American Healthcare REIT, Inc. Q2 FY2025 earnings call

• Danny emphasized the importance of quality resident care and high-quality health outcomes, and the industry's multiyear secular trend of improving operating metrics. - Gabe detailed Trilogy's 18.3% same-store NOI growth with broad-based improvements in occupancy and rate growth, and SHOP's 23% same-store NOI growth with ramping occupancy after Q1 impacts. - Stefan discussed recent investment activity, including $255 million in acquisitions, $33.5 million in dispositions, and new operator relationships. - Brian reported normalized FFO of $0.42 per fully diluted share, a 27% year-over-year increase in NFFO per share, and revised guidance for full-year NFFO and same-store NOI growth.

In the second quarter of 2025, American Healthcare REIT delivered a total portfolio same-store NOI growth of 13.9% compared to the same period in 2024. The Trilogy segment saw same-store NOI growth of 18.3% year-over-year, with occupancy climbing to 88.9% (a 219 basis point increase over the prior year) and average daily rates across all payers growing by 7.8% year-over-year. The SHOP segment had same-store NOI growth of 23% year-over-year. Trilogy's Medicare Advantage now makes up 7.2% of resident days compared to 5.8% a year ago. The operating portfolio accounts for approximately 75% of total NOI and is growing. Revenue contribution: Trilogy and SHOP are key segments contributing to the overall performance.

• Raised full-year 2025 NFFO per share guidance to $1.64 to $1.68 from prior range of $1.58 to $1.64. - Increased total portfolio same-store NOI growth guidance to 11% to 14% from prior 9% to 13%. - Trilogy segment same-store NOI growth guidance increased to 15% to 19%. - SHOP segment same-store NOI growth guidance remains 20% to 24%. - Outpatient medical guidance revised to 1% to 1.5% from prior negative 1% to positive 1%. - Triple-net lease properties guidance revised to negative 75 basis points to negative 25 basis points from prior negative 1.5% to negative 50 basis points.

Q: Just the opening comments, you sort of mentioned that just you're in the early innings of sort of this demand tailwind. And I was hoping we could sort of double-click on that. When you're thinking about sort of the Trilogy portfolio as well as the SHOP portfolio, just in your mind, what is peak occupancy? And what do you think pricing can do when you get there, again, to maintain these innings as you sort of mentioned in your opening comments?

A: Danny Prosky stated they feel confident in the early innings due to demographics and low construction starts. Peak occupancy could be mid-90s, and they think there's still room for occupancy growth and RevPOR growth with disciplined revenue mix and expense control.

Q: Helpful. And then if I could just ask a quick follow-up on the acquisitions. Just can you talk a little bit more about sort of the deals closed, the assets in the pipeline? Just what sort of occupancy level, what sort of upside is sort of baked in or underwritten in those?

A: Danny Prosky and Stefan Oh discussed focusing on RIDEA, SHOP, and Trilogy, with a pipeline over $300 million. Assets in the pipeline are larger, newer, and higher quality, with a mix of stabilized and unstabilized assets, expecting strong risk-adjusted returns.

Q: The ADR growth this quarter really stood out. And I'm just wondering if this was a glimpse of some of the recent moves taken around expanding the Medicare Advantage piece of the business and just your ability to shift mix of residents around? And should we expect that, that benefit in 2Q carries into the back half of the year as well from a rate growth perspective?

A: Gabe Willhite explained that rate growth at Trilogy is due to improving quality mix, focusing on higher rate Medicare and Medicare Advantage contracts, and having more bargaining power with Medicare Advantage plans, expecting continued growth in the back half.

Q: I wanted to circle back on the occupancy comments. I know, Gabe, you kind of outlined a little bit about acceleration through the quarter. I was wondering if you could give a little bit more detail as well as either commentary on expectations for the increased move-ins of what you're seeing today?

A: Gabe Willhite said occupancy at the end of Q2 was 87.5% and is higher now, with June and July being strong selling months, but they're focused on steady occupancy growth with the right rate for prolonged NOI growth.

Q: I just want to go back to that Medicare Advantage potential for higher rates and getting more contracts. Is there any seasonality to the renewals?

A: Gabe Willhite stated no real seasonality due to fragmented contracts, but a proportionate increase in Medicare Advantage rate based on CMS increase comes October 1.

Q: I just wanted to kind of ask about the new operator and kind of how much of the pipeline is with existing operators? How much of the pipeline is with new operators? And then how do you think about kind of operator selection? Like what's the criteria you look for from partnering with new operators?

A: Stefan Oh discussed being excited about new operator relationships, measuring operator selection by culture, growth interest, and alignment with their strategy, with a thoughtful process involving checking boxes for care, employee engagement, and market fit.