American Healthcare REIT, Inc. (AHR) June 2, 2026 Conference Transcript

Hello, everyone. My name is Joe Dickstein, one of the REIT analysts here at Jeffries, and I'm happy to introduce American Healthcare REIT and its chairman and interim CEO, Jeff Hansen.

Thanks, Joe. Good morning, everybody. Great to be here with you. I'm joined today by Gabe Wilhite, COO, Brian Pay, our chief financial officer, and in the front row to my left, of course, is Alan Peterson, which many of you know, is our head of IR. So for those of you who may be less familiar with the company, AHR is a dedicated health care REIT that's focused on allocating capital to managed care through our two Rodea segments. So those are traditional shop and Trilogy, otherwise known as integrated senior health campuses. Those are our two verticals, and Rodea as a whole accounts for roughly 80% of the company's total NOI today and growing very rapidly. In terms of growth and performance, I got to tell you, I and the rest of the board is extremely proud of the broader management team and what they've actually been able to accomplish in the space in relative short order. In terms of internal growth, we're leading the industry in many measurable metrics that is really affording a highly attractive cost of capital that in turn is driving significant and robust external growth at scale. And in terms of one of the core metrics that we're the most proud of, it's NFFO growth per share. Over the last nine quarters, nine consecutive quarters, quarter in and quarter out, we posted 20% or more in terms of per share growth. And we've done that while materially deleveraging the balance sheet to the current three times net debt to EBITDA. And by the way, for broader context, if we applied all the dollars available today in our current forwards from both ATM and a follow-on that we executed, a week and a half ago for $800 million through B of A and use that towards debt extinguishment, we'd be sitting here with zero debt on the balance sheet today. So as many of our shareholders are well aware of and I think appreciate, we're committed as a company to running an investment-grade profile balance sheet. And the beauty is we're driving this kind of growth while deleveraging when we're actually right at the front end or early innings of the growth and the demand cycle in the sector. And the last thing in terms of opening remarks that i would mention is i've never seen anything like this before i've been in the commercial real estate investment industry for over three decades running all major product types health care being the core of course the entire 30 plus years i've never seen these types of fundamentals in any other commercial real estate asset class that health care and the setup that in that it enjoys today with the veritable demographic tsunami driving insatiable demand on the demand side meeting very low, radically low and muted supply that's really creating a multi-year setup for continued outsized growth. And I can tell you as an organization and as a management team, we're just grateful to be ideally positioned into such a strong setup. So happy to... Thanks, Jeff.

Yeah, I think it might make sense to start here on capital allocation, just given how significant investments are to the potential accretion to earnings and just further growth in the portfolio. The investment pipeline has grown to $650 million as of last quarter. So maybe we could just touch on how some of these prospective shop acquisitions compare to the in-place portfolio.

I'm happy to take that one, Joe. So we just, we probably should have, should clarify, we increased our awarded pipeline in a business update that we're talking about at this conference. So we ended the quarter with $650 million of awarded deals. We're now well over a billion dollars in awarded deals, which was the catalyst for doing a capital raise a week and a half ago, like Jeff mentioned. The thing that we're most focused on today as a company is shop, growing shop with our existing operators and finding new markets with operators that we've vetted. The thing maybe that's a little bit different about AHR is we view the operator as the single most important part of a senior housing investment decision. If you told me that I could pick the best market or the best physical plant or the best operator, I would choose the best operator 100 out of 100 times to run my senior housing investment. What we're doing now in the over a billion dollars of pipeline is newer vintage, bigger buildings over a hundred units typically and with operators that we have an established relationship with to de-risk the entire investment proposition got it yeah the quarter of a billion that we've already closed year to date in addition to the billion that we've got awarded in the pipeline a hundred percent of that is expansion with existing operators and then I guess in that pipeline you know are there larger portfolios being assumed in that in that figure or is it more one-off deals? The majority of it is smaller deals. So one of the benefits of being a smaller company like AHR is we don't have to do every deal and we don't have to do multi-billion dollar deals in order to grow the company externally in a meaningful way. We can take a rifle shot approach to it. So a good example is last year we identified Great lakes management as a company that we wanted to partner with we came into the partnership with them owning one asset in st paul over the next 12 months we added incrementally one by one one-off deals to get to seven assets and have a regional concentration which is kind of the core of what we focus on having regional density where teams can drive culture recruit from other buildings leverage talent in a way that is is meaningful um the there are times when we'll look at larger portfolios um and larger i mean under a billion dollars but in the several hundreds of millions of dollars the only time that makes sense for us is it it's not where there's a lot of different operators and the the portfolio is spread all over and and you're really doing it because you have a great cost of capital you really like pricing that's not the reason the reason is you've identified an operator that has significant amount of assets in that portfolio or the portfolio overlaps with the market you want to be in and there's a strategic reason that you're the winning bidder and something that's competitively bid in that way the good news is we don't have to bid on every one of those portfolios that come out but when we see one that overlaps perfectly with what we want to execute on we do have the cost of capital to go out and do it creatively year one with a growth profile that we really like and an operator that we really want to be long-term partners with right and I guess just thinking on the development side of the equation you know the team has spoken in the past to I guess limiting the amount of truly developments to avoid stretching the team too thin but maybe we can touch on the logic behind that just seeing as how the trilogy team continues to outperform expectations quarter after quarter yeah it's a great question so trilogy is our single largest operator they run about 150 buildings for us the the model is it's unique it's how you would do senior housing if you were starting from scratch and did not care about where reimbursements came from and only cared about what's best for the resident in your building that's how you would design exactly what trilogy's campus is which is full continuum of care il al memory care and skilled nursing under one roof and not in a way like a typical ccrc that's mainly independent living with a with a hint of skilled nursing and assisted living to take care of people should they need it this is a core part of the business where you're admitting people into a post-acute stay from the hospital that's uh not uncommonly their first experience with trilogy is they had a fall they had a hip replacement they had them stay in a hospital that required them to be discharged into a post-acute care and they see you know hey this is a hospitality experience that exceeds what we thought was possible in skilled nursing. Instead of going home and trying to recover on my own, instead of moving across town, maybe I'll just move across the hallway into the assisted living setting at Trilogy. And that's how 40% of the move-ins in Trilogy's assisted living business actually come from, the post-acute business. The development there is purposeful. So of their portfolio, the vast majority are purpose-built buildings to meet that standard that need and that's rare so uh we get asked a lot of times could you do acquisitions with trilogy just have them manage other things for you we could but they probably wouldn't be as efficient as a trilogy made model is these are operators that have been developing for three decades that have done you know 70 80 buildings developed by to have the most operational efficiency with the kitchen in the exact same in the exact right spot to serve both service lines with the hallways being optimal efficiency for staffing levels things that you know when multi-family developers start getting involved in senior housing which we all know is coming it's just the question we get asked all the time is when things that those types of people will completely overlook so we're still developing at trilogy because that's the way that they can grow their business with purpose-built buildings and we're doing you know three to five new campuses a year is common for them with expansion opportunities on existing campuses also being a core component of the development meaning we have independent living villas duplexes that are adjacent to the main campus that can leverage all the operations of the main campus so that you get a product that people really like it's a neighborhood concept with people who are in the same station of life they go to church together on Sundays they have happy hour together at three in the afternoon um and then if they need the care as they progress through their life they they don't have to move to a new building they can just move into the trilogy main house we're going to continue to do that for the foreseeable at trilogy because of how predictable the returns are in that space and and finally landing the plane on your real question is how much of this can you do and how long can it go and what's the most you can do at one time well if you're running 150 buildings. The worst thing you can do is sacrifice the performance of the 150 for the five incremental new developments that you want to take off. You don't want to pull the focus of the management team away from the core business. So that's what we're constantly balancing. I think at five a year, I feel very confident that's not going to happen. At 20 a year, I feel very confident that you're going to pull focus away. And so somewhere on the lower end of that range is where we think is the sweet spot and where we'll continue to play with Trilogy.

And then I guess maybe just saying on the Trilogy point here, NOI margins are now above 20%, occupancy over 91% for the same store portfolio. I guess how should we be thinking about you know, NOI flow through and potential margin ceiling as the portfolio moves further into the mid 90% range?

It's so critical. So as occupancy goes up, there's a certain amount of costs that are fixed in every operating senior housing building and Trilogy is no different the difference with their concept though from a typical independent living or senior housing is that care is a big component in skilled nursing direct care hours are critical so there's always going to be less pull through incremental margin improvement on the skilled nursing side of their business than there would be in say a independent living business where there's no care component where once you have the dining the activities and life enrichment set up that the fixed costs are are substantial and then they're substantially fixed as well so the good part the bad part about the that setup you get less flow through the margin the good part about that setup is it's it's a very needs based business that's not elective that's why we like it so if you're worried that we're headed towards a recession or a housing recession and you want defensive portfolio with growth then we can deliver the most defensive portfolio with top of the industry type growth because we're focused on trilogy and our shop portfolio is heavily weighted towards assisted living which are more needs-based decisions and you know when we we talk about our company we were really born out of the global financial crisis with jeff and his three partners that shaped the way we think about this acuity question independent living got hit the hardest during global financial crisis because it was the most discretionary decision it's a lifestyle choice you don't have to sell your house to move into independent living with assisted living and skilled nursing it's a needs based choice you need the care you can't delay this and wait another five years to see how the housing market recovers you need to get the care that you need and that's what we like about the business is that you've got this very rare like jeff mentioned generational kind of moment where you've got you know the resilience of health care but you also have this noi growth profile that's really compelling and you give up a little margin uh in exchange which we're happy to do for

for the needs-based demographic reality.

Yeah, I mean, on that defensiveness point, and as you said, Trilogy is unique to other ideas, senior housing concepts, in part given its exposure to government reimbursement. There have been concerns that this moderates potential NOI growth versus peers with purely private pay exposure. Can you speak to some of the benefits to this model and why that concern is myopic?

Yeah, I would say it depends on your time horizon on that question, right? If you say in the next two years, will Trilogy's business be moderated compared to the industry, I'd say that you could be right. You could be more right. I think if you were saying over the next 10 years, when development comes back online, I think you'd be dead wrong. Trilogy has the widest competitive moat in our portfolio today. Skilled nursing development is non-existent, and actually the number of skilled nursing units online in America decreases every quarter. The demand that they're going to have in the skilled nursing business and the prolonged demand and the duration of that is going to fuel Trilogy's business for the long term because of how difficult it is to develop skilled nursing in a profitable way. You almost have to have this integrated campus concept where you've got the senior housing and skilled nursing paired together and you can marry those margins and get the operational efficiencies of having those two things under one roof. I think on the government reimbursement side, the one thing I'll say, even in the short term, that this is probably the most overlooked part of our retired business.

And misunderstood.

And misunderstood, is that Trilogy could only grow rates in the skilled nursing side in line with inflation. it's it's been demonstrated to be untrue so the skilled nursing average daily rate rev four whatever you want however you want to quote it has been growing faster at trilogy than their private pay side and that's happening because of a mixed shift within their skilled nursing business so if you're the highest quality operator in skilled nursing you have people seeking out your product and that helps with occupancy of course that's obvious but it also helps with pay or mix and shifting to have the residents in your building the residents that are coming from the highest pay or mix that have the highest margin because they appreciate the quality the most that means you're shifting from medicaid beds to medicare advantage beds and medicare beds And even within that shift, the Medicare Advantage plans are not all created equally. Different Med Advantage plans pay different rate for the same service. And that's all one-off contracts that are made by each provider. If that provider says, I no longer accept your contract, the price is too low, and they have the occupancy to say, we're no longer admitting people from that Med Advantage plan then you can drive outsized rate growth within the met advantage plan cohort because you're prioritizing the people that are actually paying you for the quality that you deliver and what what the whole straw that serves the drink it's leaning in on quality and being able to have the highest quality outcomes and pointing to your five-star ratings which trilogy has overall five-star ratings on average above four which nobody no other big provider has have quality metrics that are over 4.8 percent these are compelling numbers to med advantage plans that

want to partner with the highest quality provider and that they're and they're willing to pay for it and by the way the core point i've heard brian and gabe say this often is in terms of the misunderstanding is that cms indications or the rate of inflation which is what medicare and is and derivative MA plans are based on is it really a ceiling to growth and high quality post-acute is roughly half of the beds in the average trilogy facility and it's a floor, certainly not a ceiling. And you didn't mention the statistics in terms of rent growth, over 5% in Medicare and last year over 8% in Medicare Advantage, way above the average nationally of 3%.

Right. Maybe shifting gears a bit to SHOP, you know, the more traditional senior housing Rodea structure that many of you are probably familiar with. You know, just kind of given that most healthcare peers are now focused on this asset class, maybe you can provide some color on how AHR's portfolio stacks up against the competition and what attributes you look for when identifying new acquisitions for SHOP. Higher acuity.

Brian, you want to elaborate? it sure yeah our shop portfolio definitely skews much more towards assisted living as opposed to independent living for all the reasons that gabe had mentioned earlier which is you know those residents are there because they have to be there um we've we've leaned into that and uh and ultimately you know i think the relationships that we have developed with our shop operators we're confident in their ability to run those types of buildings um speaking a little bit about what we're, and by the way, our shop is growing pretty substantially, both organically as well as inorganically, but I would say maybe the most common thread amongst the acquisitions that we did in 2025 and so far in 2026 and the awarded deals is that the shop portfolio has tremendous growth embedded in it. So what you'll see is very nice same-store NOI growth in 2026, and you'll see very nice same story no i growth in 2027 so you know one of the prototypes of a building that we bought which was tremendous for us it was a the nicest newest building in the market it's in a market that we are already we have a trusted operator a developer built it hired an operator they didn't like them they fired them they hired another operator they didn't like them they fired them and so the developer who was let's be honest he was a multi-family developer who didn't get the returns so he decided to build senior housing he started running the building himself that's how you get a 74 percent full building that's the nicest newest building in the market 2018 2017 2018 vintage we um and by the way the guy was underwater until last year he could not have sold his building for what he had in it and so he brought it to market was more than happy to get his dollars out so that he can go and look for the next development project because that's what developers do they don't necessarily run senior housing or maybe they shouldn't run senior housing but in any case we were able to buy that building very attractively and we could install our existing trusted operator somebody who's working in the next town over that we've had a long-standing relationship with they're running buildings for us that are 95 and 96 percent occupied so there's no reason why that 74 percent occupied building isn't going to go right up into that 95 96 percent level. The growth that we're going to recognize from that in what I would consider to be an extremely de-risked proposition because we do have that faith and confidence in the operator and I think that's the thing that the peers you know especially the triple net triple net lease people that are getting into RIDEA I think the shop operator proposition is the single most important thing.

Let me add quickly in terms of last year's acquisitions we did just under a billion and added two new operators to our operator folio. And this year, for the 250 that we've already closed, it's been expansion, I think I mentioned earlier, with existing operators, the other billion that we have locked up, committed, and in the pipeline is very consistent with a lot of what we bought last year, predominantly high quality class A assets and strong markets with appropriate levels to material levels of barriers to entry with strong operator profiles. And the overall weighting between IL and AL and Memory Care last year in the billion was roughly just actually just under 20%.

And everything that we've closed in in the pipeline for this year's acquisitions are about the same between 20 and 30% IL with the heavy weighting to higher acuity you know as i see it you know the shop operators also benefit from the trilogy relationship obviously they have done an exceptional job operationally um and i think that there is a lot that they can do to help support those smaller regional shop players just in terms of their own processes so maybe we could speak to you know some of the work that has been happening on that end to get a sense of the opportunity yeah happy to happy to deep dive on that so we've seen the national operator model fail repeatedly in senior housing for a variety of

reasons it is the easiest idea in the world to say hey let's find one person to cover the entire country for us makes our accounting reporting a lot easier makes the conversations everybody knows the brand easier it just for what for a variety of reasons it doesn't work what does work are regional operators that have a headquarters close to the assets that care about the culture of the building that drive the talent acquisition in the building the problem with those operators is they don't have a lot of resources and sometimes sophistication that a big national operator is or a larger operator like a Trilogy would. So how do you bridge that gap? That's where we went to the Trilogy team, said, you are basically at 150 assets, what all of these operators kind of want to be. You want to develop it organically over time, but you have resources and ideas that can be rolled out through the portfolio in a beneficial way. We want to create a real financial incentive for you to help us do that so we took uh their kind of best in class alignment with trilogy it flips the typical model on its head which is a five percent fee on revenue type model in the shop business and makes it so that the the company does has a below market management fee but makes up for it in an l tip that's pay that is fully based on what the real earnings growth of the company is so full bottom line alignment that's completely unique in the space to do this set to this degree the the thing that switched last year was we said we didn't want we don't we would rather not pay this in cash we would rather pay this in ahr stock so we created the first operator stock plan in the space and what that did was create a real financial reason for trilogy to help our other shop operators as our other shop operators get stronger and the HR stock value goes up, they actually participate in the value creation that they're a meaningful part of. So there are different ways that Trilogy can do that. The biggest is probably revenue management. Search engine optimization and marketing is certainly a part of it. Employee experience, employee training, facilities maintenance, CapEx, and development are kind of the big ones. Let's start with development because that's the easiest to figure out. if you've developed 70 or 80 buildings on your own you have development capabilities internally that far exceed what most operators are able to do within our shop portfolio we did a full deep dive on where we had excess land and we're leveraging trilogy's development team to work on multiple projects right now for expansions of high performing assets within the portfolio the revenue management circling back is probably the most interesting area right now as we start to to get functionally full in assets across senior housing, the question necessarily becomes, how do you keep growing NOI when your occupancy is 100%? And the answer is revenue management. The operators need to get really good at dynamic pricing, adjusting street rates, turning off lease incentives, managing community and move-in fees, all at the same time, all dynamically while occupancy is going up and down. there's no tool today that exists to do that except for what i know to be a completely unique proprietary solution that trilogy created themselves to management internally for them so they'll assign and this is not breaking news you know these are things that other people in other industries and multi-family and in hospitality have been doing for a long time we're just taking that skill set and applying it to senior housing and i think a more novel way So taking physical attributes of each individual unit, adjusting the anticipated price, taking into account what the market occupancy is, taking into account how long a unit has been open, where that unit is located in the building, and packaging that all together in a way that the hardest part is getting that information in the hands of the salesperson and the executive director in the building or making pricing decisions on a daily basis. and pushing that information through to a dashboard that allows them to do that that has value for trilogy and is already working at trilogy the question is how much value does that have for our entire shop program so we're test piloting it with two different shop operators currently it's going well i think it's an exciting part of the business that's going to be you know not only help our performance but also help us attract the best operators in the space if you are you've already heard from us the operator is the most important thing operators have choices in capital partners if you think that you're going to have your choice in operators just because you have capital you're wrong there's a lot of people that have capital you have to be more than that for them and having a proprietary revenue management system and having a trilogy back office that can help support the operators and help them scale is a real differentiator for our platform yeah and incentives are real as we all know and they are leaning

in hard they're doing a great job with our other operators right and i guess just last one for me on succession you know we know that ceo danny prosky remains on leave and we're all wishing him a speedy recovery but i just i wanted to get a sense of how the board is approaching longer term leadership continuity and succession considerations yeah thank you for that and look danny and i have been partners for 21 years in building the platform hiring the executive management team and below the executive management team that everybody knows today many people i'm sure if not most in the room know that he had a serious health event that was completely out of left field and unexpected in february and he is at home he's on the mend he's doing very well and one thing that i can tell you is that he he had one material procedure in terms of his recovery trajectory that was that was actually performed about five or six weeks ago went flawlessly he's doing exceedingly well ultimately we'll have his prognosis in in a matter my guess is weeks not months we'll advise the market accordingly but one thing i can assure you of is that we've got a very very strong board that takes governance seriously and under any scenario The board and the management team will be ready to execute with flawless continuity. And in terms of broader succession, because I think you were alluding to even beyond the CEO role, of course, I mean, we've got a decade plus of succession planning between Dan, Matt, our third founding partner, and myself, present company included, over a decade ago. and we've got a formal written succession plan that the board reviews at least on an annual basis that covers every division in the company and three or four successors down divisionally in most instances. So we feel good about the governance we're executing and we should know soon on Danny. But he's doing great. We're happy to hear that.

So thanks everyone. This is the AHR team. Appreciate you all being here. Thanks folks. Thanks for the time. Appreciate it.

Good job, Joe.