our common stock and a corresponding reverse split of the partnership units in our operating partnership. As a result of the Reverse Splits, every four shares of our common stock, or four partnership units in our operating partnership, were automatically combined and converted into one issued and outstanding share of our common stock of like class, or one partnership unit of like class, as applicable, rounded to the nearest 1/100th share or unit. The Reverse Splits impacted all classes of common stock and partnership units proportionately and had no impact on any stockholder’s or partner’s ownership percentage. Neither the number of authorized shares nor the par value of the Class T common stock and Class I common stock were ultimately impacted. All numbers of common shares and per share data, as well as partnership units in our operating partnership, in our accompanying condensed consolidated financial statements and related notes have been retroactively adjusted for all periods presented to give effect to the Reverse Splits.

Distribution Reinvestment Plan

Our DRIP allowed our stockholders to elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of our common stock in lieu of receiving cash distributions. However, in connection with the Proposed Listing, on November 14, 2022, our board suspended the DRIP offering beginning with the distributions declared for the quarter ended December 31, 2022. As a result of the suspension of the DRIP offering, unless and until our board reinstates the DRIP offering, stockholders who are current participants in the DRIP were or will be paid distributions in cash.

Our board has been establishing an estimated per share net asset value, or NAV, annually. Shares of our common stock issued pursuant to our DRIP are issued at the current estimated per share NAV until such time as our board determined an updated estimated per share NAV.

The following is a summary of the historical estimated per share NAV:


Approval Date by our Board	Estimated Per Share NAV



03/24/22	$	37.16
03/15/23	$	31.40

For both the three and nine months ended September 30, 2023, there were no distributions reinvested and no shares of our common stock were issued pursuant to our DRIP offerings. For the three and nine months ended September 30, 2022, $3,671,000 and $26,118,000, respectively, in distributions were reinvested and 98,794 and 705,169 shares of our common stock, respectively, were issued pursuant to our DRIP offerings.

Share Repurchase Plan

Our share repurchase plan allowed for repurchases of shares of our common stock by us when certain criteria were met. Share repurchases were made at the sole discretion of our board. On October 4, 2021, as a result of the Merger, our board authorized the partial reinstatement of our share repurchase plan with respect to requests to repurchase shares resulting from the death or qualifying disability of stockholders, effective with respect to qualifying repurchases for the fiscal quarter ending December 31, 2021. All share repurchase requests other than those requests resulting from the death or qualifying disability of stockholders were rejected. On November 14, 2022, our board suspended our share repurchase plan beginning with share repurchase requests for the quarter ending December 31, 2022. All share repurchase requests, including requests resulting from the death or qualifying disability of stockholders, received commencing with the quarter ended December 31, 2022, will not be processed, will be considered canceled in full and will not be considered outstanding repurchase requests.

Funds for the repurchase of shares of our common stock were derived from the cumulative proceeds we received from the sale of shares of our common stock pursuant to our DRIP offerings. Pursuant to our share repurchase plan, the repurchase price with respect to repurchases resulting from the death or qualifying disability of stockholders was equal to the most recently published estimated per share NAV.

We did not repurchase any shares of our common stock pursuant to our share repurchase plan for the three months ended September 30, 2023. For the nine months ended September 30, 2023, pursuant to our share repurchase plan, we repurchased 1,681 shares of common stock for $62,000, at a repurchase price of $37.16 per share. For the three and nine months ended September 30, 2022, pursuant to our share repurchase plan, we repurchased 152,035 and 438,994 shares of common stock, respectively, for an aggregate of $5,650,000 and $16,233,000, respectively, at a repurchase price of $37.16 and $36.98 per share, respectively. Such repurchase requests were submitted prior to the suspension of our share repurchase plan.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

Noncontrolling Interests in Total Equity

As of September 30, 2023 and December 31, 2022, Trilogy REIT Holdings owned approximately 97.4% and 96.2%, respectively, of Trilogy. We are the indirect owner of a 76.0% interest in Trilogy REIT Holdings pursuant to an amended joint venture agreement with an indirect, wholly owned subsidiary of NorthStar Healthcare Income, Inc., or NHI. We serve as the managing member of Trilogy REIT Holdings. As of both September 30, 2023 and December 31, 2022, NHI indirectly owned a 24.0% membership interest in Trilogy REIT Holdings and as such, for the three and nine months ended September 30, 2023 and 2022, 24.0% of the net earnings of Trilogy REIT Holdings were allocated to noncontrolling interests. See Note 19, Subsequent Event, for a further discussion of our ownership in Trilogy REIT Holdings.

In connection with our operation of Trilogy, time-based profit interest units in Trilogy, or the Profit Interests, were issued to Trilogy Management Services, LLC and two independent directors of Trilogy, both unaffiliated third parties that manage or direct the day-to-day operations of Trilogy. The Profit Interests are measured at their grant date fair value and vest in increments of 20.0% on each anniversary of the respective grant date over a five-year period. We amortize the Profit Interests on a straight-line basis over the vesting periods, which are recorded to general and administrative expenses in our accompanying condensed consolidated statements of operations and comprehensive loss. The nonvested Profit Interests are presented as noncontrolling interests in total equity in our accompanying condensed consolidated balance sheets, and are re-classified to redeemable noncontrolling interests upon vesting as they have redemption features outside of our control, similar to the common stock units held by Trilogy’s management. See Note 11, Redeemable Noncontrolling Interests, for further discussion.

There were no canceled, expired or exercised Profit Interests during the three and nine months ended September 30, 2023 and 2022. For the three months ended September 30, 2023 and 2022, we recognized stock compensation expense related to the time-based Profit Interests of $21,000 and $20,000, respectively. For both the nine months ended September 30, 2023 and 2022, we recognized stock compensation expense related to the time-based Profit Interests of $62,000.

One of our consolidated subsidiaries issued non-voting preferred shares of beneficial interests to qualified investors for total proceeds of $125,000. These preferred shares of beneficial interests are entitled to receive cumulative preferential cash dividends at the rate of 12.5% per annum. We classify the value of our subsidiary’s preferred shares of beneficial interests as noncontrolling interests in our accompanying condensed consolidated balance sheets and the dividends of the preferred shares of beneficial interests in net income or loss attributable to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss.

As of both September 30, 2023 and December 31, 2022, we owned an 86.0% interest in a consolidated limited liability company that owns Lakeview IN Medical Plaza. As such, 14.0% of the net earnings of Lakeview IN Medical Plaza were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022.

As of both September 30, 2023 and December 31, 2022, we owned a 90.6% membership interest in a consolidated limited liability company that owns Southlake TX Hospital. As such, 9.4% of the net earnings of Southlake TX Hospital were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022.

As of both September 30, 2023 and December 31, 2022, we owned a 90.0% interest in a joint venture that owns the Louisiana Senior Housing Portfolio. As such, 10.0% of the net earnings of the joint venture were allocated to noncontrolling interests in our accompanying condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2023 and 2022.

As discussed in Note 1, Organization and Description of Business, as of both September 30, 2023 and December 31, 2022, we, through our direct and indirect subsidiaries, own a 95.0% general partnership interest in our operating partnership and the remaining 5.0% limited partnership interest in our operating partnership is owned by the NewCo Sellers. As of both September 30, 2023 and December 31, 2022, 4.0% of our total operating partnership units outstanding is presented in total equity in our accompanying condensed consolidated balance sheets. See Note 11, Redeemable Noncontrolling Interests, for further discussion.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

AHR 2015 Incentive Plan

Pursuant to the Amended and Restated 2015 Incentive Plan, our board (with respect to options and restricted shares of common stock granted to independent directors), or our compensation committee (with respect to any other award), may grant options, restricted shares of common stock, stock purchase rights, stock appreciation rights or other awards to our independent directors, officers, employees and consultants. On June 15, 2023, we adopted the Second Amended and Restated 2015 Incentive Plan, or the AHR Incentive Plan, which, among other things, increased the maximum number of shares of our common stock that may be issued pursuant to such plan from 1,000,000 to 4,000,000 shares, extended the term of such plan to June 15, 2033 and made certain administrative changes to the Amended and Restated 2015 Incentive Plan.

Restricted common stock

Pursuant to the AHR Incentive Plan, through September 30, 2023, we granted an aggregate of 315,459 shares of our restricted common stock, or RSAs, which include restricted Class T common stock and restricted Class I common stock, as defined in the AHR Incentive Plan. RSAs were granted to our independent directors in connection with their initial election or re-election to our board or in consideration of their past services rendered. In addition, certain executive officers and key employees received grants of restricted Class T common stock. RSAs generally have a vesting period ranging from one to four years and are subject to continuous service through the vesting dates.

Restricted stock units

Pursuant to the AHR Incentive Plan, through September 30, 2023, we granted our executive officers an aggregate 70,751 of performance-based restricted stock units, or PBUs, representing the right to receive shares of our Class T common stock upon vesting. We also granted to our executive officers and certain employees 169,529 time-based restricted stock units, or TBUs, representing the right to receive shares of our Class T common stock upon vesting. PBUs and TBUs are collectively referred to as RSUs. RSUs granted to executive officers and employees generally have a vesting period of up to three years and are subject to continuous service through the vesting dates, and any performance conditions, as applicable.

A summary of the status of our nonvested RSAs and RSUs as of September 30, 2023 and December 31, 2022 and the changes for the nine months ended September 30, 2023 is presented below:


	Number of Nonvested RSAs	Weighted Average Grant Date Fair Value - RSAs		Number of Nonvested RSUs		Weighted Average Grant Date Fair Value - RSUs




Balance — December 31, 2022	183,240	$	36.97	48,553		$	37.16
Granted	26,156	$	31.83	191,728		$	31.40
Vested	(22,528)	$	37.52	(6,400)	(1)	$	37.16
Forfeited	—	$	—	(3,452)		$	31.40
Balance — September 30, 2023	186,868	$	36.18	230,429		$	32.45

___________

(1)Amount includes 2,280 shares of common stock that were withheld from issuance to satisfy employee minimum tax withholding requirements associated with the vesting of RSUs during the nine months ended September 30, 2023.

For the three months ended September 30, 2023 and 2022, we recognized $1,558,000 and $914,000, respectively, and for the nine months ended September 30, 2023 and 2022, we recognized $4,173,000 and $2,705,000, respectively, in stock compensation expense related to awards granted pursuant to the AHR Incentive Plan. Such stock compensation expense is based on the grant date fair value for time based awards and for performance-based awards that are probable of vesting, which grant date fair value is equal to the most recently published estimated per share NAV. Stock compensation expense is included in general and administrative expenses in our accompanying condensed consolidated statements of operations and comprehensive loss.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

13. Fair Value Measurements

Assets and Liabilities Reported at Fair Value

The table below presents our assets and liabilities measured at fair value on a recurring basis as of September 30, 2023, aggregated by the level in the fair value hierarchy within which those measurements fall (in thousands):


	Quoted Prices in Active Markets for Identical Assets and Liabilities (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total



Assets:
Derivative financial instruments	$	—	$	8,200	$	—	$	8,200

Total assets at fair value	$	—	$	8,200	$	—	$	8,200

There were no transfers into and out of fair value measurement levels during the nine months ended September 30, 2023 and 2022. We did not have any assets and liabilities measured at fair value on a recurring basis as of December 31, 2022.

Derivative Financial Instruments

We entered into interest rate swaps to manage interest rate risk associated with variable-rate debt. We also previously used interest rate swaps or interest rate caps to manage such interest rate risk. The valuation of these instruments was determined using widely accepted valuation techniques including a discounted cash flow analysis on the expected cash flows of each derivative. Such valuation reflected the contractual terms of the derivatives, including the period to maturity, and used observable market-based inputs, including interest rate curves, as well as option volatility. The fair values of our interest rate swaps were determined by netting the discounted future fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates derived from observable market interest rate curves.

We incorporated credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

Although we determined that the majority of the inputs used to value our derivative financial instruments fell within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with this instrument utilized Level 3 inputs, such as estimates of current credit spreads, to evaluate the likelihood of default by us and our counterparty. However, as of September 30, 2023, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we determined that our derivative valuations in their entirety were classified in Level 2 of the fair value hierarchy. On January 25, 2022, our prior interest rate swap contracts matured and as of December 31, 2022, we did not have any derivative financial instruments.

Financial Instruments Disclosed at Fair Value

Our accompanying condensed consolidated balance sheets include the following financial instruments: debt security investment, cash and cash equivalents, restricted cash, accounts and other receivables, accounts payable and accrued liabilities, mortgage loans payable and borrowings under our lines of credit and term loan.

We consider the carrying values of cash and cash equivalents, restricted cash, accounts and other receivables and accounts payable and accrued liabilities to approximate the fair value for these financial instruments based upon an evaluation of the underlying characteristics, market data and because of the short period of time between origination of the instruments and their expected realization.

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AMERICAN HEALTHCARE REIT, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)

The fair value of our debt security investment is estimated using a discounted cash flow analysis using interest rates available to us for investments with similar terms and maturities. The fair values of our mortgage loans payable and our lines of credit and term loan are estimated using discounted cash flow analyses using borrowing rates available to us for debt instruments with similar terms and maturities. We have determined that the valuations of our debt security investment, mortgage loans payable and lines of credit and term loan are classified in Level 2 within the fair value hierarchy. The carrying amounts and estimated fair values of such financial instruments as of September 30, 2023 and December 31, 2022 were as follows (in thousands):


	September 30, 2023				December 31, 2022
	Carrying Amount(1)		Fair Value		Carrying Amount(1)		Fair Value
Financial Assets:

Debt security investment	$	85,922	$	93,047	$	83,000	$	93,230
Financial Liabilities:
Mortgage loans payable	$	1,221,238	$	1,057,769	$	1,229,847	$	1,091,667
Lines of credit and term loan	$	1,273,956	$	1,278,709	$	1,277,460	$	1,285,205

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(1)Carrying amount is net of any discount/premium and unamortized deferred financing costs.

14. Income Taxes

As a REIT, we generally will not be subject to U.S. federal income tax on taxable income that we distribute to our stockholders. We have elected to treat certain of our consolidated subsidiaries as taxable REIT subsidiaries, or TRS, pursuant to the Code. TRS may participate in services that would otherwise be considered impermissible for REITs and are subject to federal and state income tax at regular corporate tax rates.

Current Income Tax