American Healthcare REIT, Inc. (AHR) Q2 2026 Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the American Healthcare REIT's Second Quarter 2026 Earnings Conference Call. I will now hand the conference over to Alan Peterson, Vice President of Investor Relations and Finance. Alan, please go ahead.

Good morning. Thank you for joining us for American Healthcare REIT's Second Quarter 2026 Earnings Conference Call. With me today are Chairman and Chief Executive Officer, Jeff Hanson; President and Chief Operating Officer, Gabe Willhite; Chief Investment Officer, Stefan Oh; and Chief Financial Officer, Brian Peay. We are also joined this morning by Danny Prosky, a member of our Board of Directors and the company's former President and Chief Executive Officer, who will share some personal reflections later in this call. On today's call, Jeff, Gabe, Stefan and Brian will provide high-level commentary discussing our operational results, financial position, our increased 2026 guidance and other recent news relating to American Healthcare REIT. Following these remarks and Danny's contributions, we will conduct a question-and-answer session. Please be advised that this call will include forward-looking statements. All statements made during this call other than statements of historical fact are forward-looking statements that are subject to numerous risks and uncertainties that could cause actual results to differ materially from those projected in these statements. Therefore, you should exercise caution in interpreting and relying on them. I refer you to our SEC filings for a more detailed discussion of the risks that could impact our future operating results, financial condition and prospects. All forward-looking statements speak only as of today, August 7, 2026 or such other dates as may otherwise be specified. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. During the call, we will discuss certain non-GAAP financial measures, which we believe can be useful in evaluating the company's operating performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Reconciliations of non-GAAP financial measures discussed on this call to the most directly comparable measures calculated in accordance with GAAP are included in our earnings release, supplemental information package and our filings with the SEC. You can find these documents as well as an audio webcast replay of this conference call on the Investor Relations section of our website at www.americanhealthcarereit.com. With that, I'll turn the call over to AHR's Chairman and Chief Executive Officer, Jeff Hanson.

Thanks, Alan, and good morning, everyone. As most of you know, two weeks ago, we announced that Danny Prosky elected to retire after a medical leave of absence that began in early February. Fortunately, he's had a truly remarkable recovery and he continues to serve as a deeply engaged director and as a valued adviser to the management team. And as Alan just mentioned, he's actually with us today to share some thoughts prior to Q&A. As many of you are aware, Danny and I built this platform beginning 21 years ago, and I was the CEO for 16 of those years before Danny succeeded me about 4.5 years ago. Because this is very familiar territory since my return to this role almost exactly six months ago, I've been leading since day one alongside our team with the discipline, ambition and intensity you'd expect of AHR given the enviable market position with which we've been entrusted, and we take that trust very seriously. The theme of this quarter is the durability of the competitive advantages that our management team is deploying to drive calculated growth as we work hard to scale a powerful and differentiated platform to generate even greater value for shareholders. Q2 was another exceptionally strong quarter. While some investors are simply being carried by the sector's tailwinds, our achievements across core metrics illustrate our position of strength in the marketplace. For example, double-digit same-store NOI growth for the tenth consecutive quarter, industry-leading NFFO per share growth with a material increase in full year guidance while continuing to delever, which, of course, is highlighted by net debt to EBITDA of only 2.5x, exceptionally strong acquisition execution with over $1.4 billion in closed deals year-to-date with an additional more than $800 million locked up and in the pipeline, all expected to close prior to year-end. By the way, none of which is reflected in our revised earnings guidance. And of course, efficient capital formation and accretive deployment into some of the highest-quality senior housing product located in some of the most desirable infill markets in the country at scale with compelling risk-adjusted returns at a very attractive spread to our cost of capital. And rather than isolated data points, these results represent the output of a strategy that we forged together over the course of many years and a team that continues to execute at the highest level and with excellence. And although we're very proud of what we've accomplished to date, we remain strictly focused on ensuring that the best version of this company is still ahead of us. A word on pace because our volume is up meaningfully this year, and we'd rather address that directly than have it inferred. Our underwriting discipline has not changed. What has changed is the depth and the quality of the opportunity set in front of us. As our standing with operators has continued to strengthen materially and as our balance sheet has become an even stronger foundation for seizing opportunities, more of the right opportunities are simply reaching us first. And that's enabled us to be more selective, not less. Given the recent leadership announcement, I want to be clear about how I will personally continue to lead this exceptional organization. The mission, the strategy and the discipline that's driven our results does not change. And they don't change for a simple reason because Danny and I, in conjunction with the management team that you all know so well, built our strategy and our operating ethos together over the past decade. Now with that said, we will never rest on even recent accomplishments because the only scoreboard we focus on is forward-looking and calibrated to the results that we're posting for our core constituents from our valued investors to residents and our communities all across the country. My focus, among other things, is in two core areas: number one, rapidly scaling this platform to deliver the outsized growth that we're being valued to deliver and to do so in a disciplined and responsible manner, while simultaneously positioning this platform to seize the generational investment opportunity before us in the senior housing sector today. So number one is rapid scaling to drive outsized growth. Number two, strengthening an extremely talented leadership team that Danny and I and our broader Board have long since viewed as the future of the company for the next decade and beyond. That means deepening our operating capabilities and adding some of the best talent in the country in important roles across the org chart, while continuing to drive robust internal and intelligent external growth at significant scale. As we previously announced, Gabe Willhite has been elevated to President while also retaining his COO role. He and I are working together to deepen the leadership at every level of the organization, while Stefan and Brian continue to drive our investments and finance capabilities with the same discipline that you've come to rely on. I'd also like to acknowledge one of AHR's valued independent directors, Scott Estes, who, as many of you know, served for 12 years as Welltower's CFO. He was appointed lead independent director last month because AHR is committed to best practices in corporate governance, and Scott's combination of judgment and experience has continued to prove invaluable throughout his service on our Board. All of the efforts that we're discussing today are quite frankly, in service of a simple and enduring vision to position AHR as the most sought after capital partner for the best senior housing operators in America, while simultaneously delivering the highest quality care and superior health outcomes for our nation's valued elders. The demographic tailwind behind long-term care, as you all know, is powerful and still in early stages and supply remains profoundly constrained. But that tailwind essentially is available to every investor in the sector. What sets us apart is what we've built underneath it. Many of our key people are former operators, and that's by design. Then there's Trilogy. These advantages give us a finger on the pulse of this business each and every day, and real-time insight into what's actually working across thousands of units. It also means we sit across the table from our partners as people who lived in the operating world, not just in the capital markets. Operators know the difference, and they choose accordingly. Development capabilities and bed licenses in a sector where both are valuable and rare, are advantages that continue to compound. Cost of capital determines, as we all know, what you can offer to pay, but it doesn't determine what you get shown or what you get done. Anyone can be the highest bidder. AHR is strengthening our position as the industry's partner of choice, and we intend to keep widening that gap. With that, I'll turn it over to the team. Gabe?

Thanks, Jeff. Before I get into the quarter, let me thank Jeff and the Board for the confidence they've shown in me. I've been in this company and its predecessors for more than a decade. Serving as the President and COO of this remarkable company is a genuine privilege that compels a sense of enormous stewardship and responsibility. Beyond that, what excites me now the most is how AHR is positioned to capitalize on one of the most significant generational investment opportunities that we've seen in any real estate asset class. The differentiated platform we've built and the way that we're rapidly scaling it positions us to maximize the opportunity before us in senior housing in America. With that, the second quarter put numbers behind the growth and the opportunity we're describing. Total portfolio same-store NOI grew 13.2% year-over-year and 12.7% for the first six months. As important, it grew 4.9% sequentially off a first quarter that was already a high watermark. Our operating portfolio led again and it led the way we wanted to. Occupancy held, bucking the usual first-half seasonality, and rate was managed with discipline, all while expense growth was effectively controlled. This resulted in strong margin expansion and NOI growth. Getting into the segments, Trilogy continues to exceed our already high expectations. Same-store NOI grew 16.1% year-over-year and 5.4% sequentially, while same-store occupancy averaged 90.7%, up 180 basis points from a year ago. While occupancy stepped down about 50 basis points from the first quarter, we view that as typical seasonality. Just as we've seen in past years with Trilogy, a slight pullback in skilled nursing occupancy this quarter was offset by strength in Trilogy's senior housing setting. This dynamic has the potential to be a powerful driver of growth through the summer selling season and through the remainder of the year. Even though skilled nursing occupancy came down 70 basis points sequentially, senior housing occupancy held at 91.9%, flat with the first quarter and 200 basis points ahead of last year. Those residents stay with us considerably longer. So starting with a higher occupancy through the busiest selling season of the year is the result we care most about. Importantly, we more than offset the seasonal step down in occupancy by executing effectively on the expense line. Same-store operating expenses were down 0.9% sequentially with controllable costs down 4.6%. As a result, Trilogy set a new post-pandemic high watermark for same-store NOI margin, which reached 21.1%. That's a full 100 basis points of expansion sequentially. Quality mix reached 75.5% of resident days, a continuation of trends we expect to see from Trilogy. The improvement in quality mix demonstrates the effectiveness of our strategy of leaning into quality, which is being recognized by the more selective payer sources. As I mentioned before, our SHOP strategy of partnering and supporting the best operators continues to be highly successful. SHOP grew same-store NOI 20.5% year-over-year, occupancy continues to grow year-over-year, and we're widening the spread between RevPAR and ExPOR, which led to same-store NOI margin expanding 242 basis points to 22.3% year-over-year. These strong results are evident in our sequential results as well. Same-store NOI grew 9.9% from the first quarter as RevPAR rose 1.4%, while ExPOR actually came down 0.8%, propelling margin expansion. Our operating partners are truly an impressive group. Through our partnership with them, we're able to tap into strong operating leverage, which only compounds as occupancy climbs. You can expect us to continue to focus on our existing and ever-evolving best-in-class asset management practices with our best-in-class operating partners to drive results. We've demonstrated time and time again through our operating results that that's the difference maker. Underneath both segments there's the same discipline: quality of care first, collaborative accountability with every partner. We set clear performance and care expectations with each regional operator. We measure them continuously, and we put the platform to work where it adds value for our partners. The revenue management playbook we built alongside Trilogy is now in the hands of a subset of our SHOP operators with interest for more, and our asset management team is on the ground and engaged in our communities. Our partners who hold the same values and standards as AHR become the inevitable recipients of greater capital allocation. That is how we will continue to grow and to maximize value creation for our shareholders as we do it. One last point because it bears directly on how we scale. Every community we acquire has to land with an operator who meets our standard on day one, and the platform has to be ready to absorb the expansion the day we close. So we're investing ahead of the growth rather than behind it. We're adding depth in asset management, clinical oversight and underwriting, and we're extending the revenue management, analytics and reporting tools we built alongside Trilogy to more of our operating partners so that a partner who joins the AHR platform actually gains capability on day one that would otherwise take years to build alone. As always, thanks to our regional operating partners and our asset management team for another quarter of industry-leading results. With that, I'll turn it over to Stefan.

Thanks, Gabe. I'm proud to report that, as Jeff mentioned earlier, for the year-to-date, we've closed on over $1.4 billion of new acquisitions and investments. During the second quarter, we closed approximately $126.9 million of new SHOP investments, all representing expansion with existing operators. That included four communities in Georgia and South Carolina for approximately $86.4 million, which deepens our Southeast presence with an existing regional partner, and one community in Minnesota for approximately $40.5 million with another existing partner. We also sold three noncore properties for approximately $22.3 million, continuing our ongoing process of opportunistically pruning assets that no longer earn a place in our portfolio. This allows us to redirect capital into higher quality and more strategic assets. After the end of the quarter, the acquisition pace picked up considerably. We acquired 10 additional SHOP communities for approximately $1 billion which brings our investment volume to over $1.4 billion this year. That activity also welcomed new regional operators onto the platform. One of them opened up the Northeast for us at scale, a region we had targeted for some time and one we were excited to enter with the right partner. The other meaningfully deepens our exposure in the Southeast, where we already have real momentum and can supplement our exposure with another best-in-class operator. I have said this before, but I want to note again that who we choose to work with is the most important component of our investment process. Our operating partners were carefully selected and in almost every case came out of our network. The relationships were built well ahead of the opportunity. However, being familiar never substitutes for diligence; every one of them was underwritten to the same rigorous standard we apply to anyone we consider adding to the platform. We waited patiently for the right assets in the right markets before formalizing these strategic partnerships. Also after the quarter end, we funded an $86.2 million loan on seven properties with options to acquire them. The properties are operated by a partner we have an existing relationship with, and we have a defined path to near-term ownership of these communities at an attractive return. As for our investment pipeline, it currently stands at over $800 million. That includes newly awarded deals as well as deals disclosed as awarded in our first quarter release that have not yet closed. We expect to close most, if not all, before the end of the year, but none of this volume is reflected in our guidance. Let me be candid about how we are approaching this market. We pursue growth with measured conviction, strategic and disciplined, always putting quality and accretive growth potential above all else. Operator quality and market position are always the first filter, and this is nonnegotiable for AHR. From there, we underwrite care outcomes, market fundamentals, the physical plant, the service lines the asset can efficiently support and the risk-adjusted return. We do not drive growth for growth's sake. We are actively allocating capital not because we've relaxed our approach, but because meaningful opportunities met our acquisition criteria. Scale in the right markets with the right partners compounds, and the deep industry relationships we built over the past 20 years continue to generate compelling opportunities, many of which never reached the broader market. With that, I will turn it over to Brian.

Thanks, Stefan. We reported normalized FFO of $0.54 per diluted share for the second quarter, up 28.6% from the $0.42 in the same quarter last year. Year-to-date, NFFO is $1.05 per diluted share, 31.3% ahead of the prior year. Those results were achieved, first, by the organic growth embedded in the portfolio and second, from accretion from the acquisitions we have closed over the past four quarters, which are now contributing a full period of earnings—both of which combined to be an approximate 31% year-over-year increase in cash NOI. Those results, together with better visibility into the second half of the year, support a further increase to our full year 2026 guidance. We are raising full year NFFO per diluted share guidance to a range of $2.15 to $2.19, up from our prior range of $2.03 to $2.09. At the midpoint, that represents roughly 26% NFFO per diluted share growth over 2025. We are also raising total portfolio same-store NOI growth guidance to a range of 11% to 13%, up from 9% to 12%. At the segment level, we're moving both operating segments higher. Integrated senior health campuses has increased to a range of 13% to 16% from 11% to 15% and SHOP improved to a range of 18% to 21% from 15% to 19%. Outpatient medical was changed to flat to up 1% and triple net leased properties are unchanged at an increase of 2% to 3% year-over-year. As always, this guidance reflects only the transactions and capital markets activity completed through today. It does not include any awarded deals still in the pipeline that Stefan described. Turning to the balance sheet, net debt to EBITDA improved to 2.5x for the second quarter, which is 0.5 turn better than the 3x we reported in the first quarter of 2026 and 1.2 turns better than Q2 of 2025. Between our May follow-on offering and our ATM program, we raised approximately $1.5 billion of equity capital in Q2 '26 and subsequent to quarter end. As a result, and as of today, we have unsettled forward sale agreements totaling approximately $631 million in proceeds upon full settlement. The forward proceeds that remain unsettled are a powerful funding source for the pipeline that Stefan described, along with cash on hand and the full availability on our $800 million revolving credit facility. Our capital markets discipline has given rise to strong offensive capability, positioning us to pursue our most attractive acquisition and development opportunities from a position of financial strength. I want to remind everyone that our cheapest source of equity comes from the significant amount of retained earnings generated each quarter, which is a product of the company's dividend policy. Beyond that, we will continue to raise capital from nonstrategic asset sales and could potentially raise equity capital through our ATM, so long as it is attractively priced and would result in an accretive use of funds. Utilizing this strategy, we have been able to close $1.4 billion of acquisitions this year, while also creating future funding capacity by improving and reducing leverage metrics, all while expecting to grow NFFO per share by more than 25% from 2025 to 2026. That backdrop sets the stage for us to continue to play offense from here. And with that, I'd like to turn it back to Jeff.

Thanks, Brian. Before we open the call to questions, I'd like to share a brief sentiment before turning it over to Danny to share a few of his thoughts. Danny and I have been business partners for more than 20 years, and he's had an absolutely incredible 35-year career in health care real estate that's been marked by excellence at virtually every turn. His profound leadership has shaped this company in indelible ways and his DNA is infused throughout every part of the organization, from our strategy, to our culture, to several of the operating relationships that define who we are today. Fortunately, he continues to serve as a valued Board member and trusted adviser. So thankfully, he's not going anywhere. With that said, I didn't want this quarter to pass without all of you hearing from him directly. Danny, it's all yours.

Thank you, Jeff. Good morning, everyone. I want to thank the team for giving me a few minutes on today's call. As you know, we completed our leadership transition last month, and I've since retired from my role as CEO. The business is in excellent hands. So I'm not here to talk about the quarterly results. I'm here simply to share a few personal reflections and to say thank you. As many of you know, this past February, I suffered a serious health event. For reasons unknown, my heart stopped beating following my usual morning run. Although I was recovering rapidly and had anticipated returning to the CEO seat prior to our Q1 earnings call in early May, my recovery began to plateau. This ultimately resulted in a heart transplant that was thankfully very successful. Since then, my recovery has been exceptional, and I truly have a new lease on life. Such a profound experience gives one perspective, and it gave me the reason to think hard about what I want the next chapter of my life to look like, particularly after what my family has been through this year. After a great deal of reflection in many conversations with my wife, I concluded that the right decision was to step back from the day-to-day demands of the Chief Executive role. I'm fortunate that AHR's depth gives me the flexibility to prioritize my family at this stage of my life. This company is strong, the strategy is delivering industry-leading results and the senior leadership team is exceptional. During my recovery—and it's no surprise to me—Jeff and our broader team haven't lost a step. In fact, they've accelerated over the past six months, which makes it easier for me to prioritize my family while dedicating professional energy to my role as an engaged director and adviser to the leadership team that I care so much about. If you'll permit me a moment of broader reflection, I've spent 35 years working in the health care REIT space and it has been the privilege of my professional life. I was fortunate to help build this company from the ground up to invest in communities that care for people during some of the most important seasons of their lives and to work alongside operating partners who share our commitment to quality care and outcomes. What I'm most proud of isn't any single performance metric. It's the people, the culture and the purpose that define AHR. And when a company is built upon the right foundation, these attributes endure long after any one leader steps out of an operating role. To our team members across the organization, thank you. You are the reason this company is so successful. To our regional operating partners, thank you for your trust in AHR and your partnership and our shared mission. To our Board and our shareholders, thank you for your confidence over the years. And Jeff, thank you. Matt and I couldn't have asked for a better business partner or a better team to carry this forward. I'm passionate about my continued involvement and I'm extremely optimistic about the future. With that, and with tremendous anticipation for what lies ahead, I'll turn the call back to the team. Thank you all.

Thanks, Danny. Beautifully said, and we're grateful that we'll continue to benefit from your wisdom and your counsel for many years to come. Operator, we'd like to open the line for questions.

Your first question is from Michael Stroyeck with Green Street.

Congrats Danny on a spectacular recovery. That's great news. Maybe one question on expenses and Trilogy: what drove the deceleration in controllable costs within that business? Is that sub-2% growth rate just transitory in nature due to some elevated year-over-year comps? Or do you view that as more sustainable in the near term?

I'll take that, Michael. It's Gabe. So at the beginning of the year—and really, this started last year—the Trilogy team made it a big focus to manage expenses, and they've done a terrific job through the first and second quarter of 2026. That team has shown time and time again that if they focus on something they can really outperform expectations. So I would never count them out on outperformance on that front. There are a couple of things that are seasonal in nature on the expense side that you should take into account between Q2 and Q3: they're highly concentrated in the Midwest. So utility seasonality can be a component of it as you enter into the colder months, and more utilization of air conditioning and climate control in the summer can affect comparisons. But I think overall, what we're seeing there is really great execution on expense management, and it's not just coming from one area. It's coming from multiple different components of their business.

Makes sense. Maybe sticking with Trilogy and your SHOP portfolio: you talked about applying the Trilogy operating platform to SHOP. Can you provide any sort of quantification in terms of the NOI upside opportunity there in terms of bringing that to your in-place operators?

It's really hard to parse out exactly the dollars attached to that type of value, and I'll zoom out first. Our approach to operator support is multimodal. One, you've got to have capital and help them reinvest in the properties and scale their businesses. Two, you need to support them with data and analytics, and we're enhancing that in real time every day. Three, we've got the Trilogy platform, which can provide support in multiple ways. We've talked a lot about revenue management. We also can, on a private label basis, support operators in sales and marketing, employee experience, and we're expanding that and leaning into how Trilogy's CapEx capabilities and development capabilities can support other operators as well. We also support and host innovation forums for our operators. Right now, we've got 11 different operators that participate in those calls on different areas—sales and marketing, plant operations, resident experience, risk management—key areas where sharing best practices can really move the needle. And finally, our asset management team, which is primarily former operators, really runs as a high-end consulting business for senior housing operators in the space. So you take all of that together, and now you've got a platform where when you join the AHR platform as an operator, the idea is that you're going to be better off than if you were doing it without us. To get back to your question: a long way of saying, I can't tell you exactly what dollars are attached to that. I can tell you that 16% NOI growth at Trilogy for their mix and the defensiveness of the mix in their business is very strong, and over 20% NOI growth on a same-store basis in SHOP—that's the tenth straight quarter of either 20% or near-20% same-store NOI growth—is really strong, and a lot of that is because of the platform value.

Your next question is from Ronald Kamdem with Morgan Stanley.

Best wishes to Danny as well. When you guys think about Trilogy going forward and optimizing further, where is the biggest opportunity? Is it on the revenue side? On the expense side? Is it getting more beds in? How do you think about the biggest opportunity for the business over the next three to five years?

It's a mix. There's still a lot of occupancy growth that can happen at Trilogy, which is important. They're ahead of the game on revenue management, and as more of our portfolio becomes functionally full, revenue management becomes a bigger piece of outperformance. Getting out in front of that and building a proprietary software system they operate across their portfolio is key and still in early stages. That also flows through on the skilled nursing side to the mix of payer sources. As you get to higher occupancy and more sophisticated revenue management, it unlocks the ability to grow revenue on the skilled nursing side on a per-bed basis. If you look at our Medicare Advantage rate growth at Trilogy, it was 8.4% same-store year-over-year—probably higher than people thought was achievable—because they're optimizing the mix and partnering with plans that pay for the level of care they provide. Trilogy's development capabilities can't be overlooked either. We've got a strong development pipeline with five new campuses in construction today and the ability to expand existing campuses in a modular way that de-risks the proposition and creates more runway for growth as they optimize operations across the portfolio.

Great. And then on acquisitions: you noted you are seeing more product coming to you. What's driving that? Is it debt funds? Relationships? What's driving more product to you so you can close at the same underwriting as previously?

This is Stefan. This year has been very active. We're seeing a lot of deal flow compared to even last year. We've seen many groups coming to market attracted by cap rate compression earlier this year combined with operator performance that has increased asset values. That's a big driver. Secondarily, as we've grown our operator relationships, we've seen more off-market deals coming directly to us—about half of our deals have come to us off-market. As we've grown our operator base over the past couple of years, that continues to drive more off-market opportunities. So it's really those two things: more deals coming to market and more off-market opportunities from our operator relationships. Fortunately, many of those deals fit our acquisition criteria, and we're being disciplined in underwriting them as we always have been.

Your next question is from Seth Bergey with Citi.

Glad to hear about Danny's recovery. A follow-up on acquisitions: you mentioned some deals closed this quarter brought on new operating partners. Could you describe how you decide to onboard a new operator partner—is it geographically based? How do you think about that process?

Most of our operator relationships come from prior relationships we've had with these operators, so we have the ability to see how they operate over time. We're very selective in choosing operators: we look for those who provide the highest level of care, hospitality to residents, and employee experience. Geographic targets matter, too. It comes down to operator quality, the geography we're targeting, and whether the available opportunities in that geography fit our portfolio and the operator we're partnering with.

That's helpful. On the development guidance tick-up, should we think of that as additional developments with Trilogy or something else, and what are the return expectations there?

It's really executing on the plan we've talked about for a long time, that Trilogy has development opportunities. Trilogy's development capabilities have evolved over a multi-decade process, and they're doing general contracting on some developments now. We can see a path to potentially outperform our returns expectations there. They're optimizing cost and value-engineering the buildings, including with new GC projects. We like the villa projects that are expansions—where demand is already present, you can pre-lease or presell them, and there's very little operational drag. At this time, we plan to continue doing three to five new campuses opening a year at Trilogy with surrounding expansion projects, largely filling and performing to underwriting expectations.

Your next question is from Austin Wurschmidt with KeyBanc Capital Markets.

Danny, glad to hear you're doing well. The team has highlighted a banner year of investments and Gabe talked about the generational opportunity. Has there been any further discussion or change in your view around selling more of your outpatient medical portfolio to accelerate growth in senior housing?

The focus, energy and capital of the company is squarely on the generational opportunity in SHOP and Trilogy. We're aware of the embedded value in the outpatient medical platform. We've already sold about one-third of those buildings and the attributable NOI has gone from the mid-30s to where it is today, sub-13%, which will be sub-10% quickly, by design. We're always looking at alternatives to drive long-term shareholder value. We have been selling and will continue to consider sales where appropriate.

I appreciate that. On SHOP: can you talk about the demand funnel and trends you're seeing in July and August given the usual seasonality—how does that look moving forward?

One point to note is our acuity mix: we're more focused on needs-based senior housing—assisted living and memory care—about 80% of our SHOP beds fall within that component, not independent living which is more discretionary. That means higher-acuity residents and some seasonality due to involuntary move-outs in winter. We typically see a dip in Q1 that ramps into Q2. The selling season in July looks pretty strong; we're ahead of where we were in Q2 last year, which provides more pricing power. Coming off higher occupancy in July and having sequential growth that's strong opens up new doors for revenue management, which we'll focus on.

Your next question is from Michael Carroll with RBC.

Good hearing from you, Danny. Jeff, given that you've taken on the permanent CEO role, what are the key initiatives you've identified that you want to implement since taking over?

Because Danny and I founded the platform together 21 years ago, this transition is not new. I stepped into the role in the first week of February and it's all about scaling to post the growth we're being valued to deliver, with discipline and responsibility. There are four core areas: one, acquisition velocity while maintaining very high standards on assets, market, operator quality and underwriting rigor; two, onboarding industry-leading talent across the org chart to deepen capabilities; three, tapping further into Trilogy to drive more innovation across our broader portfolio of operating partners; and four, aggressive expansion of relationships and footprint with existing operators. The overarching theme is measured aggression: it's the time to act on this generational opportunity, and you'll see rapid acceleration of AHR's velocity and execution.

Mike, to add: AHR was uniquely situated to handle this situation because Jeff had served as CEO previously and remained very involved. When he stepped in, he hit the ground running. Jeff brings a level of intensity and a track record for growth and scaling that's fueling acceleration of the platform enhancements we've discussed. We're moving fast and making good progress.

Circling back to tenure: since you've stepped in as CEO, how long do you expect to be the permanent CEO? Is this role indefinite or mission-driven with a potential transition after initiatives are met?

I'm glad you asked. I retired 4.5 years ago for personal reasons that remain. This was part of an emergency succession plan that Danny and I worked on with a sophisticated Board. You should view this CEO role as mission and job driven rather than indefinite. There's been a decades-long succession plan in place; we've hired and developed Gabe, Brian and much of the team as part of that long-range succession plan. I'm here to do a job with this team, and we'll do it quickly and effectively. It won't be measured strictly in months or quarters, but you shouldn't expect years either. I don't need the job or the money—I love this company. I built it with Danny. My measure of success over the next 12 to 18 months will be how rapidly the next generation of leadership takes this company forward and posts growth that surpasses prior expectations.

Your next question is from Farrell Granath with Bank of America.

Great to hear from you, Danny, and congrats on the recovery. On Trilogy, is it possible to quantify the remaining potential for expansion of your current portfolio?

Good question. On the roughly 150 communities Trilogy currently operates, we control or have a direct path to ownership of excess land at about 30 communities where we can expand villa projects. If we do five or six villa projects a year, that's a multiyear runway for expansions just with what we control today. Expansions go beyond villa projects; we can add wings that typically require less land. We also add stand-alone memory care villages adjacent to Trilogy main campuses—about 40-unit memory care communities—on the expansion list. So while I can't give an exact total number, I feel comfortable that we have at least five-plus years of opportunities we control today at the current pace.

Good to hear. On the guidance assumptions, especially the same-store NOI growth, what are the underlying directional assumptions you baked in around RevPAR and occupancy given seasonality?

We don't separately disclose specific occupancy assumptions. We model multiple scenarios: some where we grow occupancy faster and don't push rate as much, others where we push rate more in highly occupied buildings and focus on expense control in lower-occupied ones. The portfolio is not homogenous: some campuses are lower occupied, some higher. On more highly occupied buildings, we expect rate increases in the 4% to 6% range. For lower-occupied assets, we focus on growing occupancy and may offer small move-in incentives. The approach is specific to building and submarket rather than a single blanket assumption.

Your next question is from Michael Goldsmith with UBS.

Danny, great to hear from you; glad you're doing well. Can you talk about the senior housing acquisitions and the returns they are delivering today relative to prior years? There's a lot of capital flowing into the space and some operating concerns; you've also said recent acquisitions are performing ahead of underwriting. How do those dynamics reconcile and what returns are you seeing?

One thing to note is we're buying high-quality, institutional-grade assets in infill markets—newer assets in dense suburban areas. Our underwriting is not changing and yields aren't changing much either: initial yields are coming in mid-5s to low-6s, with stabilization at seven or above. There was cap rate compression in parts of last year and early this year, but it's been relatively static recently. Many one-off low cap rate deals might be strategic, but broadly the market has stayed fairly disciplined. We're able to hold firm on yields and the assets we're buying are very good.

To expand, we didn't see cap rate compression and upward pricing until mid to late last year into early this year. Over the last several months it's been relatively static, which we're grateful for. The majority of what we're buying is in core infill markets with strong barriers to entry—first-ring suburbs and gateway markets. Many of these submarkets require land assemblage and have challenging entitlements, often a 5-to-8-year delivery concept. We're taking deals down in the mid- to upper-5s to low-6s with first-year yields stabilizing to seven and above. More than half of our year-to-date closed and pipeline are value-add profiles; the balance is stabilized. The average occupancy of the value-add is around 82%, so they are in the low 80s, while stabilized assets are in the low 90s—both present operating leverage and pricing power. We're pleased with what we've closed and what we have coming.

Your next question is from Juan Sanabria with BMO Capital Markets.

Happy to hear Danny is doing well. I wanted to touch on how assets are trading relative to replacement cost, and whether your view of replacement cost includes a developer profit or margin?

Generally speaking, we're still able to buy below replacement cost. Considering construction pricing and high costs to build high-end senior housing communities today, being below replacement cost is beneficial. Also consider timelines to build, approvals, and land acquisition. When you include time and entitlement hurdles, buying below replacement cost today is advantageous for us.

As a follow-up, any update on the Memory Care Center of Excellence and whether you've started building out initiatives yet?

Trilogy is working on the Memory Care Center of Excellence. It's one of the important initiatives that highlight our belief in continued innovation and improvement for senior care. We hope in the future it will be utilized not only by Trilogy but across our platform, including SHOP operators, and become a standard for quality in the industry. It's in early stages and I think it will be exceptional; I'm excited they're working on it.

Your next question is from Rich Hightower with Barclays.

All the best to Danny and his family. Going back to accelerating growth of the platform, help us understand how that flows through to G&A or capital needs. Is the build-out cost measured in the millions or tens of millions—how should we think about the cost?

You saw an uptick in G&A in our guidance, and the vast majority of that uptick is stock compensation tied to the stock price. Beyond that, there will be additional spend on the G&A side: we're adding talent and investing in people and technology to build out the platform. G&A will grow at a much slower rate than NOI. For example, we're targeting very significant NOI growth this year, and G&A will not grow proportionately. The intent is to invest to carry the company into the next level of growth—investing in people, technology, and real-time decision-making capability—and those investments are necessary for scaling.

There are no further questions at this time. I will now turn the call back to Jeff Hanson, Chairman and CEO, for closing remarks.

Yes. Thank you, everybody. Have a great afternoon and a wonderful weekend. We appreciate the continued support and confidence. Thank you.

This concludes today's call. Thank you so much for attending. You may now disconnect.