American Healthcare REIT, Inc. 10-Q

Item 3. Quantitative and Qualitative Disclosures About Market Risk. Market risk includes risks that arise from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices and other market changes that affect market sensitive instruments. In pursuing our business plan, we expect that the primary market risk to which we will be exposed is interest rate risk. There were no material changes in our market risk exposures, or in the methods we use to manage market risk, from those that were provided for in our 2023 Annual Report on Form 10-K, as filed with the SEC on March 22, 2024. Interest Rate Risk We are exposed to the effects of interest rate changes primarily as a result of long-term debt used to acquire and develop properties and other investments. Our interest rate risk is monitored using a variety of techniques. Our interest rate risk management objectives are to limit the impact of interest rate increases on earnings, prepayment penalties and cash flows and to lower overall borrowing costs while taking into account variable interest rate risk. To achieve our objectives, we may borrow or lend at fixed or variable rates. We have entered into, and may continue to enter into, derivative financial instruments, such as interest rate swaps and interest rate caps, in order to mitigate our interest rate risk on a related financial instrument. We have not elected, and may continue to not elect, to apply hedge accounting treatment to these derivatives; therefore, changes in the fair value of interest rate derivative financial instruments were recorded as a component of interest expense in gain or loss in fair value of derivative financial instruments in our accompanying condensed consolidated statements of operations and comprehensive loss. As of March 31, 2024, our interest rate swaps are recorded in other assets in our accompanying condensed consolidated balance sheet at their aggregate fair value of $5,491,000. We do not enter into derivative transactions for speculative purposes. For information on our interest rate swaps, see Note 9, Derivative Financial Instruments, and Note 13, Fair Value Measurements, to our accompanying condensed consolidated financial statements, for a further discussion on our interest rate swaps. 47 Table of Contents As of March 31, 2024, the table below presents the principal amounts and weighted average interest rates by year of expected maturity to evaluate the expected cash flows and sensitivity to interest rate changes, excluding the effect of our interest rate swaps (dollars in thousands): Expected Maturity Date 2024 2025 2026 2027 2028 Thereafter Total Fair Value Assets Debt security held-to-maturity $ — $ 93,433 $ — $ — $ — $ — $ 93,433 $ 93,323 Weighted average interest rate on maturing fixed-rate debt security — % 4.24 % — % — % — % — % 4.24 % — Liabilities Fixed-rate debt — principal payments $ 43,163 $ 138,275 $ 158,331 $ 55,125 $ 105,126 $ 582,846 $ 1,082,866 $ 916,661 Weighted average interest rate on maturing fixed-rate debt 3.59 % 4.30 % 3.02 % 3.47 % 4.34 % 3.59 % 3.66 % — Variable-rate debt — principal payments $ 134,554 $ 240,000 $ — $ 550,000 $ — $ 7,700 $ 932,254 $ 933,478 Weighted average interest rate on maturing variable-rate debt (based on rates in effect as of March 31, 2024) 8.18 % 8.13 % — % 6.66 % — % 7.57 % 7.27 % — Debt Security Investment, Net As of March 31, 2024, the net carrying value of our debt security investment was $87,984,000. As we expect to hold our debt security investment to maturity and the amounts due under such debt security investment are limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our debt security investment, would have a significant impact on our operations. See Note 13, Fair Value Measurements, to our accompanying condensed consolidated financial statements, for a discussion of the fair value of our investment in a held-to-maturity debt security. The effective interest rate on our debt security investment was 4.24% per annum as of March 31, 2024. Mortgage Loans Payable, Net and Lines of Credit and Term Loan Mortgage loans payable were $1,255,120,000 ($1,228,435,000, net of discount/premium and deferred financing costs) as of March 31, 2024. As of March 31, 2024, we had 90 fixed-rate mortgage loans payable and 5 variable-rate mortgage loans payable with effective interest rates ranging from 2.21% to 8.18% per annum and a weighted average effective interest rate of 4.27%. In addition, as of March 31, 2024, we had $760,000,000 ($754,101,000, net of deferred financing fees) outstanding under our lines of credit and term loan, at a weighted average interest rate of 7.08% per annum. As of March 31, 2024, the weighted average effective interest rate on our outstanding debt, factoring in our interest rate swaps, was 4.90% per annum. An increase in the variable interest rate on our variable-rate mortgage loans payable and lines of credit and term loan constitutes a market risk. As of March 31, 2024, a 0.50% increase in the market rates of interest would have increased our overall annualized interest expense on all of our other variable-rate mortgage loans payable and lines of credit by $925,000, or 0.9% of total annualized interest expense on our mortgage loans payable and lines of credit and term loan. See Note 7, Mortgage Loans Payable, Net and Note 8, Lines of Credit and Term Loan, to our accompanying condensed consolidated financial statements. Other Market Risk In addition to changes in interest rates and foreign currency exchange rates, the value of our future investments is subject to fluctuations based on changes in local and regional economic conditions and changes in the creditworthiness of tenants and residents, which may affect our ability to refinance our debt if necessary. 48 Table of Contents