American Healthcare REIT's $1 Billion ATM Offering: A Strategic Move for Capital Structure Optimization and Shareholder Value Creation

In the ever-evolving landscape of real estate investment trusts (REITs), the ability to balance liquidity, leverage, and shareholder returns is a delicate art. American Healthcare REIT (AHR) has taken a bold step with its $1 billion at-the-market (ATM) offering, a move that underscores its commitment to optimizing its capital structure while navigating the challenges of a high-interest-rate environment. This offering, which replaces its previous ATM program, is not merely a financing exercise—it is a strategic recalibration of how AHR manages its balance sheet, funds growth, and rewards investors.

The ATM Offering: Flexibility in a Dynamic Market

AHR's new ATM program, facilitated by a consortium of top-tier investment banks, allows the company to issue up to $1 billion of common stock at its discretion. This flexibility is critical in a market where REITs face pressure to maintain liquidity while avoiding over-leveraging. The program includes both traditional at-the-market sales and forward sale agreements, enabling AHR to adapt to fluctuating market conditions. For instance, forward sales allow the company to lock in capital at predetermined prices, mitigating the risk of short-term volatility.

The commission structure—capped at 2.0% of gross sales—ensures that AHR retains a significant portion of proceeds, which will be contributed to its Operating Partnership. These funds will be used for debt repayment, capital expenditures, and strategic investments, all of which align with the company's goal of deleveraging and enhancing operational efficiency.

Capital Structure Optimization: A REIT's Balancing Act

AHR's financial metrics paint a picture of a company in transition. As of June 30, 2025, its net debt-to-EBITDA ratio had improved to 3.7x from 4.5x in March, reflecting disciplined debt management. The ATM offering further strengthens this trend by providing a low-cost capital source to refinance higher-yielding debt. For REITs, where leverage is both a tool and a risk, this reduction in debt burden is a key driver of long-term stability.

The company's liquidity position—$733.5 million in cash and undrawn credit facilities—gives it the flexibility to pursue accretive acquisitions or weather economic downturns. By using the ATM to raise capital at attractive prices, AHR avoids the need for costly debt financing, preserving its credit profile and reducing interest rate sensitivity.

Shareholder Value Creation: The Double-Edged Sword of Dilution

While the ATM offering enhances liquidity and reduces debt, it also raises concerns about dilution. AHR has already issued over 5 million shares in 2025 through its previous ATM program, and the new $1 billion offering could further increase the share count. This dilution could pressure earnings per share (EPS), a critical metric for REITs that rely on consistent dividend payouts.

However, AHR's management has demonstrated a commitment to balancing dilution with value creation. The company's normalized funds from operations (NFFO) per share guidance has been raised to $1.64–$1.68, reflecting confidence in its ability to offset dilution through operational growth. Additionally, AHR's 13.9% same-store net operating income (NOI) growth in Q2 2025 highlights its capacity to generate cash flow, which supports both dividends and share repurchases.

Broader REIT Industry Context: A Benchmark for Success

AHR's strategy mirrors broader trends in the REIT sector. In 2024, REITs raised $23.1 billion through ATM programs, with AHR's $1 billion offering placing it among the most aggressive capital raisers. This trend reflects the sector's reliance on equity financing to maintain liquidity in a high-rate environment.

The FTSE Nareit All Equity REIT Index has delivered 14% total returns through November 2024, outperforming private real estate by 17 percentage points. AHR's 146.78% return over the past year, as reported by InvestingPro, underscores its ability to capitalize on these trends. However, the company's success hinges on its ability to deploy capital efficiently—its $300 million investment pipeline and focus on high-quality senior housing assets suggest it is well-positioned to do so.

Investment Implications: A Calculated Bet

For investors, AHR's ATM offering presents both opportunities and risks. On the positive side, the company's strong liquidity, improved leverage ratios, and robust NOI growth make it an attractive play in the senior housing sector, which is poised to benefit from demographic tailwinds. The forward sale agreements, while dilutive, provide a hedge against near-term market volatility, ensuring AHR can fund growth without overreliance on debt.

However, investors must remain cautious. The potential for EPS dilution, combined with macroeconomic risks such as rising healthcare costs and regulatory shifts, could pressure margins. AHR's ability to maintain its dividend—currently $0.25 per share—will be critical to sustaining investor confidence.

Conclusion: A Strategic Masterstroke

American Healthcare REIT's $1 billion ATM offering is more than a capital-raising tool; it is a strategic move to position the company for long-term resilience. By optimizing its capital structure, reducing leverage, and maintaining a disciplined approach to growth, AHR is navigating the challenges of the REIT sector with precision. For investors, the key will be to monitor how effectively the company deploys these funds and whether it can sustain its impressive operational performance. In a market where flexibility and foresight are paramount, AHR's offering sets a benchmark for capital structure optimization in the healthcare REIT space.