Form 10-Q American Healthcare REIT For: Mar 31

May 16, 2022 3:05 PM EDT

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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 March 31, 2022
or
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)

(949270-9200
(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 classTrading Symbol(s)Name of each exchange on which registered
NoneNoneNone
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 filerAccelerated filer
Non-accelerated filerSmaller 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 May 13, 2022, there were 77,678,544 shares of Class T common stock and 186,233,584 shares of Class I common stock of American Healthcare REIT, Inc. outstanding.


AMERICAN HEALTHCARE REIT, INC.
(A Maryland Corporation)
TABLE OF CONTENTS
 
 Page

2

PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
As of March 31, 2022 and December 31, 2021
(Unaudited)
March 31,
2022
December 31,
2021
ASSETS
Real estate investments, net$3,475,635,000 $3,514,686,000 
Debt security investment, net80,239,000 79,315,000 
Cash and cash equivalents75,115,000 81,597,000 
Restricted cash44,055,000 43,889,000 
Accounts and other receivables, net130,872,000 122,778,000 
Identified intangible assets, net241,140,000 248,871,000 
Goodwill211,724,000 209,898,000 
Operating lease right-of-use assets, net154,619,000 158,157,000 
Other assets, net142,786,000 121,148,000 
Total assets$4,556,185,000 $4,580,339,000 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY
Liabilities:
Mortgage loans payable, net(1)$1,103,006,000 $1,095,594,000 
Lines of credit and term loans, net(1)1,238,147,000 1,226,634,000 
Accounts payable and accrued liabilities(1)170,757,000 187,254,000 
Accounts payable due to affiliates(1) 866,000 
Identified intangible liabilities, net12,077,000 12,715,000 
Financing obligations(1)32,921,000 33,653,000 
Operating lease liabilities(1)142,615,000 145,485,000 
Security deposits, prepaid rent and other liabilities(1)50,574,000 48,567,000 
Total liabilities2,750,097,000 2,750,768,000 
Commitments and contingencies (Note 12)
Redeemable noncontrolling interests (Note 13)75,267,000 72,725,000 
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; 77,504,480 and 77,176,406 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
766,000 763,000 
Class I common stock, $0.01 par value per share; 800,000,000 shares authorized; 186,305,249 and 185,855,625 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
1,863,000 1,859,000 
Additional paid-in capital2,536,811,000 2,531,940,000 
Accumulated deficit(980,613,000)(951,303,000)
Accumulated other comprehensive loss(2,160,000)(1,966,000)
Total stockholders’ equity1,556,667,000 1,581,293,000 
Noncontrolling interests (Note 14)174,154,000 175,553,000 
Total equity1,730,821,000 1,756,846,000 
Total liabilities, redeemable noncontrolling interests and equity$4,556,185,000 $4,580,339,000 
3


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS — (Continued)
As of March 31, 2022 and December 31, 2021
(Unaudited)
___________
(1)Such liabilities of American Healthcare REIT, Inc. represented liabilities of American Healthcare REIT Holdings, LP or its consolidated subsidiaries as of March 31, 2022 and December 31, 2021. 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 9, held by American Healthcare REIT Holdings, LP in the amount of $934,400,000 as of March 31, 2022 and the 2018 Credit Facility and 2019 Credit Facility, each as defined in Note 9, held by American Healthcare REIT Holdings, LP in the amount of $441,900,000 and $480,000,000, respectively, as of December 31, 2021, which were guaranteed by American Healthcare REIT, Inc.
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
Three Months Ended March 31,
20222021
Revenues and grant income:
Resident fees and services$318,974,000 $253,026,000 
Real estate revenue51,943,000 30,023,000 
Grant income5,214,000 8,229,000 
Total revenues and grant income376,131,000 291,278,000 
Expenses:
Property operating expenses287,160,000 245,142,000 
Rental expenses15,287,000 8,055,000 
General and administrative11,119,000 7,257,000 
Business acquisition expenses173,000 1,248,000 
Depreciation and amortization42,311,000 25,723,000 
Total expenses356,050,000 287,425,000 
Other income (expense):
Interest expense:
Interest expense (including amortization of deferred financing costs, debt discount/premium and loss on debt extinguishments)(23,325,000)(20,365,000)
Gain in fair value of derivative financial instruments500,000 1,821,000 
Gain (loss) on dispositions of real estate investments756,000 (335,000)
Income (loss) from unconsolidated entities1,386,000 (1,771,000)
Foreign currency (loss) gain(1,387,000)415,000 
Other income1,260,000 272,000 
Total net other expense(20,810,000)(19,963,000)
Loss before income taxes(729,000)(16,110,000)
Income tax expense(168,000)(163,000)
Net loss
(897,000)(16,273,000)
Net (income) loss attributable to noncontrolling interests(2,059,000)4,426,000 
Net loss attributable to controlling interest$(2,956,000)$(11,847,000)
Net loss per Class T and Class I common share attributable to controlling interest — basic and diluted$(0.01)$(0.07)
Weighted average number of Class T and Class I common shares outstanding — basic and diluted262,516,815 179,627,778 
Net loss
$(897,000)$(16,273,000)
Other comprehensive (loss) income:
Foreign currency translation adjustments(194,000)69,000 
Total other comprehensive (loss) income(194,000)69,000 
Comprehensive loss(1,091,000)(16,204,000)
Comprehensive (income) loss attributable to noncontrolling interests(2,059,000)4,426,000 
Comprehensive loss attributable to controlling interest$(3,150,000)$(11,778,000)
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)


Stockholders’ Equity
 Common Stock  
Number
of
Shares
AmountAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Noncontrolling
Interests
Total Equity
BALANCE — December 31, 2021
263,032,031 $2,622,000 $2,531,940,000 $(951,303,000)$(1,966,000)$1,581,293,000 $175,553,000 $1,756,846,000 
Offering costs — common stock— — (3,000)— — (3,000)— (3,000)
Issuance of common stock under the DRIP1,226,073 12,000 11,292,000 — — 11,304,000 — 11,304,000 
Amortization of nonvested common stock compensation— — 811,000 — — 811,000 — 811,000 
Stock based compensation— — — — — — 21,000 21,000 
Repurchase of common stock(448,375)(5,000)(4,129,000)— — (4,134,000)— (4,134,000)
Distributions to noncontrolling interests— — — — — — (3,515,000)(3,515,000)
Adjustment to noncontrolling interest in connection with the Merger— — (1,173,000)— — (1,173,000)1,173,000  
Reclassification of noncontrolling interests to mezzanine equity— — — — — — (21,000)(21,000)
Adjustment to value of redeemable noncontrolling interests— — (1,927,000)— — (1,927,000)(929,000)(2,856,000)
Distributions declared ($0.10 per share)
— — — (26,354,000)— (26,354,000)— (26,354,000)
Net (loss) income— — — (2,956,000)— (2,956,000)1,872,000 (1,084,000)(1)
Other comprehensive loss— — — — (194,000)(194,000)— (194,000)
BALANCE — March 31, 2022
263,809,729 $2,629,000 $2,536,811,000 $(980,613,000)$(2,160,000)$1,556,667,000 $174,154,000 $1,730,821,000 

Stockholders’ Equity
 Common Stock  
Number
of
Shares
AmountAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Loss
Total
Stockholders’
Equity
Noncontrolling
Interests
Total Equity
BALANCE — December 31, 2020
179,658,367 $1,798,000 $1,730,589,000 $(864,271,000)$(2,008,000)$866,108,000 $168,375,000 $1,034,483,000 
Offering costs — common stock
— — (1,000)— — (1,000)— (1,000)
Amortization of nonvested common stock compensation
— — 27,000 — — 27,000 — 27,000 
Stock based compensation
— — — — — — (14,000)(14,000)
Distributions to noncontrolling interests
— — — — — — (176,000)(176,000)
Adjustment to value of redeemable noncontrolling interests— — (378,000)— — (378,000)(148,000)(526,000)
Net loss— — — (11,847,000)— (11,847,000)(3,942,000)(15,789,000)(1)
Other comprehensive income— — — — 69,000 69,000 — 69,000 
BALANCE — March 31, 2021
179,658,367 $1,798,000 $1,730,237,000 $(876,118,000)$(1,939,000)$853,978,000 $164,095,000 $1,018,073,000 
___________
(1)For the three months ended March 31, 2022 and 2021, amounts exclude $187,000 and $(484,000), respectively, of net income (loss) attributable to redeemable noncontrolling interests. See Note 13, Redeemable Noncontrolling Interests, for a further discussion.
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
Three Months Ended March 31,
20222021
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
$(897,000)$(16,273,000)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization
42,311,000 25,723,000 
Other amortization
6,166,000 5,955,000 
Deferred rent(1,695,000)(1,023,000)
Stock based compensation(32,000)(14,000)
Stock based compensation — nonvested restricted common stock811,000 27,000 
(Gain) loss from unconsolidated entities(1,386,000)1,771,000 
(Gain) loss on dispositions of real estate investments(756,000)335,000 
Foreign currency loss (gain)1,335,000 (416,000)
Loss on extinguishments of debt4,591,000 2,288,000 
Change in fair value of derivative financial instruments(500,000)(1,821,000)
Changes in operating assets and liabilities:
Accounts and other receivables(8,300,000)3,203,000 
Other assets(1,432,000)(4,440,000)
Accounts payable and accrued liabilities(7,878,000)(10,891,000)
Accounts payable due to affiliates(184,000)(5,160,000)
Operating lease liabilities(4,602,000)(4,358,000)
Security deposits, prepaid rent and other liabilities(5,192,000)(161,000)
Net cash provided by (used in) operating activities22,360,000 (5,255,000)
CASH FLOWS FROM INVESTING ACTIVITIES
Developments and capital expenditures(20,856,000)(29,196,000)
Acquisitions of real estate investments (19,878,000)(78,542,000)
Proceeds from dispositions of real estate investments14,074,000 1,248,000 
Investments in unconsolidated entities
(200,000)(325,000)
Real estate and other deposits
(507,000)(26,000)
Net cash used in investing activities(27,367,000)(106,841,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings under mortgage loans payable
22,489,000 104,092,000 
Payments on mortgage loans payable(4,538,000)(3,480,000)
Borrowings under the lines of credit and term loan941,400,000 16,600,000 
Payments on the lines of credit and term loan(928,900,000)(18,000,000)
Deferred financing costs
(4,796,000)(799,000)
Debt extinguishment costs
(2,790,000)(125,000)
Payments on financing obligations(787,000)(8,481,000)
Distributions paid to common stockholders(15,010,000) 
Repurchase of common stock(4,134,000) 
Distributions to noncontrolling interests in total equity(3,511,000)(172,000)
Contribution from redeemable noncontrolling interest173,000  
Distributions to redeemable noncontrolling interests(695,000) 
Security deposits and other(208,000)(30,000)
Net cash (used in) provided by financing activities(1,307,000)89,605,000 
7


AMERICAN HEALTHCARE REIT, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS — (Continued)
For the Three Months Ended March 31, 2022 and 2021
(Unaudited)
Three Months Ended March 31,
20222021
NET CHANGE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH$(6,314,000)$(22,491,000)
EFFECT OF FOREIGN CURRENCY TRANSLATION ON CASH, CASH EQUIVALENTS AND RESTRICTED CASH(2,000)7,000 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — Beginning of period125,486,000 152,190,000 
CASH, CASH EQUIVALENTS AND RESTRICTED CASH — End of period$119,170,000 $129,706,000 
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Beginning of period:
Cash and cash equivalents$81,597,000 $113,212,000 
Restricted cash43,889,000 38,978,000 
Cash, cash equivalents and restricted cash$125,486,000 $152,190,000 
End of period:
Cash and cash equivalents$75,115,000 $89,995,000 
Restricted cash44,055,000 39,711,000 
Cash, cash equivalents and restricted cash$119,170,000 $129,706,000 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest$18,916,000 $16,079,000 
Income taxes$191,000 $169,000 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Accrued developments and capital expenditures$14,750,000 $16,020,000 
Tenant improvement overage$223,000 $41,000 
Issuance of common stock under the DRIP$11,304,000 $ 
Distributions declared but not paid — common stockholders$8,794,000 $ 
Distributions declared but not paid — limited partnership units$467,000 $ 
Capital expenditures from financing obligations$ $136,000 
The following represents the net (decrease) increase in certain assets and liabilities in connection with our acquisitions and dispositions of real estate investments:
Accounts and other receivables$(173,000)$4,000 
Other assets, net$5,023,000 $(190,000)
Mortgage loan payable, net$(12,059,000)$ 
Accounts payable and accrued liabilities$(21,000)$ 
Financing obligations$56,000 $ 
Security deposits$7,746,000 $ 
The accompanying notes are an integral part of these condensed consolidated financial statements.
8


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
For the Three Months Ended March 31, 2022 and 2021

The use of the words “we,” “us” or “our” refers to Griffin-American Healthcare REIT III, Inc., or GAHR III, and its subsidiaries, including Griffin-American Healthcare REIT III Holdings, LP, for periods prior to the Merger, as defined below, and American Healthcare REIT, Inc. (formerly known as Griffin-American Healthcare REIT IV, Inc., or GAHR IV) and its subsidiaries, including American Healthcare REIT Holdings, LP (formerly known as Griffin-American Healthcare REIT III Holdings, LP), for periods following the Merger, except where otherwise noted. Certain historical information of GAHR IV is included for background purposes.
1. Organization and Description of Business
Overview and Background
American Healthcare REIT, Inc., a Maryland corporation, owns a diversified portfolio of clinical healthcare real estate properties, focusing primarily on medical office buildings, skilled nursing facilities, senior housing, 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 (formerly known as senior housing — RIDEA), 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 qualified to be taxed as a real estate investment trust, or REIT, under the Code for federal income tax purposes, and we intend to continue to qualify to be taxed as a REIT.
Merger of Griffin-American Healthcare REIT III, Inc. and Griffin-American Healthcare REIT IV, Inc.
On October 1, 2021, pursuant to an Agreement and Plan of Merger dated June 23, 2021, or the Merger Agreement, GAHR III merged with and into Continental Merger Sub, LLC, a Maryland limited liability company and newly formed wholly owned subsidiary of GAHR IV, or Merger Sub, with Merger Sub being the surviving company, or the REIT Merger. On October 1, 2021, also pursuant to the Merger Agreement, Griffin-American Healthcare REIT IV Holdings, LP, a Delaware limited partnership and subsidiary and operating partnership of GAHR IV, or GAHR IV Operating Partnership, merged with and into Griffin-American Healthcare REIT III Holdings, LP, a Delaware limited partnership, or our operating partnership, with our operating partnership being the surviving entity, or the Partnership Merger. We collectively refer to the REIT Merger and the Partnership Merger as the Merger. Following the Merger on October 1, 2021, our company, or the Combined Company, was renamed American Healthcare REIT, Inc. and our operating partnership, also referred to as the surviving partnership, was renamed American Healthcare REIT Holdings, LP. The REIT Merger qualified as a reorganization under, and within the meaning of, Section 368(a) of the Code. As a result of and at the effective time of the Merger, the separate corporate existence of GAHR III and GAHR IV Operating Partnership ceased.
At the effective time of the REIT Merger, each issued and outstanding share of GAHR III’s common stock, $0.01 par value per share, converted into the right to receive 0.9266 shares of GAHR IV’s Class I common stock, $0.01 par value per share. At the effective time of the Partnership Merger, (i) each unit of limited partnership interest in our operating partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive 0.9266 of a Partnership Class I Unit, as defined in the agreement of limited partnership, as amended, of the surviving partnership and (ii) each unit of limited partnership interest in GAHR IV Operating Partnership outstanding as of immediately prior to the effective time of the Partnership Merger was converted automatically into the right to receive one unit of limited partnership interest of the surviving partnership of like class.
AHI Acquisition
Also on October 1, 2021, immediately prior to the consummation of the Merger, GAHR III acquired a newly formed entity, American Healthcare Opps Holdings, LLC, or NewCo, which we refer to as the AHI Acquisition, pursuant to a contribution and exchange agreement dated June 23, 2021, or the Contribution Agreement, between GAHR III; our operating partnership; American Healthcare Investors, LLC, or AHI; Griffin Capital Company, LLC, or Griffin Capital; Platform Healthcare Investor T-II, LLC; Flaherty Trust; and Jeffrey T. Hanson, our former Chief Executive Officer and current Executive Chairman of the Board of Directors, Danny Prosky, our former Chief Operating Officer and current Chief Executive Officer and President, and Mathieu B. Streiff, our former Executive Vice President, General Counsel and current Chief
9


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
Operating Officer, or collectively, the AHI Principals. NewCo owned substantially all of the business and operations of AHI, as well as all of the equity interests in (i) Griffin-American Healthcare REIT IV Advisor, LLC, or GAHR IV Advisor, a subsidiary of AHI that served as the external advisor of GAHR IV, and (ii) Griffin-American Healthcare REIT III Advisor, LLC, or GAHR III Advisor, also referred to as our former advisor, a subsidiary of AHI that served as the external advisor of GAHR III. See “Operating Partnership and Former Advisor” below for a further discussion.
Pursuant to the Contribution Agreement, AHI contributed substantially all of its business and operations to the surviving partnership, including its interest in GAHR III Advisor and GAHR IV Advisor, and Griffin Capital contributed its then-current ownership interest in GAHR III Advisor and GAHR IV Advisor to the surviving partnership. In exchange for these contributions, the surviving partnership issued limited partnership units, or surviving partnership OP units. Subject to working capital and other customary adjustments, the total approximate value of these surviving partnership OP units at the time of consummation of the transactions contemplated by the Contribution Agreement was approximately $131,674,000, with a reference value for purposes thereof of $8.71 per unit, such that the surviving partnership issued 15,117,529 surviving partnership OP units as consideration, or the Closing Date Consideration. Following the consummation of the Merger and the AHI Acquisition, the Combined Company became self-managed. As of March 31, 2022 and December 31, 2021, such surviving partnership OP units are owned by AHI Group Holdings, LLC, or AHI Group Holdings, which is owned and controlled by the AHI Principals, Platform Healthcare Investor T-II, LLC, Flaherty Trust and a wholly owned subsidiary of Griffin Capital, or collectively, the NewCo Sellers.
The AHI Acquisition was treated as a business combination for accounting purposes, with GAHR III as both the legal and accounting acquiror of NewCo. While GAHR IV was the legal acquiror of GAHR III in the REIT Merger, GAHR III was determined to be the accounting acquiror in the REIT Merger in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations, after considering the relative share ownership and the composition of the governing body of the Combined Company. Thus, the financial information set forth herein subsequent to the consummation of the Merger and the AHI Acquisition reflects results of the Combined Company, and the financial information set forth herein prior to the Merger and the AHI Acquisition reflects GAHR III’s results. For this reason, period to period comparisons may not be meaningful.
Operating Partnership and Former Advisor
We conduct substantially all of our operations through our operating partnership. Through September 30, 2021, we were externally advised by our former advisor pursuant to an advisory agreement, as amended, or the Advisory Agreement, between us and our former advisor. Our former advisor used its best efforts, subject to the oversight and review of our board of directors, or our board, to, among other things, provide asset management, property management, acquisition, disposition and other advisory services on our behalf consistent with our investment policies and objectives. Following the Merger and the AHI Acquisition, we became self-managed and are no longer externally advised. As a result, any fees that would have otherwise been payable to our former advisor are no longer being paid. Also, on October 1, 2021 and in connection with the AHI Acquisition, our operating partnership redeemed all 22,222 shares of our common stock owned by our former advisor and the 20,833 shares of our Class T common stock owned by GAHR IV Advisor in GAHR IV.
Prior to the Merger and the AHI Acquisition, our former advisor was 75.0% owned and managed by wholly owned subsidiaries of AHI, and 25.0% owned by a wholly owned subsidiary of Griffin Capital, or collectively, our former co-sponsors. Prior to the AHI Acquisition, AHI was 47.1% owned by AHI Group Holdings, 45.1% indirectly owned by Digital Bridge Group, Inc. (NYSE: DBRG), or Digital Bridge, and 7.8% owned by James F. Flaherty III. We were not affiliated with Griffin Capital, Digital Bridge or Mr. Flaherty; however, we were affiliated with our former advisor, AHI and AHI Group Holdings. Please see the “Merger of Griffin-American Healthcare REIT III, Inc. and Griffin-American Healthcare REIT IV, Inc.” and “AHI Acquisition” sections above for a further discussion of our operations effective October 1, 2021. See Note 13, Redeemable Noncontrolling Interests, and Note 14, Equity — Noncontrolling Interests in Total Equity, for a further discussion of the ownership in our operating partnership.
Public Offering
Prior to the Merger, we raised $1,842,618,000 through a best efforts initial public offering that commenced on February 26, 2014, or the GAHR III initial offering, and issued 184,930,598 shares of our common stock. In addition, during the GAHR III initial offering, we issued 1,948,563 shares of our common stock pursuant to our initial distribution reinvestment plan, or the Initial DRIP, for a total of $18,511,000 in distributions reinvested. Following the deregistration of the GAHR III initial offering on April 22, 2015, we continued issuing shares of our common stock pursuant to subsequent distribution reinvestment plan offerings.
10


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
See Note 14, Equity — Common Stock, and Note 14, 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: medical office buildings, integrated senior health campuses, skilled nursing facilities, SHOP, senior housing and hospitals. As of March 31, 2022, we owned and/or operated 182 properties, comprising 191 buildings, and 122 integrated senior health campuses including completed development projects, or approximately 19,461,000 square feet of gross leasable area, or GLA, for an aggregate contract purchase price of $4,299,872,000, including the fair value of the properties acquired in the Merger. In addition, as of March 31, 2022, 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 continue to be disrupted by the COVID-19 pandemic and related supply chain disruptions and labor shortages. The timing and extent of the economic recovery from the COVID-19 pandemic is dependent upon many factors, including the rate of vaccination, the emergence and severity of COVID-19 variants, the continued effectiveness of the vaccines against those variants, the frequency of booster vaccinations and the duration and implications of continued restrictions and safety measures. As the COVID-19 pandemic is still impacting the healthcare system to a certain extent, it continues to present challenges for us as an owner and operator of healthcare facilities, making it difficult to ascertain the long-term impact the COVID-19 pandemic will have on real estate markets in which we own and/or operate properties and our portfolio of investments.
We have evaluated the impacts of the COVID-19 pandemic on our business thus far and incorporated information concerning such impacts into our assessments of liquidity, impairment and collectability from tenants and residents as of March 31, 2022. 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.
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 March 31, 2022 and December 31, 2021, we owned an approximately 95.0% and 94.9% general partnership interest therein, respectively, and the remaining 5.0% and 5.1%, respectively, was owned by the NewCo Sellers. Prior to the Merger on October 1, 2021, we owned greater than a 99.99% general partnership interest in our operating partnership and our former advisor was a limited partner that owned less than a 0.01% noncontrolling limited partnership interest in our operating partnership. On October 1, 2021, in connection with the AHI Acquisition, we repurchased our former advisor’s 222 limited partnership units in our operating partnership.
11


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
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 United States Securities and Exchange Commission, or 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 2021 Annual Report on Form 10-K, as filed with the SEC on March 25, 2022.
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.
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:
Three Months Ended March 31,
20222021
Integrated
Senior Health
Campuses
SHOP(1)TotalIntegrated
Senior Health
Campuses
SHOP(1)Total
Over time$230,534,000 $37,216,000 $267,750,000 $188,258,000 $19,459,000 $207,717,000 
Point in time50,478,000 746,000 51,224,000 44,968,000 341,000 45,309,000 
Total resident fees and services
$281,012,000 $37,962,000 $318,974,000 $233,226,000 $19,800,000 $253,026,000 
12


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
The following tables disaggregate our resident fees and services revenue by payor class:
Three Months Ended March 31,
20222021
Integrated
Senior Health
Campuses
SHOP(1)TotalIntegrated
Senior Health
Campuses
SHOP(1)Total
Private and other payors
$131,803,000 $35,037,000 $166,840,000 $106,110,000 $19,419,000 $125,529,000 
Medicare
94,517,000  94,517,000 84,283,000  84,283,000 
Medicaid
54,692,000 2,925,000 57,617,000 42,833,000 381,000 43,214,000 
Total resident fees and services
$281,012,000 $37,962,000 $318,974,000 $233,226,000 $19,800,000 $253,026,000 
___________
(1)Includes fees for basic housing and assisted living 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:
Private
and
Other Payors
MedicareMedicaidTotal
Beginning balanceJanuary 1, 2022
$42,056,000 $35,953,000 $16,922,000 $94,931,000 
Ending balanceMarch 31, 2022
44,032,000 39,469,000 18,448,000 101,949,000 
Increase$1,976,000 $3,516,000 $1,526,000 $7,018,000 
Deferred Revenue Resident Fees and Services Revenue
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:
Total
Beginning balanceJanuary 1, 2022
$14,673,000 
Ending balanceMarch 31, 2022
16,087,000 
Increase$1,414,000 
In addition to the deferred revenue above, as of March 31, 2022, we had approximately $2,069,000 remaining in Medicare advance payments that were received during 2020 through an expanded program of the Centers for Medicare & Medicaid Services. Such amounts were deferred and included in security deposits, prepaid rent and other liabilities in our accompanying condensed consolidated balance sheets, and are applied to future Medicare claims. Our recoupment period commenced in the second quarter of 2021, and for the three months ended March 31, 2022, we recognized $10,899,000 of resident fees and services revenue pertaining to such Medicare advance payments.
Tenant and Resident Receivables and Allowances
Resident receivables, which are related to resident fees and services, 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 uncollectible amounts, which are recognized as direct reductions of real estate revenue in our accompanying condensed consolidated statements of operations and comprehensive loss.
13


AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
As of March 31, 2022 and December 31, 2021, we had $13,872,000 and $12,378,000, respectively, in allowances, which were determined necessary to reduce receivables by our expected future credit losses. For the three months ended March 31, 2022 and 2021, we increased allowances by $5,223,000 and $2,478,000, respectively, and reduced allowances for collections or adjustments by $2,099,000 and $1,505,000, respectively. For the three months ended March 31, 2022 and 2021, $1,630,000 and $1,606,000, respectively, of our receivables were written off against the related allowances.
Accounts Payable and Accrued Liabilities
As of March 31, 2022 and December 31, 2021, accounts payable and accrued liabilities primarily include reimbursement of payroll-related costs to the managers of our SHOP and integrated senior health campuses of $28,456,000 and $31,101,000, respectively, insurance reserves of $35,294,000 and $36,440,000, respectively, accrued property taxes of $21,654,000 and $22,102,000, respectively, accrued developments and capital expenditures to unaffiliated third parties of $14,750,000 and $22,852,000, respectively, and accrued distributions to common stockholders of $8,794,000 and $8,768,000, respectively.
Statement of Cash Flows
For the three months ended March 31, 2021, amounts totaling $101,734,000 have been removed from borrowings under mortgage loans payable and early payoff of mortgage loans payable to properly reflect only actual cash flows resulting from borrowings and payments of mortgage loans compared to amounts previously presented. There was no net change in previously disclosed net cash provided by financing activities.
3. Real Estate Investments, Net
Our real estate investments, net consisted of the following as of March 31, 2022 and December 31, 2021:
 
March 31,
2022
December 31,
2021
Building, improvements and construction in process$3,495,979,000 $3,505,786,000 
Land and improvements332,486,000 334,562,000 
Furniture, fixtures and equipment202,965,000 198,224,000 
4,031,430,000 4,038,572,000 
Less: accumulated depreciation(555,795,000)(523,886,000)
$3,475,635,000 $3,514,686,000 
Depreciation expense for the three months ended March 31, 2022 and 2021 was $34,422,000 and $24,190,000, respectively. For the three months ended March 31, 2022, we incurred capital expenditures of $8,248,000 for our integrated senior health campuses, $2,434,000 for our medical office buildings and $1,454,000 for our SHOP. We did not incur any capital expenditures for our skilled nursing facilities, senior housing facilities or hospitals for the three months ended March 31, 2022.
Acquisition of Real Estate Investment
For the three months ended March 31, 2022, we, through a majority-owned subsidiary of Trilogy Investors, LLC, or Trilogy, of which we owned 72.9% at the time of acquisition, acquired an integrated senior health campus located in Kentucky. See Note 4, Business Combination, for a further discussion. The following is a summary of such property acquisition for the three months ended March 31, 2022:
LocationDate
Acquired
Contract
Purchase Price
Mortgage
Loan Payable(1)
Louisville, KY01/03/22$27,790,000 $20,800,000 
___________
(1)Represents the principal balance of the mortgage loan payable placed on the campus at the time of acquisition.
Sale of Controlling Interests in Real Estate Investments
On February 8, 2022, we sold approximately 77.0% ownership interests in several real estate assets for development within our integrated senior health campuses segment for an aggregate sales price of $19,622,000 and a gain on sale of $756,000. We retained approximately 23.0% ownership interests in such real estate development assets, which interests are
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
accounted for as investments in unconsolidated entities within other assets, net in our accompanying condensed consolidated balance sheet as of March 31, 2022. From February 8, 2022 through March 31, 2022, 23.0% interest in the net earnings or losses of such unconsolidated entities were included in net loss from unconsolidated entities in our accompanying condensed consolidated statements of operations and comprehensive loss.
4. Business Combination
For the three months ended March 31, 2022, using cash on hand and debt financing, we completed the acquisition of an integrated senior healthcare campus, which was accounted for as a business combination. The contract purchase price for such property acquisition was $27,790,000 plus immaterial transaction costs. See Note 3, Real Estate Investments, Net, for a further discussion. Based on quantitative and qualitative considerations, such business combination was not material to us and, therefore, pro forma financial information is not provided. We did not complete any property acquisitions accounted for as business combinations for the three months ended March 31, 2021.
The fair values of the assets acquired and liabilities assumed during 2022 were preliminary estimates. Any necessary adjustments will be finalized within one year from the date of acquisition. The following table summarizes the acquisition date fair values of the assets acquired and liabilities assumed of our 2022 property acquisition.
2022
Acquisition
Building and improvements$17,235,000 
Land3,060,000 
In-place leases3,420,000 
Goodwill1,827,000 
Furniture, fixtures and equipment1,558,000 
Certificates of need690,000 
Cash588,000 
Total assets acquired28,378,000 
Security deposits(7,747,000)
Accounts payable and accrued liabilities(109,000)
Financing obligations(56,000)
Total liabilities assumed(7,912,000)
Net assets acquired$20,466,000 
5. Debt Security Investment, Net
On October 15, 2015, we acquired a commercial mortgage-backed debt security, or debt security, from an unaffiliated third party. The 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.
As of March 31, 2022 and December 31, 2021, the carrying amount of the debt security investment was $80,239,000 and $79,315,000, respectively, net of unamortized closing costs of $948,000 and $1,004,000, respectively. Accretion on the debt security for the three months ended March 31, 2022 and 2021 was $980,000 and $881,000, 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 March 31, 2022 and 2021 was $56,000 and $47,000, 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. No credit loss was recorded for the three months ended March 31, 2022 and 2021.
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AMERICAN HEALTHCARE REIT, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) — (Continued)
6. Identified Intangible Assets, Net
Identified intangible assets, net consisted of the following as of March 31, 2022 and December 31, 2021:
March 31,
2022
December 31,
2021
Intangible assets subject to amortization:
In-place leases, net of accumulated amortization of $28,703,000 and $28,120,000 as of March 31, 2022 and December 31, 2021, respectively (with a weighted average remaining life of 8.1 years and 8.2 years as of March 31, 2022 and December 31, 2021, respectively)
$77,597,000 $81,538,000 
Above-market leases, net of accumulated amortization of $3,193,000 and $2,082,000 as of March 31, 2022 and December 31, 2021, respectively (with a weighted average remaining life of 9.6 years and 9.7 years as of March 31, 2022 and December 31, 2021, respectively)
33,962,000 35,106,000 
Customer relationships, net of accumulated amortization of $