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Citi Neutral on American Healthcare REIT stock, cautious on execution

EditorEmilio Ghigini
Published 04/03/2024, 08:58
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Monday, On Citi began coverage on American Healthcare REIT, Inc. (NYSE:AHR) with a Neutral rating and a price target set at $14.00. The firm highlighted the real estate investment trust's focus on senior housing, skilled nursing, and medical office properties. The company's approach includes a mix of triple net and RIDEA structures, which is seen as a distinguishing factor in the market.

The coverage notes that approximately 40% of American Healthcare REIT's net operating income (NOI) stems from its relationship with Trilogy Health Services. This partnership is particularly notable due to its RIDEA structure, which is utilized for both senior housing and skilled nursing facilities. This structure allows for the REIT to participate in both the operational upsides and risks of the properties.

Citi analysts pointed out that American Healthcare REIT is poised to benefit from long-term demographic trends, specifically the aging population and the consequent increasing demand for healthcare-related real estate. The company's smaller scale compared to some competitors is also seen as a potential advantage, as it may enable more significant earnings growth through external accretive opportunities.

However, the report also cautions investors about potential risks associated with the company. These risks include the challenges of operational execution, tenant and geographical concentration, and an elevated dividend coverage. These factors could impact the company's performance and are considered in the Neutral rating.

The $14.00 price target reflects the firm's assessment of American Healthcare REIT's current position and prospects within the healthcare real estate sector, considering both the opportunities and challenges it faces.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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