Ah Realty Inc Stock

Welcome, everyone. Welcome to the BofA 2026 Global Real Estate Conference. My name is Farrell Granath, and I am the coverage for the Healthcare REIT on our BofA U.S. REIT team. I also, in the audience, have Jeff Spector, Head of U.S. REITs and my associate over here, Julietta. We are joined here today with Jeff Hanson, the CEO of American Healthcare REIT as well as Gabe Willhite, COO; and Alan Peterson, VP of IR and Finance.

So at first, we'll turn it over for opening remarks, and then we can open it up for Q&A. I definitely encourage everyone to interject if you have any questions, feel free to have an open conversation. So Jeff...

Yes. Thank you, Farrell. Great to be here with everybody. And in addition to the gentleman on my right and on my left, we also have our Lead Independent Director, -- on my left in the back, Scott Estes, who many of you probably know, served as Welltower's CFO for 12 years. So he's been an incredible value add being on our Board for the past 4.5 years.

So in terms of AHR, those of you who may be less familiar with the company, we're a dedicated health care REIT that's essentially focused exclusively in our RIDEA vertical, which is obviously the high-growth sector of the health care industry and the real estate industry in general these days. It represents well over 80% of our NOI, growing rapidly. That's by design.

And it's been an incredible year for the company. We continue to post industry-leading internal as well as external growth. And we've managed this year, particularly to scale the operating platform meaningfully, both ahead of and in conjunction with robust and disciplined external growth. In terms of performance, many of you are probably aware, in Q2, we did increase guidance yet again. This time, it was over 5%, and that translates at the midpoint into NFFO per share growth this year over last year of 26%, which leads the entire industry sector by a fairly wide margin.

I think that the next closest peer is 21% and we've been able to do so, and this is what we're very proud of, while deleveraging materially at the same time. So we took 3x net debt to EBITDA at the end of Q1 down to 2.5x and continuing to drop again while we're driving robust external growth. I think the last thing that we would mention is the performance of the company and all the same-store NOI metrics to continue in most respects to lead the industry. They're largely driven and continue to be driven by increasing revenue, expanding margins and increasingly widening operating spreads. So the business is incredible, and we're really grateful for the way AHR is positioned.

Thank you. And I think to kick this off, we've obviously seen a lot of press releases coming out, updated in news. Can we first start with your updated year-to-date acquisitions? We've now seen over $2 billion worth of investment flows for year-to-date. Can you touch on, one, what those acquisitions may be made up of larger acquisitions as well as some of the smaller ones? And maybe how that has changed your framework of how you buy or at least is in line with how you buy?

Do you want to lead off, Gabe?

Yes. Thank you for hitting that, Farrell. So what we saw so far in 2026 is an expanding opportunity set of really great assets and unique operating partnerships that are going to take us to the next level. So of that $2 billion, the average vintage 2019, they're all very new continuum of care assets that are larger, meaning you have AL, IL, memory care all under one roof. It's easier to cross-sell between those sectors, and it drives occupancies higher and margins wider. The -- our main strategy for growth because of our size, we're about a $13 billion market cap company is do onesie-twosie acquisitions that bolt on to existing operator relationships in the markets we're already in.

The hardest part of this entire business is finding the right operators, actually having access to them and making them better than they would be if they weren't a part of your platform. That is the key to success in senior housing in a nutshell. So if you pair the right operator with the right asset, you get outsized performance. Once you have already identified the right operator, build a regional concentration, adding 1 or 2 buildings to their existing platform is very easy, and it's a low-risk way to grow their scale and to grow our business.

In certain rare circumstances, there are operators who are new to us from a financial relationship, but known to us for probably decades. We have an asset management team that's been in the business for, in some cases, 3 decades, and they know everybody in the industry. So when a rare opportunity to partner with like a Kensington comes up, who has never had a REIT capital partner before, and they have options on who they pick, -- we stand out because we're the preferred capital partner for an operator like that because we're focused on the quality of care first, the resident experience, the employee experience, and we're aligned on what matters most.

So we saw Kensington as -- by the way, that's an $873 million deal, super infill locations that are incredibly hard to replicate with a typical entitlement process and a land assemblage process that took 5 to 8 years. That's us playing offense and defense at the same time, right? You're growing a portfolio with a great asset, but you're also buying assets that are going to be -- have a long runway for growth and have a wide competitive moat, just really hard to compete.

So that Kensington deal, I think, is a great example of how we're going to execute. And like I said, $873 million, of which about $570 million is closed, the remainder is supposed to close at the end of the year. It's not just a onetime transaction. Kensington has developed 7 of the 8 assets that we bought. They have 3 more that are in the pipeline. We would love to be a partner with them on future developments one way or another, and we look for that in every operator relationship, not just a onetime transaction where it's getting the assets and growing for growth's sake. It's building a strategic relationship that can add value to AHR's platform over time.

And I'd add the LCB or the Berkshire, that's anonymous portfolio that we took down in early August that -- and LCB manages, they built 5 of the 8. They manage 7 of the 8 for us. And there are a lot of commonalities between both the Kensington and the Berkshire deal, A, in terms of the process, relationships, long-standing decades-long relationships went not just up to the senior management team in both those deals, but actually up to our Board.

And we were outbid on both those deals, but we were deemed not the highest price, but the best partner. And Dave Faeder at Kensington is on the public record stating that. So we appreciate that. The second thing is it's not just Kensington that's in fortress or high barrier to entry markets. This is some of the best SHOP asset quality that I've seen in a 32-year career.

So is the LCB product or the Berkshire product. Those were all built either in 2020, 2022 or 2023. And LCB also has, as Kensington does, very deep core Class A luxury senior housing development capability that we would love to grow with as well.

Well, before we dive in a lot deeper on the development and acquisition side, I also wanted to touch on other recent press releases and news updates, namely in your leadership transition as well as recent hires. Can you just give us an overview of some of the moving pieces that we've seen be announced as well as future plans for AHR's leadership?

Look, there's a lot of exciting things happening. A lot has been compressed into a compressed period of time over the last several weeks, but the reality is it was work in progress since the beginning of the year. So strategy doesn't change at all. The strategy was right. What changes is our ability as a company to execute at much higher scale -- much broader scale, okay? So we -- Dave was appointed President and Chief Operating Officer. He already held the COO role. I came back in as the Chairman and CEO, a role that I filled for 16 of the last 21 years as Danny retired after his health issue.

We recently announced that we brought Aric Chang in. He starts October 1st from Public Storage. Many of you will know that's an S&P 500 operating REIT. And so it was important to us to pull our next-generation CFO, not from a traditional property REIT configuration because we're too dynamic of an operating business. So Aric is going to be a phenomenal next-gen CFO for the company. Again, he starts October 1st.

And Dan hasn't gone anywhere, by the way. He's still a very -- a highly valued adviser to the management team, and he remains on the Board as one of the co-founders of the company. We also hired 2 very important division heads, both of whom report to Gabe. They started on the same day 2 weeks ago.

One is Ann Lacey from Artemis. She built their SHOP asset management platform. She heads up as our EVP of SHOP Strategic Asset Management, the same function. Importantly, she came with deep financial acumen from 7 or 8 years with one of the best-performing SHOP investors in the country. But as importantly, she was in critical operating roles for 11 years with Sunrise Senior Living before that.

So she has the perfect blend that we've actually built our entire asset management vertical around, which represents one of our competitive advantages with operators, both new and existing. And the last, do you want to go into our new CTO?

Yes. So our CTO, Jon Crosier, comes from Kilroy before that, the Irvine company has deep experience across real estate asset classes, which I think is pretty important to the story today. So I don't think I'm going out on a limb here by saying a lot of people have commented on the lack of sophistication from the senior housing investment community and the lack of resources maybe from a tech stack side for the operators.

We're trying to bridge that gap better than anybody has done before, not just on investments, although that tech and that data is important to make better investment decisions, utilize data that's not just available to everybody through a subscription to NIC MAP, which is not a very high barrier to entry, focus on different data that if everybody is focused on one data set and you have better, more accurate, more real-time data that's coming from somewhere else, you have a competitive advantage in investment selection, but also going much further than what just the initiation of the transaction with an operator is, which is actually finding the deal and closing the deal. It's now what do you do? Now how do you outperform operationally.

And our focus is a little bit different than most. We don't think one national operator that has great resources is the best way to play in the space. We think the regional operators, headquarters basically drivable to all the assets they manage for you is a better way to do it. They drive the culture in the building. They care about it. It's easier for them to recruit. They provide advancement opportunities for their best employees within their buildings, just moving to different locations in that regional density.

That's a lesson learned from owning Trilogy for almost 11 years, right? What has really worked at Trilogy? How did they outperform? How do we copy that playbook throughout our SHOP playbook. So what do the regional operators, that's all the good stuff they give you. What's the cost associated with that? Otherwise, everybody would be doing it. One, they're smaller. They don't have the resources to have their own CTO to build out their data and analytics platform. And two, they might not even know what to do with that data once you give it to them or have the resources to do something about it. So 2 ways that we're fixing that. One is Jon Crosier, our CTO, who's going to draw on a far broader background than just senior housing to deliver the competitive advantage we need.

But two, we've got the Trilogy platform supporting the whole thing. And that's absolutely unique in the space to have alignment like we have with Trilogy at their scale. They operate 150 buildings for us. One of the things that they're really good at is innovation and not having pride that right now, we're -- this is the best it's going to get. And that innovative idea can come from literally anywhere in Trilogy, and they'll test it out in 1 building, 3 buildings and then roll it out to 150 within their ecosystem.

But what if we roll that to 250 within our ecosystem at AHR more globally. That's a real platform value advantage. So we've created financial alignment with the Trilogy management team to do just that. So we have probably the best-in-class alignment to NOI growth for the management company, and that's the LTIP that they have is based on real NOI, not just top line revenue, which I think is table stakes at this point if you're in seniors, if people are not talking about real NOI incentives, and I think it's borderline uninvestable. But the way that we pay that NOI-based LTIP is in AHR currency.

So we created the first management incentive plan that's equity-based with our equity -- they participate in the value creation from growing Trilogy's NOI, which is great for all of us. It's the right incentive. But two, they have this real financial incentive for our other SHOP operators to outperform. So if they need help implementing a software that Trilogy has developed, like their revenue management software, the operator might not have somebody to do that. A Trilogy employee can actually work with them and help them integrate their systems so that they can leverage Trilogy's tech and also accomplish the mission of doing something with the data that you already have.

Yes. And I add one brief thing. The same-store metrics that I'm sure most of you are familiar with as it relates to AHR, they're not -- they're good numbers, but they're not just good numbers. They're a deep signal to us that the synergistic operating ecosystem that we've created that is AHR is actually working and it's firing on all cylinders. That's right. And the reality is we're still at the very early stages.

And you've got an operator that's as good as Trilogy over the past 30-some-odd years and they're really an operating laboratory at scale for us. And the real value proposition, they're not just an investment. They're probably one of our most strategic assets. Those of you that are familiar with the company, understand just how true this is. The real goal is to take what we know works well through that operating laboratory and propagating it across the other 11 operators that we have. And we've got a thin operator base in terms of total number by design.

So just to dive in a little bit deeper, I think Trilogy is such a unique product. And so I was hoping that you can go through and you were already alluding to what I was going to ask. But when thinking about your initial relationship with the IPO, the next steps when you were able to buy out your full ownership? And then also with that potential of doing future development on Trilogy campuses and then the rollout through your SHOP platform as well.

Can you walk us through either where you are in different stages of that process and where -- as you were already speaking about the Trilogy platform, but even on the development side, what you see as the future for Trilogy?

Yes. Their development capabilities are exceptional, Gabe. I'll take a certain part of that at a level.

Yes. The vast majority of their 150 that they operate for us were actually developed themselves because it's a unique asset type with unique requirements, so they're purpose-built. -- right? The prototype we're on now, I think, is prototype 4, maybe 5, you ask. It's value engineered so that, one, the costs are not too high, of course, right? But it's also value engineered operationally.

So a lot of the times, if you're doing a development deal, it's designed by somebody who is designing without senior housing in mind or they like the idea of senior housing, but they don't understand, hey, if I put too many units on a straight hallway to nowhere, it's going to screw up my staffing ratios and now it's going to be less profitable because of the physical plant design issue.

So Trilogy has solved that because they are true operators, operators. So how do we tap into that and go beyond just Trilogy, I think, is an interesting question that just put a pin in for right now. Within Trilogy, we're developing 3 to 5 new campuses a year. in the states that they're in. Those new campuses have expansion opportunities after they're already up and running. It derisks the entire development proposition when you don't build so big and guess what the demand is going to be, you build potentially a little bit smaller and have excess land to develop product where the need dictates the product should be.

So you can add independent living villas, which will be on the tour, you should sign up for it if you haven't already or you could expand memory care, you could expand AL, you could expand SNF. You have optionality on where the demand is showing up and what you want to do with it. So that expansion opportunity is the part that's probably the most interesting right now.

So we did a deep dive across our entire SHOP portfolio. Most of those operators are not focused on development expansions, right? But where we have very high demand, needing high occupancies, we have high rates and we have excess land, that's an opportunity to expand the existing SHOP portfolio. So we've identified several of those opportunities that we're pursuing right now, and Trilogy's development team is managing those developments for us, actually working with the architects to optimize for operations.

So they've come back. We got the design and Trilogy is like, not this one, not this one, do it this way. Can you go over here, like real valuable feedback to make them more profitable and make the developments make sense. That's something that I think we can continue to look at and expand on beyond the first start was the low-hanging fruits where we actually owned land. Step 2 is let's see where we can buy adjacent land and do even more expansions and have -- get even more benefit out of Trilogy's development capability.

So general rule of thumb is $150 million to $200 million in new development commitments annually within the Trilogy ecosystem. And the one thing that Gabe didn't mention that I will mention briefly is not only wing expansions or general expansions of existing SHOP assets, but they're also running all of our CapEx with their extremely sophisticated capabilities for all of our SHOP portfolio.

So we're really extracting synergies. And the way that Gabe structured their incentive with our stock is the currency through an LTIP is deeply incentivizing them to do so. They're sharing everything with our operators.

Yes. And can we unpack that for a minute? Why is that important, right? So at some point, your building is going to become so dated that you're going to be at a competitive disadvantage. And what we saw Trilogy doing over and over and over again was this 5-year and even longer plan of here's the ones that need X, Y and Z update. Here's the pacing of how those updates should be done. A lot of times in the industry, you'll see the buildings that are performing the best with no CapEx because they say, "Oh, you don't need it." -- so they become dated.

The employees there feel flighted like, oh, our reward for success is that we have the 1990s yellow walls and maroon carpets and stuff like that. It doesn't make any sense. I get why people end up there. But if you're thinking long-term growth and long-term value and how do we keep our best employees engaged and performing at a high level, that's all part of what they do.

So Trilogy now can do that for our entire SHOP portfolio, have regular refresh plans, but also identify the opportunities where you might be able to have a rate -- a big rate increase opportunity by putting some CapEx into the building and kind of repositioning it as well. That's probably the next frontier for good value-add investments as well.

Can you break down the returns expected on the ground up versus the expansions?

Yes. I can jump on that one. So most of -- and this is all in our supplemental, by the way, if you want to look at, we actually disclose every single project that's going on. So if you look at the independent living villas, -- those have a little bit of a lower cash yield, like, call it, high single digits, but they get to operational profitability far faster.

So the great part about those villas is you don't build them unless the building is really ripping and doing well. You've got the excess land and you can pre-lease them. You build a model home and you pre-lease them. So you don't have the operational drag that you would have a typical senior housing development where you're going to lose some money before you actually start to make some money. You already have the staff there.

You already have the sales team there. It's ready to go. So those are from a path to profitability, returns on investment perspective, probably the best opportunities in Trilogy, not to mention from a quality of life perspective, the people that are in that product love it. It's like -- I don't know, it's kind of like a [indiscernible] for old people.

So they -- well, they probably start drinking the same time of the day, 3:00. So it's -- that social aspect of it is interesting and good for them. The occupancies there are frequently the highest in our portfolio in the mid-90s. The expansion projects have the highest ROI, but there's just not that many of them, and they're kind of inexpensive. So a typical wing expansion could be $1 million or a couple of million dollars. It's hard to get a lot of value deployed that way, a lot of capital deployed that way.

The main campuses are, call it, low double-digit returns, still really strong. How are they doing that? Well, they're playing in markets that others couldn't because of what we talked about earlier from a size perspective and efficiency perspective. They also, like we said, have financial engineered the building and they're just good at. They also are their own GC on projects now, which further takes the cost down. It's just a machine that's been evolving over 25 to 30 years of development gets really efficient.

I think the most important takeaway there at a high level is the risk-adjusted return reality. It's already good development returns relative to any other asset class where you develop, but it's derisked because they have got this down to like a franchise level, cookie-cutter, 30-year tried and true approach, where they've got SWAT teams of -- I don't know -- what do they call them, opening teams, they send that descend on new communities that are opened and they're stabilizing.

Yes. And the most important part of that -- the success of the new development, right, is who's the CEO of that building, the Executive Director. And how do you ensure that they're going to be good if they're coming in from nowhere? Well, in Trilogy, you ensure they're good because you take somebody who's already crushing it in one of your other buildings, and they feel like that's a reward like, this is amazing that the company has that amount of faith in me to let me operate a brand-new building and look at how beautiful this thing is. That's a real accomplishment for them.

So you backfill that ED with somebody who's been brought up through Trilogy's administrator and training program. So you're filling with people who are already a cultural fit, who you've already tested out, who you know are good and that derisks the whole proposition as well. That's where the regional densification really starts to show its value is in the human capital side of the equation.

How long does it take to stabilize? And is that happening faster now?

A little faster, yes.

So what would you say? I mean, 2 years, full stabilization before now probably 18 months, closer to 18 months.

That's right. That's what we're assuming is a 2-year lease-up period, can be faster on the AL side and the IL side is definitely seeming to be faster than what we predicted. And then the interesting thing about Trilogy and its development, and we -- I'm sure, fairly, you have 100 other questions. I know because that seems -- -- but there's -- if you think that this world is headed towards disruption from new supply, right? If you think that's what causes the music to stop on seniors, the skilled nursing business is not going to be impacted by that.

There is no development in skilled nursing. If you look at the NIC data, there might be like 3, and it's us, it's Trilogy, right? 3 buildings, I mean. The number of units that are online in America and skilled nursing are actually decreasing. So yes, you've got a little bit of the government risk and reimbursement, which you have to factor into the whole risk-adjusted equation, and we can dive into how Trilogy manages that through Med Advantage plans and others, then they're capturing a much higher rate of growth than inflationary on the rate side there.

But if you're really worried about new supply, Trilogy's model has the most durable competitive advantage of probably any product in America in seniors because of the way that they build both different acuity levels under one roof.

And as you've said many times, all skilled is not created equal. This is high-quality post-acute. 20% of their total post-acute revenue is coming from private pay. And as many of you know that are familiar with Trilogy and have done the tours previously, a full 40% of all their AL campus new move-ins are right out of their post-acute. So the synergistic ecosystem in Trilogy can't be overstated, and that's why they're driving same-store NOI growth that's exceeding most SHOP portfolios.

Yes, it's over 16%. I mean I think most SHOP owners would be happy with.

I think you're reading my mind. I was about to dive into especially the skilled side of Trilogy and why that makes it a unique product type. But also if you screen against some of the larger peers who are more pure-play SHOP, your margins are at different levels.

And I would say I wanted to point out the Trilogy same-store margin reaching post-pandemic highs at 21.1%. Can you break down what's going to drive the margin to -- compared to maybe peers who are in the 30s what does the portfolio mix do to a margin, but what is also the opportunity outside of that margin, what we're seeing today?

Yes. Maybe I'll start and you can add in. So like Jeff said, not all skilled nursing is created equal, not all senior housing is created equal either. I think people are not diving in enough on the difference in kind of that continuum of care within definitionally senior housing.

So if you start at active adult on one end, very discretionary, no care being delivered, the independent living, which is mainly activities and meals being a part of the equation, the assisted living, which now you actually need help with an activity of daily living, bathing, eating, using the bathroom, those sorts of things, it's a real needs-based decision and memory care, even more so, it's a safety issue if you're on your own, right?

So we live in the highest acuity level of the spectrum within SHOP and Trilogy is the same. Trilogy adds this other layer of skilled nursing onto the whole thing. Because you're in a higher acuity level, you're spending money on employees to actually take care of the people, you necessarily have a lower margin than somebody who's just providing housing.

So if your sole focus is, I think highest margin is the best senior housing, what you're really saying is I think the most discretionary senior housing is the best senior housing, and that has risks associated with it that not everybody is appreciated. What happened during the global financial crisis to the most discretionary side of the senior housing continuum of care?

Well, it was the most impacted by occupancy losses because if somebody can't sell their house for as much as they thought it was worth 6 months ago, they're going to wait to sell their house until they think it's more valuable. With assisted living, yes, you have a lower margin. So I think an assisted living margin in the 20% to 30% range is a good target for that and the independent living margin in maybe over 40% or 35% to 40%, maybe even a little bit above in some areas is a good range for that.

But what you get with the assisted living and Trilogy higher acuity is more defensive assets that are more durable through recessionary times and potentially could be more valuable now if you think that pricing power is going to be here for a long time because we're supply constrained, then you probably want to be invested in the product whose demand is the strongest and the most inelastic, and that's the higher acuity of senior housing, right?

Otherwise, you kind of top out where the prices go because now you start making a different decision. Maybe I should just go live in an apartment. Maybe I should just stay at my house. On the need-based side, you don't have quite that luxury. It's more a requirement that I move in the year.

So that's why our portfolio leans that way. That's why we're willing to take -- accept that lower margin. I think margins are still growing from here, and this isn't -- it's not like we're happy. Oh, yes, great -- read the supplemental, it's a great margin. That's what it's going to be for the next 5 years. They're getting better and better and better. Revenue is outpacing -- revenue growth is outpacing expense growth. So that trend is going to continue, but we like playing offense and defense at the same time. So buying these assets that are going to be -- have the longest runway, have the most durability, I think I'm pretty confident our portfolio will not be the first to show cracks.

Sorry, on the margins, are that going to be -- so those growth -- that growth is going to be mostly revenue driven?

Yes, I think that's right. I think it's mainly rate driven, although when you have a certain amount of fixed costs to run the building, as occupancy grows, you're spreading it across a wider base. So your export, your expense per occupied room, it could actually be negative in some cases, like the growth rate.

But our margin expansion in our SHOP portfolio was just over 240 basis points quarter -- Q2 over Q2 of last year, and Trilogy was just under 180 basis points. So strong margin expansion, 330 basis point spread between revenue and OpEx in SHOP, and I think Trilogy was somewhere in the low 2s, low to mid-2s.

And then now when we're thinking about -- well, we started the conversation about the $2 billion worth of investments that you pretty much put to work year-to-date thinking about now the universe that you're evaluating, especially with this new hire of CTO and really focused and we continue to hear the theme of data-driven decision-making.

And also now with your densification, regional operators, what is the opportunity set, especially on the investment landscape? Has this continued to expand? Are you getting more efficient in your ability to evaluate opportunities or more coming to you versus you going out and seeking?

Yes. Look, I mean, the opportunity set has expanded significantly for everybody. I to say that velocity in terms of acquisition opportunity in deals this year over last year is 2x is probably a material understatement. So the opportunity set is expanding for everybody. And the interesting thing is we started seeing -- you didn't ask about pricing, but we originally started seeing cap rates compress materially in Q3 and Q4 of last year, a little spilled over into Q1.

We were very concerned that, that would continue throughout the year and having serious discussions internally about external growth if -- and we've been pleasantly surprised to see that cap rates and pricing have held pretty static for many months this year, and we're still doing the entire $2.7 billion in deals that we're doing this year is right in line with initial yields that we've been quoting to everybody, stabilized yields and so forth.

So the opportunity set is great. As Gabe said, I think at the front end, everything that we've acquired in that $2.7 billion that includes pipeline is Vintage 2019. So this is newer state-of-the-art product. Not all of it, but a lot of it, particularly Kensington is in fortress markets in terms of barrier to entry because there isn't developable land.

You've got to assemble it and then take it through entitlement. LCB was another highly strategic larger $700 million transaction we did this year that I mentioned in Northeastern markets, all 2020, '22, '23 vintage, high barrier to entry markets, high RevPAR--

Continues to be your focus entering into the space.

Yeah--

Well, I know we've just reached the end of time. So I have 3 rapid-fire questions to conclude the meeting. The first one is if long-term rates stay higher for longer, which has the biggest impact on your sector? Higher refinancing costs, longer -- excuse me, lower transaction activity or less new supply?

For us, we don't use a lot of debt right now. We have a really strong balance sheet. I think the big takeaway is less new supply. So that's nice. And I would add less competition from leverage buyers.

Over the next 3 years, will third-party capital become a more important source of growth for public REITs than balance sheet capital? Yes or no?

Not for us.

Or just for your public REITs in general? That's fine. For your sector, will 2027 same-store NOI growth be higher, the same or lower than '26 -- for the sector, not AHR.

Yes. For the sector, I think it will be pretty similar.

Wonderful. Thank you very much.

Thank you Farrell. Appreciate it everybody.

Hello, everyone. Thank you for joining us, and welcome to the American Healthcare REIT's Second Quarter 2026 Earnings Conference Call. [Operator Instructions]

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, 2 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 [indiscernible] and I built this platform beginning 21 years ago, and I led 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 6 months ago, I've been leading since day 1 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 by the way.

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 a 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, by the way, 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 by the way 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 2 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 has 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. And 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 a 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.

Ad development capabilities and bed licenses in a sector where both are valuable and rare, you have 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 in serving as the President and COO of this remarkable company, it's a genuine privilege that compels a sense of enormous stewardship and responsibility. And beyond that, what excites me now the most is how HR is positioned to capitalize on one of the most significant generational investment opportunities that we've seen really in any real estate asset class. The differentiated platform we've built in 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 6 months. GIST 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% and 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%. And 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% and 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 clients. 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 since 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 value and the standards as HR 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 1, 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 HR actually gains capability on day 1 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 4 communities in Georgia and South Carolina for approximately $86.4 million, which deepens our Southeast presence with an existing regional partner and 1 community in Minnesota for approximately $40.5 million with another existing partner.

We also sold 3 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 and never substituted for diligence, every one of them was underwritten to the same rigorous standard we apply to anyone we consider adding to the platform. And 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 7 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 HR. 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 4 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 advisers. 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 unknown reasons, my heart stop 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 1 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 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 6 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 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. Jeff?

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.

[Operator Instructions] 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 -- the focus on expenses, and they've done a terrific job of managing that 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 what the expectations will be. 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, though, 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, that sort of thing. But I think overall, what we're seeing there is really great execution on expense management, especially -- and it's not just coming from 1 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?

Really hard to parse out exactly the dollars attached to that type of value and I'll zoom out first. So our approach to operator support is really a multimodal approach. 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 working on enhancing that real time every day. here. Three, we've got the Trilogy platform, which can provide support in a multitude of ways. We've talked a lot about revenue management. We also can on a private label basis, support operators in sales marketing, employee experience, and we're expanding that and really 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, I would be remiss if I didn't mention our asset management team, which is primarily former operators and really run 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 come on as an operator to AHR platform, the idea is that you're going to be better off than if you were doing it without us.

And 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, 16% NOI growth at Trilogy for their mix and the defensiveness of the mix in their business is very strong, over 20% NOI growth on a same-store basis in SHOP, which is 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. Look, I think my first 1 is just sticking with Trilogy for a second, clearly, the performance has been pretty impressive over the past 2, 3, 4, 5 years as you guys sort of think about going forward and optimizing further. Is there -- where is the biggest opportunity? Is it on the revenue side? Is it on the expense side? Is it just getting more beds in. Just how do you guys think about over the next sort of 3 to 5? Like what's the biggest opportunity for the business now?

Yes, Ron, I'll take that one again. It's Gabe. Thanks for the question. It's a mix. It's great to think about that. I think there's still a lot of occupancy growth that can happen at Trilogy, which is going to be an important part of the story. I think they're ahead of the game in the space on revenue management. And as we get to more and more of our portfolio being functionally full, you can see the revenue management becoming a bigger and bigger piece to outperformance.

So getting out in front of that and building a proprietary software system that they operate, they're using for their entire portfolio today is a key component of it. I think that is still in early stages and continue to improve. That also flows through on the skilled nursing side to the mix of payer sources in the skilled nursing side. As you get to higher occupancy and as you get more sophisticated about revenue management, it unlocks what I think is probably the most overlooked component of our entire portfolio, which is the ability to grow revenue on the skilled nursing side on a per bed basis.

If you look at our Med Advantage rate growth at Trilogy, it was 8.4% on a same-store basis year-over-year. That's probably higher than what people thought was achievable and that's because they're optimizing the mix, they're optimizing for the plans that they partner with. They want to partner with people that are willing to pay them for the level of care that they provide because it costs more to provide that level of care.

So they're optimizing their partnerships and continue to push. I think all of that is critical. But that's just on the same-store basis. Trilogy's development capabilities can't be overlooked either. We've got a strong development pipeline there. We've got 5 campuses, new campuses that are in construction today. And we also have the ability to expand existing campuses in kind of a modular way that derisks the proposition and creates more runway for growth as they optimize their operations throughout their entire portfolio.

Great. And then my follow-up, if I could switch to acquisitions for a second. Obviously, pretty impressive volumes so far. I guess, 1 of the comments you made earlier is that you are seeing more product coming to you guys. And I'm just curious if you could provide a little bit more color what's driving that? Is it debt fund? Is it relationships? Just can we get a sense of like what's driving more product to you all to be able to sort of close at the same underwriting as you were previously?

This is Stefan. Yes, I would -- I think you can easily say that this year has been a very active year. We are seeing a lot of deal flow compared to even last year, where we started to see a pretty strong uptick -- and this year has just been very heavy. We've seen a lot of groups that are coming out basically attracted, I think, by some of the cap rate compression that we saw at the beginning of the year combined with operator performance that has increased value in their assets as well.

So I'd say that's pretty much the big driver. I mean you're just seeing a lot more folks who are finding the opportunity now to come out and bring opportunities to the market. Secondarily, though, I would say -- as we have grown our operator relationships, we are certainly able to see more off-market deals coming to us directly. As we have had about half of our deals come through to us on an off-market basis. And I think, as you know, we've grown our operator base a little bit over the past couple of years, and that continues to just drive more off-market opportunities to us as well.

So I think it's really those 2 things that are driving it. And fortunately, a lot of those deals that we're seeing are deals that have fit into our box. We are being very disciplined in how we are underwriting those deals just as we always have. So combined with the fact that there's a lot of deals that are out there and the fact that -- we just have to find some -- a lot of opportunities that fit us. I think that's a big part of why you're seeing our acquisition volume grow as much as it did.

Your next question comes from Seth Bergey with Citi.

Glad to hear that you're making a good recovery, Danny and best washes. I guess just maybe sticking with acquisitions. You talked -- some of your deals that closed this quarter both new operating partners. So could you just talk a little bit about more of how you go through that process of deciding to kind of onboard a new operator partner and -- is it based off of geographically where they operate? And just a little bit more about kind of how you think about that?

Well, yes, first of all, I'd say most of our operator relationships are coming from prior relationships that we've had with these operators. So that gives us a lot of ability to see not just from an initial due diligence standpoint how they operate, but also having a long-term relationship with them and seeing over history over time, how they have operated in their communities.

Obviously, we're very selective in how we choose our operators. So combine the fact that we're looking for those operators that are going to provide the highest level of care, that can provide the highest level of hospitality to the residents and an employee experience with the fact that there are certain markets that we are targeting geographically, that's kind of what drives us to where we are going to bring in a new operator business.

And obviously, it's not just a matter of identifying the operator and the geography we want to be in, but it also has it's also a matter of what opportunities are available to us in those geographies? Are they going to be a fit for our portfolio and for the operator that we're partnering with.

That's helpful. And then maybe just on the development kind of guidance. It looks like that ticked up a little bit. Is that -- should we think about that as additional kind of developments with Trilogy or is another opportunity and kind of return expectations there?

It's really executing on the plan we've talked about for a long time, Seth, that Trilogy with their developments. The opportunity set there is fairly deep. Trilogy's development capabilities have been evolving over a multi-decade process, and they're actually doing GC work on some of the developments now. So we can see a path to maybe even outperformance to our standards on what the returns will look like there. They're always optimizing for cost and value engineering the buildings, including with this new GC project. So we like that.

We really like the villa projects that are expansions that we focus on where the demand dictates that it's already there, so you can pre-lease those properties, presell them, and there is very little operational drag that comes along with them. But I think at this moment in time, we're going to continue to do what we said, which is 3 to 5 new campuses opening a year at Trilogy with expansion projects surrounding those as well, and they're largely filling and performing to the underwriting expectations that we had.

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

Danny, yes, great to hear from you and that you're doing well. Just I want to wish you good health and all the best moving forward. The team has highlighted that it's been a banner year of investments. Gabe, you highlighted the generational opportunity ahead of you. I mean has there been any further discussion or change in your view around selling more even all of your outpatient medical portfolio to accelerate the growth in the senior housing?

Yes, Austin, Jeff Hanson here. So look, I mean, yes, the focus and the energy and the capital of the company is squarely focused on the generational opportunity in both SHOP and Trilogy and expanding. So as you've heard Brian and others say before, we're well aware of the embedded value in the OM platform. And as I think you know, we've already sold 1/3 of the buildings the attributable NOI has gone from mid-30s down to where it is today, sub 13%, which is going to sub-10 quickly, and that's by design. We're always looking at alternatives and ways to drive long-term shareholder value. So we've been selling. We understand there's value there, and we're going to continue, of course.

I appreciate the thoughts. And then I just want to touch on SHOP a bit. I mean can you talk a little bit about the demand funnel and trends you're seeing in the July and August given maybe some of the softer early seasonal acceleration from the first quarter into the second quarter. Just curious how that looks moving forward?

Yes. One thing to point out before I answer that question directly is that we have a little bit of a different acuity mix than most of the peers. We're more focused on the needs-based part of senior housing, which is assisted living and memory care and about 80% of our SHOP bets fall within that assisted living memory care component of the business as opposed to the independent living part of the business, which is more discretionary. As a result, you're dealing with higher acuity residents. And part of having higher acuity residents means that there's a little bit more seasonality in the occupancy because of involuntary move-outs that come through the winter season. It's just a part of the business.

So we see a bit of a dip typically in Q1 that ramps into Q2. And we're seeing the selling season now in July actually looking pretty strong. And we -- we're ahead of where we were in Q2, ahead of where we started last year at this time, and that provides more pricing power as well. So I think with those -- coming off of a higher occupancy number in July, having sequential growth that's strong and still feels good, opens up new doors for revenue management, we're going to be focused on that as well.

Your next question is from Michael Carroll with RBC.

It's good hearing from you too, Danny. Great career. Just switching over to Jeff. I wanted to touch base with you just given that you've been taking on as the permanent CEO. Like what are the key initiatives that you're kind of identified that you kind of want to implement by -- since you kind of take over this role?

Yes. And look, because Danny and I founded the platform together beginning 21 years ago, it's not just with the leadership announcement a couple of weeks ago. I hit this seat in the first week of February, unexpectedly, of course, at Mac7 with the team that I built with Danny over the last decade plus. And it's all about scaling for -- as I said in my prepared remarks, to be able to post the growth that we're being valued to post, while doing so with discipline and responsibility. So there's already been a plan in place, and we're executing it in an accelerated fashion because we view really 2006 and 2007 is an inflection point in the overall arc and growth trajectory of the company. So number one is acquisition velocity.

There are really 4 core areas: Number one, acquisition velocity while maintaining very high standards from assets to market to operator quality to underwriting rigor, right; then very critical, and we've been working on this for the past 6 months, haven't made announcements yet, but we will very shortly in terms of onboarding industry-leading talent across the entire org chart. And this is all in the support of rapidly scaling SHOP from the Investments division at 3 levels to the SHOP portfolio and asset management division at 2 or 3 levels and also technology.

I'd say number three, is tapping further into Trilogy to drive even more innovation across our broader portfolio of operating partners. And the fourth would be aggressive expansion of relationships and footprint with existing operators. There are other platform initiatives that we've been working on. Those are the 4 primary -- and I would just say that the overarching theme, if you will, is measured aggression. And because this is the time to do it with, again, a generational opportunity before us, and you're going to see a rapid acceleration of HRs, velocity and execution in order to capitalize on the setup that's before us.

And Mike, it's Gabe. I want to add just a little bit to that. AHR was uniquely situated to handle this situation because Danny and Jeff ran the company together before. Jeff was the former CEO, had served as CEO for 16 of the last 21 years, had been very involved as the Chairman of the Board. So when he stepped in, in a time of need, he was able to hit the ground running. And Jeff has unique gifts as a leader. Danny has unique gifts as a leader. What Jeff brings is a level of intensity and a track record for growth and scaling that's really incredible and fueling an acceleration of the platform enhancements we've been talking about.

So we -- I think he was underselling exactly how fast we're moving and how hard he is charging. We're making really good progress, and we feel really good about where we're going to end up this year.

That's good to hear. And I guess circling back to Jeff, I know since you have been the CEO step down. I mean how long do you want to be the permanent CEO? I mean you kind of looking at these initiatives and kind of once you get them up and running and kind of making good progress. I mean is that at a point in time where you're wanting to step back down? Or how should we think about that? Or is this more of an indefinite type move?

Listen, yes, I'm glad you asked that, thank you. I retired 4.5 years ago for a particular set of reasons. Those reasons haven't changed. But ultimately, I was part of an emergency succession plan that's been in place for the last decade that Danny and I have been working on with a very sophisticated Board. And ultimately, the way you should view this CEO ship isn't the typical into perpetuity CEO ship. Now we've got a sophisticated Board that's not establishing arbitrary time lines because that would be inappropriate. But you should view my CEO ship as mission and job driven.

And the beauty is, again, there's been a decades-long succession plan that began with hiring present company, Gabe, Brian, and much of the rest of the team at the C-suite and even below the C-suite, some of whom you know, some of whom you don't know as again, a long-range succession plan that we're in the later stages. So I'm here to do a job with this team attached to my hip, and we're going to do it very quickly. We're going to do it very effectively. And will it be measured in a period of months or a few quarters? No, but you shouldn't expect it to be measured in years either.

And I'll tell you, look, the beauty is, I don't need the money. I don't need the job, but I love this company. Danny and I built it from the ground up together. So nobody comes to this role at this particular inflection point, time and opportunity with this platform with more intensity and higher agency than someone who built it. And Matt, Dan and I put our balance sheets up to establish our predecessor companies. So there's a high degree of agency. And the way I'm going to value -- the way I'm going to measure my success in what we do over the next 12 to 18 months is how rapidly the next generation of leadership takes this company forward and post growth that Danny and I never thought possible in the seats, right? That's how we're going to measure my success in the out years.

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

Great to hear from you, Danny, congrats on your successful career and good luck with your retirement. So my first question is really about Trilogy. And I know you already -- you kind of touched on this, but is it possible to quantify the remaining potential for the expansion of your current portfolio?

That's a good question for expansion projects on the 150 assets at Trilogy currently operates. I can't tell you the exact number. I can tell you that we are -- there are more opportunities than people probably understand.

We look at -- we have currently, I believe, about 30 properties communities at Trilogy that have excess land that we own today or have a direct path to ownership of where we can expand the villa projects. If we do 5 or 6 villa projects a year, that's a multiyear runway for villa expansions. I think that's the way to think about it. And that's just what we control today and not the other communities where we would go out and have to source land to do it.

The expansions that we're working on, though are -- go well beyond villa projects, as you know, Farrell, where we can add wings that typically requires less land. So there's probably a significant opportunity set there from a physical barrier perspective. And we also add memory care -- stand-alone memory care villages that are called the legacy village that are about 40-unit memory care communities that are next to the Trilogy main campus and those show up in our expansion project list on the development list as well.

So a long way of saying, I can't tell you exactly the number of communities that we have, but I feel comfortable that we have at least 5 years plus of opportunities that we control today at the current pace.

Good to hear. And my other question is you did touch on this slightly, but just to dig a little bit deeper on your underlying assumptions, especially with the repass guidance? And maybe I'll narrow in on the shock same-store NOI growth, especially the levers of RevPAR and occupancy. What are some of those underlying assumptions that you kind of baked in, even if it's just directionally kind of keeping things more stable or taking into consideration the potential of the seasonality with the peak leasing season?

You're asking about the assumptions baked into the guide for the rest of the RevPAR...

Occupancy -- I mean we don't separately disclose that. One or 2 of our peers may actually talk about that. We have we have multiple scenarios whereby we are growing occupancy faster and we're not pushing on rate as much. And frankly, across the portfolio, it's not entirely homogenous. It's not as though every single campus that we own is 89% occupied. We've got some that are lower occupied, some that are higher occupied. We're pushing rate more on the more highly occupied ones. Expense controls is always appropriate. That's universal. We're always trying to make sure that they're pushing on that.

Generally speaking, I think the more highly occupied buildings we're pushing on rate I think you're -- we would expect to see rate increases in the -- somewhere between 4% and 6% range. Control expenses on the lower occupied buildings. Again, we're not pushing rate. We may even be giving small move-in specials, but that's a really small piece of the portfolio. And there, it's grow occupancy. And I think that's -- again, it's not one set of circumstances. It's very specific to the building and the submarket.

Your next question is from Michael Goldsmith with UBS.

And Dan, great to hear from you. I'm glad to hear you're doing well and wishing you continued good help and all the best. Can you talk about the senior housing acquisitions and the returns they are delivering today relative to maybe the last prior years. We know there's a lot of capital flowing into the space and have seen some operating concussions, but then you've also mentioned several times that the recent acquisitions are performing ahead of underwriting. Just trying to reconcile those 2 competing dynamics and how that results in the returns that you're seeing?

Yes, this is Stefan. So I guess one thing I want to point out just from the very beginning is that what we're buying now is high-quality institutional-grade assets that are in infill markets or dense suburban areas. So I think -- newer assets as well. So I think the one thing you could take away from this is that despite the fact that we are buying even higher quality assets today than maybe we had been a year ago, our underwriting is not changing. And our yields are actually not changing much either. I mean we're coming in at initial yields of, I'd say, mid-5s to low 6s. We continue to reach stabilization of 7 or above.

And I think you could easily say that there was some -- obviously some cap rate compression that happened at the tail end of last year, at the beginning of this year. But it just really hasn't -- it hasn't really continued to accelerate the way it had 6 months ago. I think we are starting to -- we have seen that, that has stayed fairly consistent. And part of that is, again, a lot of off-market deals that we're seeing where we are getting first buy to the apple. But I also think that just on an industry basis, people are continuing to stay fairly disciplined at this pricing level.

Obviously, there will be times where there will be the one-off deal that gets sold at an extremely low cap rate. But a lot of times that might be strategic. But I would say we've been able to hold firm in our yields, and I think the assets we're buying are really, really good.

Yes, Michael, this is Jeff. I'll expand a little bit. Stefan and I were actually talking about this fairly late last night here in the office. And we didn't really start to see cap rate compression and upward lift in pricing until around the third quarter last year. And we saw a fair -- a pretty decent amount of cap rate compression third, fourth quarter definitely into the first quarter -- part of the first quarter this year. But over the last several months, it's been pretty static, which is surprising, and we're grateful for that, quite frankly.

And I want to underscore the commentary that Stefan mentions as it relates to quality because the vast majority of what we're buying ar in core infill markets with very strong barriers to entry. Almost all of them are first ranked suburbs and gateway markets. Many of the submarkets, not all, but the majority of the submarkets, both of what we've closed year-to-date and what we have locked up and in the pipeline expected to close by the end of the year. These submarkets require land assemblage. -- there isn't developable land available. So you got to assemble land, there are challenging entitlement processes. And many of these submarkets represent 5- to 8-year concept of delivery, if you can actually assemble the land and get through the entitlement process. And we're still taking these deals down in the mid- to upper 5s to low 6s. -- with real first year yield stabilizing, as Stefan said, to 7 and above.

And more than half of what we have in the pipeline plus year-to-date closed is actually value-add and profile, and the balance is stable at what we call stabilized. But Stefan, you mentioned last night that the average occupancy of the value add is 82%. So in the low 80s. And even what we call stabilized are actually average occupancy in the early -- in the low 90s, still representing operating leverage and pricing power. So we're really pleased with what we've closed year-to-date and what we've got closing.

And I think it's important to keep in mind, where are we competing? I think the first and foremost, we don't need to buy $5 billion to $20 billion of acquisitions this year to meaningfully move the needle on our earnings, which is super helpful. We've been blessed with a cost of capital that while it's not the greatest in the sector, it's better than a lot. So we're not necessarily competing with other folks that are -- that may require a higher going yield that's invariably going to wind up being more flat than what we're buying.

And then when you slice that again by saying, look, we're doing 50% of the deals are off market. Now we're suddenly diminishing the amount of times that we're competing solely on price.

And one last thing on acquisitions. Importantly, it hasn't been asked yet, but the average age of the $2.2 billion that we've referenced, the $1.4 million closed year-to-date, the $800 million in the pipeline is average 2019 vintage. And even after a year has gone by, our average shop asset age has dropped from 29 years to 21, 8 years in that -- so it's significant improvement in a very rapid period of time.

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

This is Robin Hadeland sitting in for Juan. Happy to hear that Danny is doing well. I wanted to touch on some of your of where assets are trading relative to replacement costs and if your view of replacement cost includes a developer profit or margin?

Yes, this is Stefan. I would say, generally speaking, we're still able to buy below replacement cost. And considering where construction pricing has gone considering the high cost today that we're seeing in the construction of high-end senior housing communities. It's -- we'll still be able to buy below what it would cost for someone else to build that. But I think you also need to consider the fact that, like Jeff mentioned, it's not just the actual cost of building. It's what's the time line it would take to build that what are all the approvals that you need? How do you acquire that land.

So I think you put all of that together what we're able to do by buying today at something that's below replacement cost is really beneficial for us. And I think we're very pleased with what we're able to acquire because of it.

And as a follow-up, curious if you have any update on the Memory Care Center of Excellence. And if you started building out any initiatives yet?

Yes. Thank you for asking about that. So if the our Trilogy partner is working on the Memory Care Center for Excellence. It's one of the things that I think will be the mark [indiscernible] tenure as CEO of Trilogy. It's something that highlights what we believe deeply about operating in this space that we should continue to innovate, continue to get better, invest in any way we can to help make the experience for the seniors that are in our buildings better. It's something that we hope to in the future, not only be utilized the Trilogy, but throughout our platform. And not only just our shop operators, but hopefully to be a standard for everyone in the industry to hold themselves to. It's still in early stages, and I think we'll be an exceptional thing to be a part of. I'm excited that they're working on, and I appreciate that question.

Your next question is from Rich Hightower with Barclays.

All the best to Danny and his family as well. Just one for me. But going back to some of the commentary on really accelerating the growth of the platform overall. I think you measured aggression and increasing velocity where some of the phrases used, but help us understand maybe how that flows through to G&A or capital needs? And is it measured in the millions, the tens of millions? Just how should we think about some of the cost of that build-out as you grow that way?

Yes. Look, I think you saw -- if you looked at our guidance, I think you saw that there was an uptick in our G&A slightly. The vast majority of that uptick is, frankly, it's stock compensation, and that's tied to the fact that the price of the stock has gone up.

Beyond that, there are some additional spend on the G&A side. We've talked about the platform. We've talked about some serious talent that we're adding to the equation. The reality is the G&A is going to grow at a much, much slower rate then our NOI is growing, I think from like 31% NOI growth from last year to this year, which is pretty great. And I can tell you our G&A is not going to grow by 31%. But the idea here is to build out the platform to carry the company into the next level of growth beyond where we are today, investing in people, investing in the platform, investing in technology to be able to continue to make real-time decisions. All those things are going to be critically important for allowing us to continue to grow the company and scale.

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.

Hello, everyone. Thank you for joining us, and welcome to the American Healthcare REIT Q1 2026 Earnings Conference Call. [Operator Instructions] 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 First Quarter 2026 Earnings Conference Call. With me today are Jeff Hanson, Chairman and Interim CEO and President; Gabe Willhite, Chief Operating Officer; Stefan Oh, Chief Investment Officer; and Brian Peay, Chief Financial Officer. 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, 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 position and prospects. All forward-looking statements speak only as of today, May 8, 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 our Chairman, Interim CEO and President, Jeff Hanson.

Thanks, Alan, and good morning, everyone. Before the team gets into the quarter, I want to provide a brief update on Dan Prosky, our CEO and President. As you know, he experienced a health event in February, and he continues to recover at home. We're very pleased, by the way, to share that he underwent the only important medical procedure that was actually part of his treatment and recovery plan. That happened a couple of weeks ago. It went exceedingly well, and he's in good spirits and making strong progress at home.

I'd also note that during the entirety of this interim period, he's remained fully engaged in each of our Board meetings virtually, and he and I speak regularly each week on the business front. Although we don't have a definitive time line for his reentry given the recent procedure, we do expect to have that clarity soon and look forward to sharing the details with you in the near term.

In the meantime, AHR is advancing with full momentum, and I want to be clear about what that looks like from where I sit. As most of you already know, I served as Chairman and CEO of our predecessor companies. So stepping into this seat was not a transition into unfamiliar territory. To the contrary, it was a return to a business, a strategy and a team that I know intimately and have significant track record with.

Gabe, Stefan, Brian and the broader leadership team are executing at a high level, and my role has been to lead alongside them day-to-day and full time since Danny's event, making sure that we continue to operate with the discipline and ambition that you expect of AHR. The results you'll hear this morning reflect that fact.

Q1 was another exceptionally strong quarter across core metrics, double-digit same-store NOI growth for the ninth consecutive quarter, efficient capital formation and accretive deployment and even further strengthened balance sheet and raised full year guidance. Rather than isolated data points, these represent the output of a strategy that we've forged together over time and a team that's executing consistently.

What gives me the greatest confidence, though, is what lies beneath these numbers. AHR exists to deliver higher quality care and superior resident and patient outcomes while also striving to be the most sought-after and trusted capital partner for some of the best operators in the space. This mission, by the way, isn't the slogan. It's the operating logic that AHR fully embraces and that our people live each and every day through our strategic operating partnerships.

When we get our operator relationships right, underwrite with discipline and structure capital to support long-term performance rather than short-term optics, financial results naturally follow. Q1 is another quarter of evidence that this approach is not only effective, but that it's effective at scale.

With that, I'll turn it over to Gabe and the rest of the team to walk through our operating performance. Gabe?

Thanks, Jeff. Q1 2026 was another strong quarter for AHR's operating portfolio. We delivered total portfolio same-store NOI growth of 12.1%, our ninth consecutive quarter of double-digit total portfolio same-store NOI growth. That kind of sustained consistency reflects the confluence of 3 key things: the enduring strength of the fundamentals underpinning long-term care, the quality of our regional operating partners and the durability of our platform.

Let me say a word about the strength of those fundamentals because I think it's important context for everything you're going to hear today. Long-term care demand is being driven by a demographic wave that is still in early stages. The 80-plus population, the core consumer of long-term care ranging from independent living to skilled nursing is growing at an accelerating rate as baby boomers age. Meanwhile, new supply growth across senior housing remains near historic lows.

The economics of new construction don't pencil for most developers today, and that dynamic hasn't changed recently. What you get from that combination, surging demand meeting constrained supply is the compelling operating environment our operators are experiencing right now. Occupancy surpassing prior high watermarks with potential for stabilized occupancies to settle well beyond 90%, sustained rate growth and expanding margins. We believe this trend will continue well into the next decade, now into the quarter.

Our ISHC segment, also known as Trilogy, delivered same-store NOI growth of 14.5% with same-store occupancy averaging 91.2%, up roughly 220 basis points year-over-year. Same-store revenue growth of 6.9% was driven by both rate and occupancy improvements. A big driver of rate growth has been the continued improvement in quality mix, which now stands at 75.5% of resident days on a same-store basis, up roughly 60 basis points from a year ago and up 200 basis points on a total portfolio basis.

This shift directly reflects Trilogy's continuing focus on alignment with payer sources, especially Medicare Advantage plans who value quality outcomes and are committed to paying a rate necessary to deliver high-quality care, which, of course, is the hallmark of Trilogy's business. Trilogy's clinical reputation is what earns its strong census, and we continue to invest in maintaining and expanding it.

I'm proud to report that as a result of Trilogy's consistent use of the various levers at its disposal, Trilogy same-store NOI margins have now eclipsed 20% for the first time since COVID. Congratulations to the Trilogy team for surpassing another important milestone.

Turning to SHOP. Same-store NOI increased 19.7% for the first quarter. Same-store occupancy averaged 88.6%, up roughly 255 basis points year-over-year, and same-store NOI margin expanded approximately 215 basis points to 20.6%. Performance in the SHOP same-store pool reflects our approach to bottom line optimization. more specifically, the utilization of various levers available, which enable us to continuously calibrate financial performance through dynamic revenue and expense management in our operating portfolio.

Early in the year, that meant building a strong occupancy foundation to combat what I view as regular seasonality pressures in our high acuity portfolio and positioning the portfolio to capture incremental demand as the selling season really gains momentum. As move-in activity accelerates in the spring and into the summer, we're highly focused on managing street rates while taking a more measured resident-focused approach to in-place pricing.

This ability to adjust in real time market by market, asset by asset, by acuity level and even unit by unit is absolutely central to how we seek to sustain NOI growth above historic averages over the next several years and without compromising high-quality care and outcome standards that take precedence.

The operating leverage in this portfolio continues to build. As occupancy continues to push higher, each incremental dollar of revenue flows through at a disproportionately higher margin. Combined with the structural demand tailwinds I described earlier, we remain highly confident in our ability to deliver sustained double-digit NOI growth through 2026.

I want to close by thanking each of our operating partners as well as our AHR asset management teams for their unwavering commitment to the residents and the communities they serve. Trilogy Management Services, Senior Solutions Management Group, Great Lakes Management, Compass Senior Living, Heritage Senior Living, Cogir Senior Living, Priority Life Care, Heritage Communities and WellQuest Living. Your work is the foundation of everything we're able to report today, and we thank you.

With that, I'll turn it over to Stefan.

Thanks, Gabe. Q1 2026 was a productive quarter for our investments team, and I'm pleased to say the volume and quality of what we are seeing in the market has only increased as we move through the year. Year-to-date, we have closed $249.2 million of new acquisitions, all within our SHOP segment.

Approximately $162.8 million of those acquisitions closed during the first quarter. This includes the 5 previously announced communities in California and Missouri for approximately $117.5 million and 2 additional properties in Kansas that closed after our last earnings call, totaling approximately $45.3 million. Subsequent to quarter end, we closed on 6 more SHOP assets in Georgia and South Carolina for approximately $86.4 million, deepening our Southeast presence with one of our trusted regional operators.

Every deal we do starts the same way with the relationship. Before we spend time underwriting any asset, we've underwritten the operator first. Their commitment to resident care, how they run their buildings, how their teams have performed under varying circumstances over time. In parallel, we built a deep understanding of the market before we invest capital.

That operator-first approach means that a lot of our activity comes through off-market or limited process channels where we have a genuine informational advantage. Our trust in the operator drives our confidence to pursue opportunities alongside them, informed by real insight into execution, consistency and alignment. This depth of conviction is simply not available to everyone underwriting the same asset in a broadly marketed process. And it is a meaningful competitive advantage in how we price risk and project returns.

Our underwriting process is equally deliberate. We look at market demographics, operator expertise, acuity mix, asset age, the holistic long-term cash flow profile and the competitive set, not simply initial yield. The goal is not near-term accretion for its own sake. It is building a portfolio of assets that will generate durable compounding NOI growth for years to come. We are highly selective and that selectivity has served us well.

What gives us added confidence heading into the back half of this year is what we are seeing since we closed. Across a number of our acquisitions we completed last year, performance is already tracking ahead of our initial underwriting. That is a direct reflection of how we approach every deal from day 1.

The asset management plan is developed with our operating partners since they are touring and underwriting the deal alongside us. So by the time we take ownership, that plan is already in motion and our partners are executing against it. Seeing those early results come in above expectations reinforces our conviction in both the process and the operators we are deploying capital with, and it informs how we underwrite and structure new investments today.

In addition to the approximately $250 million we've closed to date, we have a pipeline of over $650 million of awarded deals that have yet to close. We expect to close these well before the end of 2026 and feel very good about the quality and composition of what's in front of us.

On development, our in-process pipeline totals approximately $173.9 million in expected cost, of which approximately $52.4 million has been funded to date. These are predominantly Trilogy campus expansions and independent living villa projects. They are capital-efficient growth opportunities layered onto existing operational platforms that should extend our earnings runway at attractive yields with a limited market risk.

In summary, we remain well positioned with capital available to execute quickly and efficiently, a growing network of trusted operators and a pipeline that gives us real confidence in continued accretive deployment through the balance of this year at the very least.

With that, I'll turn it over to Brian.

Thanks, Stefan. Q1 2026 was another quarter of strong financial performance, and I'm happy to report that these results support an increase to our full year 2026 guidance. For the first quarter, we reported normalized funds from operations or NFFO of $0.50 per diluted share, representing a 31.6% growth compared to $0.38 per diluted share in Q1 2025. These results were driven primarily by the continued double-digit total portfolio same-store NOI growth, supplemented by accretion from the $950 million of acquisitions completed in 2025 that are now contributing to earnings.

Our proactive hands-on asset management approach has continued to deliver solid financial performance at the start of 2026, and the strength of Q1 gives us confidence in raising our same-store NOI growth guidance for the full year to a range of 9% to 12%. At the midpoint, our updated guidance implies another year of double-digit total portfolio same-store NOI growth for the third year in a row.

At the segment level, our current full year 2026 same-store NOI growth guidance is as follows: 11% to 15% growth at Trilogy, 15% to 19% growth in SHOP, 0% to 2% growth in outpatient medical and a range of 2% to 3% growth in our triple net lease property segment.

Turning to the balance sheet. Our net debt to annualized EBITDA improved to 3.0x as of March 31, 2026, down from 3.4x at the end of 2025 as strong EBITDA growth continues to improve our already attractive leverage profile.

On the capital markets front, during the first quarter and the first few days of the second quarter, we entered into forward sale agreements under our ATM program to sell approximately 8.1 million shares for $412.7 million in gross proceeds.

As of today, we maintain unsettled forward agreements under our ATM program, representing approximately $527.4 million in gross proceeds, assuming full physical settlement. With well over $1 billion available on our existing program, we will continue to utilize this tool opportunistically depending on how the stock is trading.

I also want to highlight the credit facility amendment completed subsequent to quarter end. We increased our unsecured revolving credit facility capacity from $600 million to $800 million. We extended the maturity to April 2030, and we have two 6-month extension options. And as of today, there are 0 amounts outstanding on the revolver.

Between our forward sale agreements and the increased and available capacity on our line of credit, we have meaningfully derisked the execution of our external growth plans, which include the over $650 million Stefan described. This should provide us with the ability to deploy capital at scale throughout 2026. Combined, the strong organic and external growth is prompting us to increase our full year 2026 NFFO per share guidance to a range of $2.03 to $2.09 per share, up $0.04 at the midpoint and would now reflect 20% growth in NFFO per share over 2025.

As always, our guidance includes only those transactions and capital markets activity that have been completed as of today. We are entering the rest of the year from a position of strength, growing earnings, continuing to improve our already attractive leverage, creating ample liquidity and fostering relationships with operators that continue to deliver strong performance. We remain focused on executing our mission of facilitating high-quality care and health outcomes for residents while creating long-term value for our shareholders.

And with that, operator, we'd like to open the line for questions.

[Operator Instructions] Your first question comes from the line of Farrell Granath from Bank of America.

My first one is in regards to the same-store NOI growth guidance within your segments. So we know that the Trilogy or integrated health campus guidance was increased, but SHOP remained unchanged and especially that all segments outperformed the midpoint of your guidance this quarter. Can you just give a little bit more color of how you're thinking about that pacing through the rest of the year or generally, if there's any baked in conservatism?

Sure. So Trilogy had such a strong quarter that ultimately, we felt a lot of conviction that they were going to continue to exceed. If we didn't raise guidance, then the rest of the year would have looked flat relative to -- or relatively flat compared to the first quarter. So that was a no-brainer.

On the SHOP side, we still have tremendous conviction on the space. We love our operator base. We believe greatly that they can continue to deliver. If you look at the supplemental and go into the SHOP portfolio, what you'll notice is that sequentially from Q1 of 2025 to Q2 of 2025, is a pretty significant uptick. I think we increased -- the NOI increased on the same-store pool by a little over 9.3%. So I think that's part of the reason why it gave us pause. It is only the first quarter. But as I say, we have tremendous conviction about their ability to continue to perform.

And then also my follow-up question is in regards to your sources of capital. I know you just ran through a little bit on the lowering of your leverage as well as the ATM that you have outstanding. Can you just walk me through how you think about sourcing of capital and use when you're thinking about your acquisition pipeline going forward?

Yes. Listen, so REITs are an interesting vehicle required to pay out 90% of your taxable income. The truth is it's really difficult to maintain a lot of retained earnings. Having said that, our Board has decided on the dividend policy that is allowing us to retain a not inconsequential amount of retained earnings. So that's the cheapest form of equity that we can source, cheapest form of capital. So that's first and foremost.

And then secondarily, we have dedicated ourselves to a disposition program. Over time, we've been selling smaller, less strategic, lower growth assets. That's certainly a nice source of funds for us to be able to utilize for external growth, for debt paydowns for whatever else might come up.

And then beyond that, on the equity side, we have been a user of the ATM in the past based on the stock price. And I think we will, again, based on stock price, utilize the ATM in the future. It's an incredibly efficient vehicle for raising capital. And when you can do it on a forward basis, you can do it in a nondilutive way.

Stefan will probably -- I'm certain this question will come up later. But obviously, our use of those funds, we're doing it in an immediately accretive, but more importantly, in a long-term accretive fashion. So those are all the sources of equity that we're -- or capital -- sorry, I did leave out the line of credit.

We're happy at 3x debt to EBITDA. There's nothing bad that happens to us to the extent that, that number continues to go lower. It really just creates dry powder as long as we can continue to hit the earnings growth that we have projected. We do have $800 million of capacity. In thinking about those as alternatives, I don't think you're going to see us run the debt up very much at all. We're committed to running the company in a -- with essentially investment credit rated ratios because we know that it's going to help the equity trade at its best possible multiple.

Your next question comes from the line of Austin Wurschmidt from KeyBanc Capital Markets.

Gabe, the Trilogy portfolio this quarter saw very strong sequential NOI pickup from all the levers that you've spoken about in the past quarters. I think it was even better sequential growth versus what you saw last year, which was really strong. Recognizing there's a lot of moving pieces and some seasonality in this business, I guess, what -- does that sequential strength carry momentum into the spring and summer? Or is that not necessarily the right way to think about the business?

I think that's a great way to think about the business, Austin. One thing I'll point out, in 2025, there were a few things that -- well, a lot of things went right for Trilogy, many of which are repeatable, a few were one-time things. So for example, we talked about the Medicare Advantage strategy and trying to find different ways to optimize our partners on that front. And last year, in March, we signed a new contract with a partner that was substantially higher, opened up more residents to Trilogy facilities. So had a really strong impact on '25 earnings. That would be a bit of a headwind for 2026.

I think counterbalancing that is exactly what you're talking about, which is we're coming into the year with higher occupancy than we had last year at Trilogy, and that higher occupancy unlocks the ability to not only push rate on very full buildings within the Trilogy ecosystem that have occupancies in some cases, at near 100% on the private pay side, but it also helps us to continue to work on the Medicare Advantage strategy on prioritizing the partners that actually are willing to pay for the quality of care that Trilogy delivers.

And that means that at Trilogy, there are a lot of different Medicare Advantage plans you could have a contract with. Some of those are looking for the low-cost provider. Some of those Medicare Advantage plans are. Some are realizing that the best way for the Medicare Advantage plan to make money is to spend -- is to provide the highest quality of care to the resident to get them healthy faster, and that's exactly what Trilogy brings to the table.

So I'm still a big believer in Trilogy. They're still one of the best operators I've ever seen. If there are ways to pull different levers to continue to push on NOI, they'll figure out a way to do it. And we have the right kind of unique alignment with our management contract with them that will reward them for their outperformance with AHR stock like we've talked about in the past as well.

That's helpful. It kind of leads a little bit into my follow-up question, which is you highlighted NOI margins are now back above 20% first time since COVID. Given the higher occupancy today and that ability to push rate on the private pay side of the business, I mean, what's sort of the longer-term or medium-term opportunity is set to drive margins across the Trilogy portfolio?

Yes. I think we did 134 basis points of margin expansion last year. That was a pretty good mark for them. I think in some ways, it does get -- you could see it getting easier in 2026 as you push further ahead because the occupancy and the rate management that we're talking about. In some ways, it gets a little trickier because the Medicare growth rate is decelerating a little bit. That number is triggered off of inflation. As inflation comes down, that number comes down as well.

So one other thing I haven't talked about yet is the development pipeline at Trilogy. And currently, if you look at what we've disclosed in our supplemental, you'll see that it skews towards IL and senior housing. Those businesses have higher margins. And as we lean into those product types and try to expand on the AL and IL side of their business, I think you'll see margin expansion as a result of the asset mix shifting to more private pay as well.

Your next question comes from the line of Michael Carroll from RBC Capital Markets.

Gabe, I wanted to continue on that line of questioning, specifically talking about Trilogy's expansion plans in Wisconsin. I noticed that the development that was recently broke ground was in Wisconsin. I mean, should we think about the growth that Trilogy is going to pursue in that new state largely going to happen via developments?

I think that's probably the base case, Mike. So what we would like to do is get to a spot where the best operators have a regional presence. And why the regional presence matters is because they can get a regional director to oversee multiple different facilities and there are synergies from sharing of employees and having an upward path for employees that are within your campuses.

We'd love to see a concentration of Trilogy campuses in Wisconsin where we can utilize the benefits of that kind of regional strategy that have worked so well for Trilogy in the past. It's hard for Trilogy to find acquisition opportunities that allow them to run their integrated model, and we don't want to move away from the integrated model.

So maybe 75% of Trilogy's assets are purpose-built for their business. It's one of the reasons why they outperform. There's operational synergies and care synergies that come from having AL and SNF under one roof. And if you have a Trilogy prototype that's been value engineered over several iterations, it's just easier to do that.

So I think that's the base case. We're always looking for creative solutions. The Portage campus that's on -- that's in our supplemental is one of those interesting opportunities. It was actually a defunct assisted living building that went dark. And we bought that. It was a 50-unit building, which is really hard to operate. We bought that and instead of building ground up, we added on the necessary skilled nursing component.

So it was a really smart way to actually lower the cost of the total development costs, and it's going to be a good deal for us because of it. I think those opportunities we will continue to look for, but the base case is the Trilogy prototypes.

So Mike, keep in mind also, the state that Trilogy has the most concentration is Indiana. They may have 7,000 to 8,000 beds in Indiana. Think about the total addressable market in Indiana. There are far more customers than 7,000 to 8,000 -- potential customers than 7,000 to 8,000 in Indiana. So they can continue to grow in Indiana and all of the other states that they're in, in addition to Wisconsin.

Yes. No, that's helpful. I mean just kind of sticking with Wisconsin a little bit is like how many assets do you really need to get that regional scale? And then how many developments in Wisconsin are you willing to pursue at a time? Or should we think about that as 1 a year? Or can Trilogy pursue more if they really like the success that they've been having and trying to build that necessary scale right away?

We're evaluating all of those things right now currently. I think -- to your first question about how many do you want for a regional concentration, I think you want to be in the 5 to 6-plus range in order to get there. We're committed to what we've said in the past, 3 to 4 new campuses a year with Trilogy. That's currently a mix of Wisconsin and its other existing assets and partially because of the CON requirements.

And that's one of the other things that widens the moat for Trilogy and it creates a competitive advantage is that these are CON states. You need the licenses in Wisconsin. That's something that we need to manage through to make sure that we get the license in the counties that we want to be in as well. So I think it will be incremental within the Wisconsin market as we augment it with markets that Trilogy is already identified in the markets they're currently in.

Your next question comes from the line of Seth Bergey with Citi.

I guess I just wanted to dive into the $650 million kind of pipeline a little bit more. Just kind of geographically, where are those assets located? And are those primarily with existing operators? And then I guess the third point would be just have your yields that you're kind of underwriting changed at all just given it seems to be that there are more kind of players entering the senior living space?

Yes. So I would say deal activity right now is very high. I mean, I think our pipeline is in great shape. Obviously, we've closed $250 million so far this year. We have another $650 million that's been awarded. So -- and it's almost exclusively in SHOP. We're not surprised that we're seeing other people showing a lot of interest in this space. It's attractive. It's still in the early stages of extended demand growth. But I think we're definitely in an advantageous position.

Half of our deals are coming in on an off-market basis. We've been able to raise capital that allows us to compete on the targeted assets that we really want to buy. And we have a good reputation as a buyer. If you look at the composition of our deals, again, higher quality, newer primarily with existing operators that we have in our portfolio today. 100% of what we've closed so far has been with existing operators.

Our pipeline is probably a mix of about 80% existing, 20% that is new. And we continue to look in all the major regions that our operators are already located on. I mean, that is going to be -- the primary focus is growing in the areas where they have their expertise. So it has been -- the team has done a great job of identifying, sourcing, underwriting, working with our partners on these acquisitions. And I think there's going to be -- we're going to be very pleased as we close these throughout the year.

And then I guess just thinking about the supply and demand picture, how -- where are you kind of acquiring at a discount to kind of replacement cost? And how high the rates kind of need to move before you start to see new supply happen on -- come in on the SHOP side?

I mean, we're still buying at below replacement costs. Construction, although it's not -- there's not a whole lot of it. What we're seeing is coming in at higher amounts than they continue to grow. The cost to build continues to grow. So we've been very fortunate. We continue to find deals that are below replacement cost even in primary markets where we see high barriers to entry.

So pricing continues to be within our bandwidth. We're still seeing stabilized yields in the 7s, and that's through continued disciplined underwriting. And I think that's been paying off. Obviously, we've seen that our previous underwriting is proving out, and that gives us more confidence in our underwriting going forward.

And one thing I'd add to that, Seth, is we've been in the SHOP business for a long time. We've been in it through cycles. So on the supply side, the things that Stefan is targeting are areas where we think there's more runway before supply really picks up. That's why you don't see us really focused on Florida, which is, of course, a great state for senior housing, but one where we've seen become overbuilt right away. So the pipeline that he's building is taking into account the things that you're asking about, which is when does supply really start ramping and it's built to have a longer runway.

Our next question comes from the line of Ronald Kamdem with Morgan Stanley.

Just want to go back to Trilogy. Obviously, always optimizing for revenue. But when you're thinking about sort of the occupancy trajectory and the incremental margins that are coming through, maybe can you talk about how much more upside you think you have at this point and how that's playing out?

Yes. So I think on a few different fronts, Trilogy still has a lot of meat on the bone. From the occupancy perspective, even at really, I think, what are considered to be market-leading occupancies, we're still seeing occupancy grow, especially strong in the senior housing space when this is kind of a typically down time of the year and you can experience some seasonality. It's nice to see that Trilogy has been able to hold steady and had a really great year of occupancy growth on that front last year.

I think that's going to continue to be the case at Trilogy, where people understand that there is a market reputation for being the place that takes care of their family the best, you're going to be a preferred provider. I think the other thing that they've really figured out is that quality will carry the day from a rate perspective as well. If you're willing to pay -- if you appreciate quality and the quality of care above all other things, I think you're willing to pay for that quality and the experience because you know that it costs a little bit more sometimes to deliver that.

So Trilogy is really leaning into the revenue management side through a proprietary software program that they developed over years in their business that prices units dynamically and can do it on a daily basis. And that's based on market demand, market prices and also leasing velocity as well as different unit attributes. The way that they're doing that, I think, is so far in front of where all the other senior housing operators are, by and large, in the country. And I think that will be able to -- that will be a significant tailwind for them on the revenue front as well.

The real question that we would be speculating on is just the velocity of those things, Ron, and that's hard to predict. How quickly will occupancy continue to build when you're at higher levels and how much will rate growth continue to grow over the next year. I have extreme confidence that those 2 things are going to be higher by the end of the year than they are now. But at what rate, it's really hard to speculate, and I think not helpful because of how speculative it is.

Great. And then my follow-up, I mean, obviously, during the quarter, there was a lot of talk about the CMS proposed rate -- preliminary rate came out at 2.4%. I guess I'd just love to hear that just how did sort of you and Trilogy react to that? Does that change anything to the business plan, not only near term, but even longer term, if that rate continues to trail inflation, does Trilogy need to do anything differently?

Yes. I think this is where people probably are the most uninformed on Trilogy's business. So I'm glad that you asked that question, Ron. I think most people assume that skilled nursing is just going to grow at an inflationary rate and that you're going to have to be stuck with it. If you've followed Trilogy for the last several years, you've seen that's not true. Their skilled nursing rate, if you look at our supplemental, is growing at 5% a year. That's ahead of where inflation is and significantly ahead for a couple of reasons.

One, a big component of their skilled nursing is private pay. The rates on private pay move much like private pay senior housing and Trilogy has control over those rates. So those, I would expect to outpace inflation. Even though Medicare Advantage contracts typically price off of the Medicare rate increases, what Trilogy has been able to do is select the Medicare Advantage plans and manage those relationships in a way where they are able to generate rate growth of 6.6% last quarter, well above inflation and well above what the Medicare rate was.

That's because they're being more selective on who they partner with. And as occupancy grows, it makes -- it creates the opportunity for Trilogy to be even more selective. They've got really sophisticated systems for managing that entire process. And that's one of the things that comes with scale in this industry and experience and great leadership. So I think they'll -- the 2.4% was not a surprise. That's right in line with what we expected. And I think that, that is -- I view that more like a floor than I do a ceiling, and I fully expect Trilogy to manage all of their opportunities for maximizing revenue growth within the skilled nursing side to push it beyond 2.4%.

Your next question comes from the line of Juan Sanabria from BMO.

Just wanted to ask about the SHOP RevPOR growth, a little bit below where you were trending last year. So I'm not sure if there was an impact from the typical seasonality with some discounts in the first quarter that maybe impacted growth and how we should think about RevPOR kind of trending for the balance of the year?

Yes. So first, I would say the biggest reason for the deceleration in RevPOR growth is that we changed the same-store universe, which happens once a year for us. And if you looked at our 2025 same-store, the RevPOR growth there would be high 4s. So more in line with something what we're expecting and what we're managing towards. The reason why it's lower in the same-store now is that we've shifted some non-stabilized assets into the same-store. Those assets have incredible NOI growth, but the strategy has always been build occupancy first and grow rate second.

So as they're building occupancy, they're a meaningful component of the NOI growth on a same-store basis, and we think it's a great way for us to add value is to grow NOI that way. The second thing I would say is it would be an oversimplification of a complex operating business to look at one number like RevPOR without the context of the expense side of the equation. What we're managing towards every quarter and every year is NOI growth. We're not managing towards just hitting an occupancy target or a RevPOR target or expense target. It's taking many different things into account and figuring out how to deliver the most NOI growth within our portfolio.

So for example, if we were focused on NOI, we may go out and ask our operators to focus on reducing the referral fees that we're paying for move-ins into the buildings. That would help on the expense side of the equation. But if you pass a little bit of those savings on to your residents, then it may be a headwind for RevPOR while it's still going to grow NOI and expand margin because you're managing the expenses. But if you're just focused on one number, you would lose all that. And by the way, it's exactly what we did. We reduced referral fees by over 20% in our portfolio year-over-year. And I think that's the right thing to do. As you start to push occupancies higher, you need to look at a variety of different things to optimize for NOI, and that's what we're asking our operators to do.

Great. And then earlier in the call, you noted kind of the sources and uses to fund acquisitions, including dispositions. But just curious, there seems to be a very strong bid across the spectrum for different asset types within health care, including medical office. So just curious if you thought about potentially selling assets more quickly or at a larger scale, assuming you have the ability to redeploy those proceeds to take advantage of the bid or maybe explore joint venture opportunities.

Yes. Listen, Juan, my guess is you're talking about our outpatient medical portfolio. Everything else is such a tiny little piece. I think our triple net is less than 6% and shrinking every day. We're well aware of the value that is embedded in our outpatient medical segment. Our thinking is that all of the things, all the fundamentals that make the long-term care business really positive are equally true for outpatient medical, right? Older -- aging America, you need more doctor visits. More things are happening in an outpatient medical setting than they are in hospitals. So -- and a total lack of new supply.

So having said that, we haven't added to our -- we haven't even underwritten an outpatient medical building in years. It continues to shrink as a piece of our portfolio. We have sold over 1/3 of the assets in the outpatient medical segment. Now they were smaller, slower growth assets. We've got another handful of buildings that we're continuing to expose to the market. We have every expectation that we're going to be able to sell those. Beyond that, we're pretty happy with our portfolio. It's a nice balance.

I got to be honest, we love having outpatient medical buildings during the pandemic. The occupancy in that segment was higher at the end of 2021 than it was at the beginning of 2021. So as of now and today, we are committed to the diversified strategy of health care investments. But I would say over -- everything we're buying is SHOP. And as a result -- and we're selling a little bit more outpatient medical. As a result, that's going to become a smaller and smaller piece of our total pie.

Your next question comes from the line of Alec Feygin with Baird.

On the development strategy, is Trilogy or AHR the bigger driver of identifying where and when to start new projects?

Within the development pipeline at Trilogy, I would say it's collaborative, but I think the Trilogy team is really driving the process up on identifying the opportunities and bringing them to us and for us to talk about and collaborate on and then decide which of those opportunities they've identified are the ones that we're actually going to pursue. The development pipeline at Trilogy for new campuses, by the way, is probably 30 markets deep, of areas that within Trilogy's current footprint of states, markets that they want to be in.

And how do we decide from that 30 of kind of opportunities, which 3 to pursue a year or 4 to pursue a year? We have to marry a few different things. One, land availability in that market that's significant so that we can build out an entire campus and actually have room for expansion to add villas if we want to at the beginning or in the future. Two, where do we have access to bed licenses? And there's magic to that as well. So because Trilogy has scale, there's almost a bed license bank that they can pull from within their own ownership universe to move licenses from one campus to the next or to slide licenses from one county to the next.

Those rules are complex. They're hard to navigate, and it's hard to find the licenses to do it. And that's a big advantage for Trilogy that I don't think people understand on the development side. We're going to continue to be incremental in the new campuses that we add there. But I feel good that the opportunity set is really deep, and it's a multiyear development pipeline that's essentially exclusive to us. So that's going to continue for the foreseeable future.

And as you can imagine, we're going to help decide what makes the most sense for us as far as the commitment to development, the dollars that we're putting out, the yields that we're going to demand in return for that. But as Gabe said, it's highly collaborative.

Yes. Maybe then switching gears to 3 to 4 developments for Trilogy, what's the appetite with maybe other operators or to do development funding? And if it's not right now, what would you need to see in order to pursue those opportunities in the future?

It's something that we're looking at. We haven't hit go on any new developments with other operators right now. What we're doing first is looking at our existing portfolio and taking a page from the Trilogy playbook, seeing where we have excess land in really high demand, really high occupancies, and we're expanding our existing SHOP portfolio buildings. The IRRs on those investments are the highest, I think, in our entire portfolio. The problem is it's not an unlimited amount of dollars, and it's not a major amount of dollars either.

So we'll do that, and we're actually using Trilogy's development capabilities to help us manage those processes. It's a great example of the synergies between the companies working for our collective benefit and the platform value that we have. With other new ground-up developments, what we're thinking about is how can we expand our existing relationships, use our operating partners that have development experience and potentially grow their presence in the markets that they're already in.

We haven't found the perfect opportunity to do that just yet, but I think we're getting closer and closer to that spot. The holdup -- I do think the holdup is that we're buying things below replacement cost, and that's going to be the holdup until that shifts. We know that the demographics are going to continue to be strong. We know that the supply is not enough to keep up with the demand that's coming over the next 5 and 10 years and that we will hit max occupancy at some point. The question is, when do you really want to start developing to meet that opportunity when you have all these other opportunities in front of you that are below replacement cost, it's hard to say yes to that.

Your next question comes from the line of Michael Stroyeck from Green Street.

Within Trilogy, ex-core growth saw a pretty nice deceleration in 1Q versus recent quarters. Were there any one-timers that may have impacted expenses during the quarter? Or I guess anything worth calling out that may have drove that deceleration?

No, it's more of a broad focus on expense management. And this was in response to decel and Medicare reimbursement, us understanding that, that was coming and getting out in front of it and understanding that we needed to manage the expenses. And when I say us, I mean really the Trilogy team getting out in front of it and understanding how to run their platform in the right way. We made some significant investments last year, and I think this year, we're going to see the expense management really work for them and help them to expand margin further. No one-timers, though.

Got it. Understood. And maybe, Gabe, just going back to a point you made on CONs. As SNF occupancy just continues to trend higher, have you seen any states actually relax certificate of needs rules or seen any sort of indication that we could see an acceleration in supply growth across any of your markets?

No. In fact, this is -- that's the exact reason why I say Trilogy has the most durable competitive moat in our entire portfolio is because if you look at skilled nursing development, their beds as a percentage of inventory being added, I think, is negative and has been for several years. There's more beds coming offline than they are coming online. If there are any coming online, I would be speculating they're almost all coming from Trilogy. So the supply side on that part of the business, I don't think is going to be a problem. I think that's where there's the absolute longest runway in our portfolio.

The other thing that's going on there is it's really hard to develop SNF because most of them that exist are focused on Medicaid with the average Medicaid mix being 60%, 70% of the building, it's really hard for it to pencil out from a development perspective. The reason why it works at Trilogy is because they have the integrated campus, they have great relationships with hospital and they have a disproportional amount of their residents that are on Medicare and Medicare Advantage plans, which are higher reimbursement sources. That's really hard to replicate if you're not an experienced operator with regional concentration.

Your next question comes from the line of Michael Goldsmith with UBS.

Just I think on the last call, you indicated that the non-same-store pools for both Trilogy and SHOP could actually grow faster than the same-store, but I guess that could be lumpy. So just how should we think about the NOI growth in the non-same-store pools for Trilogy and SHOP, I guess, relative to the same-store pool?

I think anecdotally, it's not a bad supposition. I think if you unpack the type of asset that we've been targeting, these are assets that are going to have a tremendous amount of internal growth. So when we finally do put them into the same-store pool, you're going to see dramatic same-store earnings growth. So the stuff that we bought in 2025, we've talked at length, maybe it's a building that's under occupied, undermanaged. We put our trusted operator in.

We bought -- the poster child was -- we bought a building that was 74% occupied from a developer. The developer built it. They were a multifamily developer. They hired an operator. They didn't like them. They fired them. They hired the next operator. They didn't like them, they fired him and then they started running the building themselves.

They were finally able to get out whole, get their capital back. So we bought it, and that's in a market where we have a trusted operator. And that operator is running buildings for us that are 95% full. So we have tremendous conviction on their ability to grow that. And that's the type of asset. Not every single building is like that, obviously, but that's the type of asset that we've been targeting, and there is upside. So yes, I think it's probably fair to say that the non-same-store is going to grow faster than the same store.

Got it. And then some of your peers have reported that U.S. SHOP has gotten more competitive, just given AHR doesn't disclose initial yields. Are you seeing more cap rate compression to start the year? And then maybe if you could share the timing on that $650 million pipeline?

Yes. I'll start with the timing. I would say that a majority of what we have in the $650 million pipeline is going to close by the end of this quarter with the remainder closing in the third quarter. As far as pricing, I mean, certainly, it's fair to say that the cap rates have moved Generally, I'd say, 25 to 50 bps over the last year. But it's very deal specific. And I think also for us, we're buying a mix of light value-add and stabilized assets. So the way we're looking at it really is on the long-term cash flow durability. How -- what is the projection over several years, not just over the first year. And that's been consistent throughout. So it's been very positive for us. I think we've been able to still find deals that make a whole lot of sense for us, and there are a lot of other deals out there that we continue to look at.

And just while I've got you one more, just can you walk through what was the driver of the G&A guidance increase?

Yes, sure. So the -- it's not a bad thing, by the way. In fact, I think it's a positive. The real increase in G&A, and I think I mentioned it earlier, we're always looking for talent. We're adding a little here on acquisitions, a little in accounting and a little in asset management. But beyond that -- that's not moving the needle very much. Beyond that, the real mover on guidance on G&A is tied to stock-based compensation. And it's 2 buckets.

Number one is that last year, we had investors approve our ability to reward our operators with outperformance with incentive compensation. And that incentive compensation was in the form of AHR stock, which gives us best-in-class alignment with those guys. So we did grant some shares, and those grants are now showing up in the numbers. That's part of the increase. The other part of the increase is stock-based comp goes up when your stock price goes up, and we've been in the blessed position of having the stock price go up. So the G&A guide went up.

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

Yes, sure. Thank you, operator, and thank you, everybody, for investing time and your continued support and confidence in the company. I know Danny is actually attending the call this morning as well, and he's looking forward to reconnecting with all of you directly as soon as he's able. So with that, we'll conclude the call, and have a great weekend.

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

Hello, and welcome to AH Realty Trust First Quarter 2026 Earnings Call. Please note that this call is being recorded. [Operator Instructions] I would now like to turn the call over to Chelsea Forrest, EVP of Investor Relations. Please go ahead.

Good morning, and thank you for joining AH. Realty Trust's First Quarter 2026 Earnings Conference Call and Webcast. On the call this morning, in addition to myself, is [ Shawn ] Tibbets, Chairman, President and CEO; Matthew Barnes-Smith, CFO; and Craig Romero, EVP of Asset Management. The press release announcing our first quarter earnings, along with our supplemental package were distributed yesterday afternoon. A replay of this call will be available shortly after the conclusion of the call through June 4, 2026. The numbers to access the replay are provided in the earnings press release. For those who listen to the rebroadcast of this presentation, we remind you that the remarks made herein are as of today, May 5, 2026, and will not be updated subsequent to this initial earnings call. During this call, we may make forward-looking statements, including statements related to the future performance of our portfolio, transactions involving our multifamily portfolio, our real estate financing program and our construction business and the use of proceeds from such transactions, our rebranding and the effects thereof, the consequences of our strategic transformation, our liquidity position as well as comments on our outlook. Listeners are cautioned that any forward-looking statements are based upon management's beliefs, assumptions and expectations, taking into account information that is currently available. These beliefs, assumptions and expectations may change as a result of possible events or factors, not all of which are known and many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the forward-looking statement disclosure in our press release that we distributed yesterday afternoon and the risk factors disclosed in documents we have filed with or furnished to the SEC. We will also discuss certain non-GAAP financial measures, including, but not limited to, FFO, normalized FFO and FFO as adjusted. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the quarterly supplemental package, which is available on our website at ahrealtytrust.com. I will now turn the call over to Shawn.

Good morning, and thank you for joining us today. Today, I will briefly reflect on the quarter results, our progress on the company's transformation to date, discuss portfolio highlights and conclude with a review of our capital allocation activity. Since announcing our strategic restructuring on February 16, we have executed more transformation milestones in a single quarter than in any comparable period in the company's history. We entered into a binding agreement to sell 11 multifamily assets for $562 million completed the sale of the construction business, advanced the wind down of our real estate financing platform through multiple dispositions, repurchased 4.3 million shares of common stock, nominated 2 highly qualified independent directors to the Board, secured term sheets or reached final stages on all 3 2026 debt maturities, launched our new corporate identity as AH Realty Trust and raised full year FFO as adjusted guidance. The pace and magnitude of these actions reflect our unwavering commitment to unlocking shareholder value, and I will walk through each of these in more detail. In the first quarter of 2026, we delivered solid operating results, reflecting strong performance in our retail and mixed-use office portfolios and the benefits of our disciplined operating approach. AH Realty Trust is a pure-play, high-quality retail and mixed-use office REIT focused on identifying and realizing dominant market competitive advantages throughout the Sunbelt, Mid-Atlantic and Southeast. Our company is primarily comprised of and focused on open-air shopping centers and mixed-use ecosystems within our markets. We are encouraged by a combination of the retail market strength and the leasing activity we are experiencing in both retail and office. We are also mindful of macroeconomic conditions and geopolitical uncertainty, including higher interest rates, elevated financing costs and heightened global tensions as they continue to influence the broader real estate landscape. That said, our results exceed our internal expectations and reflect the actions we are taking to restructure AH Realty Trust into a simpler and more focused real estate platform positioned for long-term value creation. As a result of the performance of the retail and mixed-use office portfolio, our visibility into the coming quarters and the transformational actions we've taken to date, we are raising our full year 2026 FFO as adjusted guidance range to $0.51 to $0.55 per diluted share. We are here first and foremost for shareholders, and every single action we take is aimed at identifying and clearly demonstrating the underlying value in our portfolio. Another key initiative as part of this transformation is ensuring that we have the right Board skills and governance profile to help guide us. I trust you saw our press release last week announcing planned changes to the Board as part of our ongoing refreshment process to add directors with skills and experience that align with the company's evolved strategy. This includes the Board's nomination of Ted Bigman and Lori Wittman to stand for election at the 2026 Annual Meeting of Stockholders. Ted brings deep capital markets and real estate investment experience owned over decades at leading institutional platforms, capabilities that are directly aligned with our capital allocation priorities and balance sheet optimization objectives. Lori brings extensive public REIT, operating and financial leadership experience that will be invaluable as we execute the next phase of our strategy as a focused retail and mixed-use office REIT. Together, their skill sets are purpose-built for the company AH Realty Trust is becoming. I would also like to recognize George Allen and Dennis Gartman, who will not stand for reelection to the Board at the annual meeting. We are very grateful for their years of service and significant contributions during their tenure. The first quarter of 2026 was pivotal in AH Realty Trust's strategic transformation. We made meaningful progress implementing our new operating model and disciplined capital allocation framework. We are reshaping our business by exiting multifamily properties and focusing on high-quality retail and mixed-use office assets in markets where we have durable competitive advantages. As evidenced by our actions in the first quarter, we are taking decisive and deliberate steps to simplify the company, reduce leverage and reallocate capital to advance a new operating strategy. During the quarter, we entered into an agreement with an affiliate of Harbor Group International to sell 11 of our 14 multifamily assets for $562 million. This transaction represents a major milestone in our strategy to exit the multifamily property sector and will meaningfully strengthen AH Realty Trust's balance sheet and materially reduce complexity across the organization. Importantly, this sale reflects a significant premium to the value the public market was implicitly assigning to these assets within our REIT structure, which we believe further validates our thesis that substantial embedded value exists across our portfolio. We expect to close the sale in the coming weeks, subject to customary closing conditions. We are marketing the remaining 2 multifamily assets in Gainesville. Following these sales, we intend to retain only Smiths Landing in the residential category because its ground lease structure is unique relative to the remainder of the portfolio and the property continues to generate stable cash flow. As a result, we concluded that given the stable cash flow generation, combined with the ownership structure, retaining Smiths Landing is appropriate at this time and remains consistent with our value preservation objectives. Exiting the multifamily sector unlocks significant embedded value that has not been reflected in our share price, and there was a robust private market demand for our well-located and young assets. We also concluded that we prefer to compete in the commercial market and that future growth for our company in multifamily would be difficult given the low cap rates. Also, given the highly volatile nature of Southeast U.S. multifamily, where supply cycles are long and absorption predictions are often inaccurate, we are far more excited to return that value to shareholders through deleveraging our stable go-forward portfolio of well-leased, well-located retail and mixed-use office assets. Outside of multifamily, we made considerable progress exiting other noncore businesses. Last week, we completed the sale of the construction business, fully exiting. We also advanced the wind down of our real estate financing platform. We closed the previously announced sale of 2 multifamily financing investments. Additionally, I'm happy to announce that our partner closed on the sale of Allure last week. Collectively, we expect the asset sales already underway and those that have been completed will provide us with approximately $750 million in proceeds, which we intend to use to delever the balance sheet and achieve our target leverage ratio of 5.5x to 6.5x net debt to total adjusted EBITDA while also repurchasing shares in the market. We will do this while ensuring the dividend remains fully covered by core property operating cash flow. We will also have removed dependency on uneven construction fees and mezzanine investment revenue. I am proud of the significant progress we have made on our transformation in 2026. We have already achieved a number of key milestones in our journey, and we are well positioned to complete the transformation this year. A focused and agile AH Realty Trust will operate as a pure-play model, retail and mixed-use office real estate investment platform. Our retail portfolio consists primarily of open-air shopping centers and mixed-use retail environments located in strong, fundamentally supported markets. Importantly, 95% of our office investments are concentrated in vibrant mixed-use settings rather than stand-alone suburban office assets. These properties benefit from integrated retail, residential and experiential components, which continue to support consistently high demand from high credit tenants. At quarter end, our stabilized retail and mixed-use office portfolios were 94.8% and 96% leased, respectively. In contrast, while our office product delivers superior occupancy and performance metrics that exceed those of our peers' office product nationally, we would like to see a better appreciation of its value. This disconnect reflects broader sector sentiment rather than asset level fundamentals. 95% of our office portfolio is situated in mixed-use ecosystems and therefore, is highly differentiated and not suburban office product. As a result, our assets benefit from integrated retail, residential and experiential components. These characteristics support durable demand, consistently strong occupancy and a high-quality tenant base, resulting in operating performance that stands apart from prevailing conditions affecting the broader publicly traded office sector. The strength of our retail and mixed-use office portfolios was evident in their performance this quarter. For the first quarter, FFO as adjusted was $0.15 per diluted share, exceeding our internal expectations and demonstrating the earnings power of our go-forward retail and mixed-use office platform. Craig will discuss portfolio performance in detail in his remarks. Turning to capital allocation. We remain disciplined and shareholder focused. Since the beginning of the year, we have repurchased approximately 4.2 million shares for a total of $24.1 million at a weighted average price of approximately $5.70 per share, representing more than 4% of the common equity and reflecting our confidence in the underlying value of the business. Our commitment remains allocating available capital where we believe it is most beneficial to shareholders. Our NAV demonstrates the intrinsic value of our real estate and simultaneously informs our capital allocation decisions. When combined with our transformation, we believe the implied yield relative to other capital allocation alternatives is compelling. To put it simply, we believe that investing in our own assets above a 9% cap rate is very attractive and creates more shareholder value than other available capital allocation options. We expect that our transformation will create additional financial flexibility to allow us to invest in future growth opportunities while building on the performance of the portfolio and the momentum of this transition. As you know, as part of the transition planning, we initially modeled up to $50 million of retail acquisitions to offset potential gains associated with the multifamily sale. As we move closer to closing the residential transactions, we now have improved visibility into the timing and magnitude of the related tax considerations, and we expect, in this case, that the transactions do not result in a material tax consequences to the REIT. With that clarity, given our current cost of capital and leverage objectives, we have reallocated approximately half of that previously modeled acquisition capital towards share repurchases to date. And as stated, we believe this is the most compelling use of capital. We continue to evaluate our remaining allocation options while being mindful of leverage. Factors such as market conditions and potential dispositions will also figure prominently into our analysis. Finally, I want to acknowledge the key role our people play in our company's ongoing transformation. Over the past several quarters, we have made meaningful changes across the organization to ensure that we have the right people, focus and operating discipline to deliver on our full potential in this next chapter. We are investing intentionally in our people and building a culture centered on accountability, execution and disciplined decision-making. We believe these efforts are critical to sustaining performance and successfully executing the next phase of our strategy. In closing, our transformation continues to gain momentum. The multifamily sale is a defining step forward, and we remain committed to executing our strategy with discipline, transparency and strong governance. With a simpler platform, a strengthened balance sheet and continued governance enhancements, we are confident that we are positioning AH Realty Trust with the resiliency and flexibility to capitalize on opportunities while generating consistent cash flows, disciplined growth and superior risk-adjusted returns. We appreciate the continued support of our shareholders and look forward to the opportunities ahead. With that, I'll turn it over to Craig Romero to go through our portfolio highlights.

Thank you, Shawn, and good morning, everyone. Before discussing first quarter portfolio performance, leasing activity and expectations for the rest of this year, I'll draw your attention to additional information presented in this quarter's supplemental financial package, particularly economic occupancy. Economic occupancy as opposed to leased occupancy, which we've historically presented, considers free rent periods, rent abatements and periods prior to rent commencement, therefore, providing stronger correlation to cash NOI. We believe reporting both economic and leased occupancy going forward will provide investors with greater clarity on both past and expected future results. Retail lease occupancy at the end of the first quarter was 94.8% and economic occupancy was 92.5% -- we expect rent commencements primarily at Columbus Village and the Interlock to drive retail economic occupancy increases during the second half of 2026. Retail same-store NOI for the quarter was up 2.2%, driven by rent commencements on new leases across the portfolio as well as positive cash spreads on both new leases and renewals. We anticipate growth to slow through the rest of the year because of certain vacancies and store closures with annual same-store NOI growth ultimately settling well within our projected range of 1% to 2%. Higher economic occupancy at the Interlock Patterson Place, Overlook Village and Columbus Village was the primary driver of first quarter growth. We expect these properties to continue to boost same-store NOI for the rest of the year, driven by rent commencements from new tenants, including Trader Joe's, Golf Galaxy and F1 Arcade. First quarter visits to the new Trader Joe's at Columbus Village continued to outpace the only other location in the market by nearly 2x, while the new Golf Galaxy ranks in the top 3 nationwide. During the first quarter, F1 Arcade opened at the Interlock, driving a 30% year-over-year increase in visits and a 45% increase in parking volume, solidifying the property's destination status in the market. Partially offsetting first quarter gains were vacancies at Southgate Square, Broadmoor Plaza and Broadcreek Shopping Center as well as store closures at Hilltop and Town Center. We expect these properties to weigh on current year same-store NOI as we work to backfill spaces previously occupied by Conn's, Party City, JOANN, West Elm and Orbis. However, we anticipated these closings and tenant demand for these spaces is strong, creating future growth opportunities. We are already in the process of securing high-quality national tenants to fill these storefronts at positive spreads and enhance the merchandising mix at these properties to create longer-term durability. I look forward to providing further updates in the coming quarters. Our retail portfolio remains well positioned to capture sustained tenant demand for retail space at higher rents as demonstrated by positive first quarter spreads of 14.4% on new leases and 4.5% on renewals. Office leased occupancy at the end of the first quarter was 96% and economic occupancy was 87.7%. We expect rent commencements at the Interlock and Town Center to drive economic occupancy gains during the rest of the year. Office same-store NOI for the quarter was up 0.7%, driven by contractual rent increases on existing leases, new rent commencements and 7% positive cash spreads on new leases. These economic occupancy gains were partially offset by vacancy at One City Center from space reclaimed from WeWork in the second quarter of last year. Nevertheless, we expect to end the year comfortably within our projected range of 1.4% to 2.5% annual growth, supported by scheduled rent increases and anticipated rent commencements during the second half of 2026. At the Interlock, we've already begun realizing nearly $1 million of new ABR with the majority expected to commence in the third and fourth quarters. We anticipate that these economic occupancy gains, combined with additional increases at Team Street Wharf, 2 Columbus and 222 Central Park, formerly Armada Hoffler Tower, will outpace temporary challenges at One City Center, 4525 Main and Wills Wharf. While we are not forecasting any new rent commencements at either One City Center or Wills Wharf in 2026, we are seeing good activity and interest in the market and remain confident in our team's ability to re-lease the space. At 4525 Main, we remain on track to re-lease the 8,000 square feet we recaptured last quarter with lease execution expected by the middle of this year. At One Columbus, while we expect leased occupancy to decline by roughly 10 basis points in the second quarter because of anticipated lease expirations, we expect economic occupancy to slightly increase, driven by rent commencements for new tenants at positive spreads. Additionally, we're already at lease on over half of the expiring space at One Columbus and are confident in our team's ability to backfill the rest given the tremendous demand for Town Center office space. Just last week, we completed the consolidation, downsize and relocation of AH Realty Trust's offices to accommodate this demand. As a result of this intentional move, we unlocked and leased 38,000 square feet at 222 Central Park at top of market rents creating $1.3 million of new ABR, which we expect to begin fully realizing in the third quarter of next year, with partial recognition weighted towards the third and fourth quarters of 2026. Town Center is a case study example of the type of asset in which we invest, high quality, differentiated, mixed use and located in markets with high barriers to entry. Another good example is Southern Post, our newest mixed-use asset delivered at the end of 2024, where this quarter, we leased 22,000 square feet to industrious. Just last week, our team executed another 9,000 square foot lease, bringing office lease occupancy at Southern Post to over 93% -- we expect economic occupancy to increase to over 60% by the end of this year and over 80% by the first quarter of 2028 as free rent periods for existing office tenants burn off. Office portfolio fundamentals remain strong with nearly 8 years of WALT, high credit tenancy and less than 2% rollover for the rest of 2026 as well as our team's demonstrated ability to lease space and grow rents. We see continued organic growth opportunity across both our retail and office portfolios through proactive leasing, mark-to-market adjustments on new leases, positive renewal spreads, disciplined expense management and targeted redevelopment and capital investment where returns justify it. This operational focus is central to how we intend to drive consistent NOI growth and deliver long-term value going forward. With that, I'll turn it over to Matt for more details on our first quarter financial results and an update to our fiscal year 2026 guidance.

Good morning, and thank you, Craig. AH Realty Trust delivered solid first quarter performance, laying a strong foundation for the 2026 fiscal year. The results reflect the resilience of our assets and the benefits of the actions we are taking to reshape our portfolio and implement a simpler operating approach with less debt, focused assets and shareholder value that recognizes our asset quality. For the first quarter, FFO attributable to common shareholders was $20.6 million or $0.20 per diluted share, above our expectations for the period. FFO as adjusted attributable to common shareholders was $15.1 million or $0.15 per diluted share, also above our expectations for the period. FFO as adjusted excludes the segments classified as discontinued operations, multifamily, construction and real estate financing and therefore, represents the clearest measure of the earnings of our go-forward retail and mixed-use office platform. We believe this is the metric investors should focus on as it reflects a simplified higher-quality earnings profile that will define AH Realty Trust following the completion of our transformation. Net operating income for Q1 was $34.7 million, representing a 1.8% increase year-over-year and approximately $700,000 ahead of guidance. AFFO totaled $19.9 million or $0.19 per diluted share, which exceeds our current cash dividend as outlined in the supplemental with a payout ratio of 72%. Starting with the supplemental package, this quarter reflects a comprehensive refresh aimed at enhancing transparency and aligning disclosures with how we evaluate the business internally. We introduced several new metrics and disclosures, including economic occupancy, a refreshed NAV page and rental revenue disaggregation, all of which are designed to provide clarity on cash flow durability, asset performance and the embedded portfolio value. We believe these changes allow investors to more effectively track our continued progress by assessing both the quality and sustainability of our earnings streams, specifically as it relates to future cash flow growth. A key highlight is the NAV section illustrated on Page 13. This page is intended to provide a clear and transparent view of the underlying per share asset value, excluding the segments and assets categorized for discontinued operations. The analysis reflects the strength of our underlying real estate portfolio, including our high-quality office and mixed-use assets with the non-stabilized component currently representing Southern Post at development cost. The NAV framework plays a central role in how we evaluate financial performance and deploy capital. As our transformation progresses, we believe the quality of our assets is increasingly positioned to translate into durable earnings and shareholder returns. Our NAV analysis points to the intrinsic value of the real estate and serves as an important reference point in our capital allocation decisions, including share repurchases. As Shawn touched on, we remain committed to executing a disciplined capital allocation approach centered on shareholder interest. To that end, we have continued to take advantage of the dislocation between our share price and underlying asset value through our share repurchase program. Year-to-date, we repurchased $24.1 million of common stock at a weighted average price of $5.70 per share, representing an implied yield that we view as highly attractive relative to other investment opportunities. We see this as having a chance to invest our own assets at an effective implied cap rate for this quarter's share purchase above a 9% cap rate. Where else can we create more shareholder value than doubling down on our market-leading portfolio. As Shawn highlighted, dispositions of the multifamily portfolio, real estate financing platform and construction entity are all either complete or well underway. Based on the headway made, we are well positioned to continue advancing our balanced capital allocation strategy, paying down debt, making disciplined investments in select high-growth markets and continuing to execute our share repurchase program where appropriate. Turning to the balance sheet. We are proactively managing maturities and maintaining flexibility in what continues to be selective capital market environment. Looking ahead to the remainder of 2026, we have 2 office asset loans and 1 term loan scheduled for refinancing. We are actively engaged with lenders on all notes and expect to complete these refinancings consistent with our broader balance sheet strategy. Starting with the term loan. Maturing at the end of May, we have received a term sheet from our current lenders and are working to extend this loan at maturity for 12 months under the same terms and conditions, including extending the pricing that we have today. Pain Street Wharf matures at the end of September, and we are in the final stages with a relationship lender to close in the coming days on a 5-year nonrecourse asset level note priced in the 5.25% to 5.5% range. To round out the refinancings, we've also received a term sheet from a large institutional life insurance company for both 5-year and 7-year fixed rate debt on the Constellation office asset priced around 200 basis points plus the corresponding treasury with the expectation to close on this refinancing in the next 2 months. We are pleased with the pricing and terms of each of these loans. This reflects the quality of the underlying assets and the credit strength of the tenants and reinforces our track record of prudent liability management and our ability to navigate an especially challenging office debt market. Reducing leverage to strengthen the balance sheet remains a core priority. Upon completion of the transformation, we anticipate approximately $700 million in total debt paydown, a material reduction that is expected to fundamentally reshape our capital structure. Net debt to total adjusted EBITDA was 8.3x at quarter end, temporarily elevated relative to the prior quarter. We intend to use proceeds from the sale of 11 of our 14 multifamily assets to meaningfully reduce leverage to our target range of 5.5 to 6.5x net debt to total adjusted EBITDA, which we anticipate closing in the coming weeks. We ended the quarter with approximately $142 million of liquidity, providing adequate coverage of our capital needs. We are committed to maintaining a flexible balance sheet, disciplined capital allocation and sufficient liquidity to navigate a potentially prolonged higher rate environment. Now moving to our updated guidance. We are raising full year 2026 FFO as adjusted guidance to $0.51 to $0.55 per diluted share, reflecting the continued restructuring progress, retail and mixed-use office portfolio strength and the solid first quarter performance. We are confident that the actions underway, including simplifying our operating model, exiting noncore businesses, strengthening our balance sheet, executing opportunistic share repurchases positions us to drive long-term value for shareholders. We are committed to unlocking that value one way or another, and we have enhanced disclosures that will provide shareholders with additional transparency to continue to track our progress as we advance these initiatives. With that, I will turn the call back over to Shawn

Over the past several quarters, we have taken many of the hard but necessary actions to reposition the company for long-term success. We have completed the majority of our strategic transformation, simplifying the business, strengthening our foundation and sharpening our focus on a high-quality operating portfolio. Today, AH Realty Trust is a pure-play retail and mixed-use office REIT, owning and operating open-air shopping centers and thoughtfully integrated mixed-use assets in strong markets across the Sunbelt, Mid-Atlantic and Southeast. With these actions largely behind us, we are now squarely focused on execution and on delivering sustainable performance that drives long-term shareholder value. The path forward is clear, close the multifamily transaction, reduce leverage, continue to invest in our shares at a compelling discount to intrinsic value and demonstrate through consistent operating results that this portfolio deserves to trade at a valuation commensurate with its quality. We have never been more aligned with our shareholders. We remain deeply grateful for the continued support and confidence of our investors as we move into this next chapter. Operator, we are ready for the question-and-answer session.

[Operator Instructions]

Your first question comes from the line of Jana Galan of Bank of America.

Congratulations on the progress of the restructuring. The capital markets activity is especially impressive given the macro and interest rate volatility. I was hoping if you could talk to kind of the breadth and depth of buyers for multifamily and for the construction platform and maybe the decision to go with the portfolio versus single assets?

Yes, thank you for the question. And we appreciate the congratulatory remarks. We are excited to be able to beat our forecast and raise, and we're excited about the path forward. In terms of the capital markets, we've continued to see, especially in the multifamily and retail, obviously, the depth of the market. It's good to see that those markets remain strong even given the kind of macro headwinds. That being said, we had an opportunity to sell to Harbor Group here, great deal for our shareholders, obviously, at a mid-5 cap on in-place and likely, hopefully, a good deal for their investors. We saw interest. We talked to quite a few folks, but we were able to make the best deal for shareholders all things considered with Harbor Group. So we feel good about that. And we're excited, by the way. We're a couple of weeks out, and will be -- that will be a material move, as you're aware, for our firm at $562 million, paying down debt. And as you heard, buying back some of our own shares at what we believe is a nice discount. In terms of construction, that business was and has been in wind-down mode. So our view was let's sell it. And the best buyer for that was actually the employees of the company. So we essentially traded that for a price that's north of what was due to the shareholders anyway in terms of gross profit, but we sold that at a slight uptick from what gross profit would have otherwise been received by the shareholders. It's a tough business right now, as you could imagine, with interest rates, and we think this is the best move for the company, for the shareholders to create a more simplistic company reduce not only confusion, but reduce risk, quite frankly, over the short, mid and long run. So we're excited about that.

Super helpful. And then I appreciate the enhanced disclosure. And you mentioned several lease commencements in the second half '26 for both retail and office, but also some offsets and known move-outs. Can you give any type of year-end '26 economic occupancy projections or ranges for either portfolio?

Sure. I'll just start by saying that -- we are encouraged by the tailwinds, by the strength of the market and the leasing kind of momentum and velocity activity out there broadly, especially in terms of our retail and mixed-use office portfolio. But I think, Craig, why don't you drill down a little bit, if you don't mind, just quickly and talk a little bit about what's on the horizon here?

Yes, sure. Happy to, Shawn. And thank you for the question. When it comes to lease and economic occupancy, I think the widest gap is obviously today in the office portfolio, as you can see. The biggest pieces of that are the Interlock, which we expect to see that gap narrow during the second half of the year as new tenants that we've secured and leased in prior quarters begin to pay rent. And one interesting anomaly, the same Street Wharf, you'll see a decent sized gap there between leased and economic occupancy. The main tenant there is Morgan Stanley. They have a month of free rent every other quarter. That happens to be this quarter. So you will see that gap narrow in the second -- actually close in the second quarter, again, widen in the third and then close again in the fourth. So a little bit of volatility there. But overall, macro speaking, you'll see the difference between leased and economic occupancy from our expectations to narrow as we progress through the second half of this year due to rent commencements.

[Operator Instructions]

Your next question comes from the line of Victor Fediv of Scotiabank.

I have a question on your decision to kind of shift from acquisitions to share buybacks. It kind of makes sense given where your stock is trading. Just trying to understand the financial implications because if I'm not mistaken, you were planning to use some 1031 exchange money to kind of do these acquisitions. I'm just trying to understand financial implications for you connected with this decision.

Sure. Thank you, Victor. I think it's pretty straightforward. As we get closer to closure in a couple of weeks on the kind of biggest material part of our transaction or transformation, have a better line of sight on the tax consequence to the REIT, and it looks like that will not be material. So we chose to -- given the value the stock was trading at and kind of capital allocation opportunity cost, if you will, versus buying a retail center at a 7 cap, we said, look, north of a 9 cap, it's better to invest in our assets that we have perfect information on. And obviously, to the benefit of the shareholder, kind of reduce that share count. So we think that was the best move. Obviously, we'd like to get into a mode where we're acquiring additional properties, but not at all costs, right? It needs to be accretive to the shareholder. So our view was let's take the opportunity while there is a discount and let's take also the opportunity to close that distance between current share price and what we believe NAV is -- we will move through that chapter as well as kind of look at some repositioning, kind of some redevelopment opportunities on the smaller scale within the portfolio as we close that gap and then continue to focus on our FFO growth to grow the value of the firm. So we thought it made a lot of sense, especially given that gap to buy the shares back kind of opportunistically, especially given that the REIT is not facing a material tax consequence as a result of the sales of the assets or otherwise real estate positions.

Makes sense. And then on these 2 multifamily assets, which are left in Gainesville. So I see that now you're kind of expecting to close it in Q4 '26, first quarter of -- so just trying to understand your logic here. So are you trying to kind of reach full stabilization for those assets and then sell them at the highest price? Like just trying to understand whether you will be willing to sell it earlier or later? How do we think about that?

Yes. I think, look, the reality is they are stabilized now. And there's some market timing to this as well in addition to the fact that the buyer was not willing to pay us what we wanted for those assets, and we believe the market will bear a better price. So we're going to take those and sell them at the market to get the best number that we can and obviously benefit the company and therefore, the shareholders the best that we can in the form of paying down debt and bringing capital back on the balance sheet.

Got it. And then just last for me on -- in terms of -- you mentioned kind of some opportunities to invest capital in redevelopment. Or do you have like any outparcel that you can invest in or kind of upcoming redevelopments that are not on the lease that you're kind of considering? Can you provide some additional details on that?

Sure. There is a page in the supplemental, forgive the page flipping because I didn't memorize your page. But yes, Page 29 of the supplemental, Victor, includes opportunities that we see kind of on the horizon given the portfolio that we currently own. And there are a number of outparcels there as well as some assets that I would characterize as maybe underutilizing the real estate. Outparcels are probably the quickest move, right, in terms of getting some accretive opportunity into the earnings stream, but also there are some opportunities there with assets that may not be using the real estate in terms of the size of the plot they sit on or the box, quite frankly, may not be the best -- may not have the best tenant. So kind of repositioning in terms of something like we did with the Bed Bath & Beyond the Trader Dose, outparcels, and we have a couple of other opportunities with assets with large parking lots and sitting on a large amount of acreage that we could think about more in the midterm. So yes, we're thinking about that a lot. Candidly, we're doing a lot of work on that. But yes, we'll continue to look for those opportunities and strike at the right time when it makes sense to best deploy that capital.

Your next question comes from the line of Jon Peterson of Jefferies......

Great.

On the share buybacks, I mean, you talked about the implied cap rate of your company being well north of 9%. I mean, how do we think about where your share price needs to go where you hit some sort of breakeven where share buybacks make less sense and maybe investing in future acquisitions or buying back more debt is -- it makes more sense.

Yes. I think, John, thank you for the question, first of all. Second of all, I think -- when we get within a line of sight of NAV, I think, would be the way to think about that for us, right? Theoretically, if we're at NAV, we can begin to think about deploying capital. I think that implies that our -- we're trading at a cap rate that's compressed relative to where we are today. We don't think we're there. Candidly, we think we've got some work to do to close that gap. So in the short run, as you know, we bought back these shares, and we may do some more. But yes, I think we've got a little ways to go before we can think about actually deploying capital into an acquisition or otherwise, obviously, yield dependent, market dependent.

Okay. And then if we look at your lease expiration schedule over the next 2 or 3 years, are there any material mark-to-market opportunities, particularly in the retail portfolio that we should be thinking about?

That's squarely down the middle of your plate. Why don't you take that one?

Yes, happy to take that, Jon. Thank you for the question. As far as expirations for this year, about half of those we've actually already renewed at positive spreads. So we feel pretty good about near-term expirations. Looking out further, a lot of this is big box anchor spaces, which we'll expect to be able to push rents nominally on those. That's kind of the balance of the retail side. In office, I think there's still tremendous opportunity to mark-to-market, particularly in Charlotte at our Province Plaza asset, where I know we are significantly below market. That is a little bit older, but we have plans to reinvest in that particular location so that we can drive further rent growth. So still lots of organic growth opportunity in both sides of the coin, retail and office and bullish about our prospects going forward here.

Maybe kind of -- Shawn, just bringing together all your comments and just all the moves that you guys have made with the Board refresh and the selling multifamily, what would you say is the most meaningful movement that the company has made this year?

Well, that's a tough one. As you can tell, Jon, and I appreciate the question, we're excited about where we are and more importantly, where we're headed. It's hard to single one out. But I think from an economic standpoint, the scale and the momentum created here as of late on the sale of the multifamily and the real estate financing as well as the construction business. I mean, we came to the market 3 months ago and said we are going to do these things, and we have materially done those things. I think when you add to that, this kind of evolution of our company, the ability to bring highly skilled directors on board is, in my mind, metaphorically accretive to the Board, right? And it gives us an opportunity to have some additional guidance. We appreciate more than they know the kind of contributions from George and Dennis. But as we evolve this company, we're bringing 2 folks with deep capital markets REIT, public REIT experience on to this Board. And we think that is helpful to us to kind of challenge some assumptions work through the challenges that face us ahead and continue to grow this company, grow, again, close that NAV gap and grow the FFO and in turn, grow the shareholder value over time. So we're just excited about this, excited about the opportunity, thankful for the directors that were with us and very thankful for the ones that will be joining us. And I think, look, I'd be remiss not to say I'm thankful for the team for digging in and plowing through this challenging yet rewarding kind of phase in our company here. But we're fired up. We're excited. We are bullish, and we are executing, and we're excited about the future.

This concludes our question-and-answer session. I would now like to turn the call back to Shwan Pivot for closing remarks.

Thank you very much. First and foremost, we appreciate your interest in our firm. For the shareholders, your investment in us, for the employees, your continued resolve to see our company continue to succeed. I just want to thank you for joining us today. We look forward to more exciting quarters in the future and look forward to some press releases from us. We're excited about where we're headed and couldn't be more excited for the support that we're receiving along the way. So thank you for joining this morning, and have a nice day.

Thank you. That does conclude today's call. You may now disconnect. Goodbye.

Bergey from Citi Research. Pleased to have with us American Healthcare REIT. This session is for Citi clients only and disclosures have been made available at the corporate access desk. [Operator Instructions] Brian, I'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reason and investors should buy your stock today, and then we'll get into Q&A.

Thanks, Nick. Really appreciate being here. It's a great conference. So with me is Gabe Willhite, our Chief Operating Officer; and Alan Peterson, our VP of Investor Relations. So I think the reality is that we are in a great segment of the real estate population. So supply and demand fundamentals are terrific in our space in the senior housing long-term care. I think that based on that fact, our organic earnings growth has been terrific, and that has allowed us and afforded us a wonderful cost of capital, which is allowing us to grow externally as well. So I think if you look at the midpoint of our guidance that we just released on Thursday and Friday of last week, we're talking about nearly 18% NFFO per share growth, which is significant.

And so top reasons to buy stock today seem to be good fundamentals, good cost of capital, external growth.

Yes. Terrific fundamentals and quite frankly, very high per share earnings growth. And by the way, we're delivering that per share earnings growth while also continuing to delever. So a really safe balance sheet at 3.4x net debt to EBITDA.

To think about that growth algorithm internally driven obviously by the fundamentals that you're seeing, externally driven based off of kind of the acquisition opportunities as well as kind of your cost of capital that makes it that accretive? Is there any reason to think that the current growth rate, particularly given kind of where leverage is now could not continue for the near and medium term?

Yes. I mean I think that the fundamentals in our sector, as I described, are spectacular. And I think that you're going to see -- I mean, unless every single day, 10,000 people turn 80 years old. And 80-year-olds are definitely in need of exactly our kind of service that we are providing. We tend to lean into the acuity. Some of our peers are far more independent living. We skew more towards assisted living and skilled nursing. And so people are in our buildings because they need to be in our buildings, not because they chose to not because they decided to sell their house and needed to move to something else. So yes, and as far as supply goes, you're really seeing very little new construction. I think the numbers out today are less than 1% of the total stock is under construction today.

So with the supply and demand, yes, I think you're going to see a good long period of sustained growth in our segment and feeling very good about long-term fundamentals. I think that last year, we grew our occupancy by 270 to 280 basis points in our RIDEA segments. I don't know if we're going to grow by another 280 basis points this year. But I do know that the average age of people moving into an assisted living facility is between 75 and 85 and the oldest baby boomers this year are turning 80. So we're right in the middle of a period of sustained growth and demand.

And one of the questions we've been getting from investors has just been on the topic of MA and the 0% kind of projection. Could you just remind us how you think about that in the context of how those contracts were kind of on a state-by-state level and how you see those as really an opportunity to kind of drive revenue growth for the company?

Sure. Great question, Seth. So what we're really talking about is in our Trilogy segment. Trilogy is about half skilled nursing business. Within that skilled nursing business, I think the mistake that people often make is they ascribe a kind of inflationary rate increase to that business and think that it's somehow going to cap the NOI growth because you're relying on government reimbursement sources. So a couple of things that they're missing. One of their business that's skilled nursing, about 20% of that is private pay skilled nursing that rate is going to be pushed in the same way that a private rate in AL and IL would be pushed. So they've got pricing power there.

And secondly, on the Q mix, the mix of what Seth is talking about between Medicare, Medicare Advantage, Medicaid, they have -- they've got a new thing going on right now. The Medicare Advantage plans, maybe 18 months ago started having issues with their 5-star ratings. And their 5-star ratings are really triggered off of customer satisfaction type scores and access to the best quality operators. Trilogy is one of the highest quality operators in the space. They have a CMS rating of 4 stars, no other large provider has a 4-star rating across their portfolio. They have quality measure rating above 4.8. I think I'd put that up against anybody as well. So the Med Advantage plans are realizing that they're a very high-quality operator that they need to be partnered with. And Trilogy is going through and finding who the best partners are for them from a Med Advantage plan side, and a lot of that is driven based on what the rate is that they're willing to pay them.

So within Trilogy's Med Advantage mix, they're partnering with the plans that are going to give them the highest reimbursement so that they can provide the level of care that their residents are used to and that people in the post-acute setting really value. As you get more and more occupied, you can be even more and more selective with the plans that you're partnering with, and that's how they've been able to deliver in their Med Advantage business over 8.5% growth year-over-year on the rate side because they're managing which plans they're partnering with. That trend, I can't tell you it's going to be 8.5% again in 2026. But the main drivers of that trend are still intact. Med Advantage plans still want to partner with the highest quality operator. Trilogy is still hyper focused on optimizing those partnerships. And as you get more and more occupied, you have more power to do it.

And then with that kind of growing occupancy, how do you think overall kind of the sources of payment between Medicare and Medicare Advantage, Medicaid, private pay -- how is that an opportunity to drive kind of revenue on that side, just stepping out of just the Medicare Advantage side, but looking at it overall and driving the revenue mix there?

That's another great point, even assuming that rates just grew inflationary, you can still get rate growth on a per patient day basis that's better than inflation rate by changing the mix of residents that you're bringing into your building, meaning instead of having a high percentage of Medicaid residents that are paying the lowest reimbursement rate, you are getting more and more post-acute admissions in bringing in people that are on Medicare and Medicare Advantage, and that's pushing your overall daily rate higher because those are higher reimbursement sources. That's going to probably continue to be the trend. I think over the last year, we saw maybe a 2% decrease in the amount of resident days that are in the Medicaid setting that trends should continue as there are more post-acute admissions coming into Trilogy.

And then one of the other topics that we kind of discussed with investors is just thinking about Trilogy so can you just kind of explain why it's not a SNF operator within a RIDEA structure and what makes that unique?

Sure. So we get that question a lot. SNF RIDEA who would do that, who would be that crazy to do that. Our competitors, I think, bring it up sometimes. And to be clear, we are not a SNF RIDEA company. We're a Trilogy RIDEA company. The integrated campus is much different than your typical stand-alone SNF that relies heavily on Medicaid that relies heavily on government reimbursement. So within Trilogy, you have approximately half the beds in any given building, which could be 100 to 120 unit buildings. About half our skilled nursing, about half are AL memory care, independent living. That continuum of care on the campus allows them to do a lot of things that other people can't do. One, you have post-acute admissions in the skilled nursing side that are fueling the occupancy on the assisted living side. So about 40% of the move-ins in the assisted living business at Trilogy are coming directly from the post-acute business.

If we had that set up across our entire portfolio where you had the dominant skilled provider post-acute provider, giving you 100% of the referrals to your AL. Our occupancy in our AL business would be measurably higher. That synergy works the other way as well as people age from independent living, they start to utilize assisted living. And if you need even more care than assisted living, you'll be in a Trilogy skilled nursing bed. The other thing that it does is just structurally, being able to run a 50-unit stand-alone skilled nursing business or a 50-unit stand-alone assisted living facility is going to be very difficult because there's just too many fixed costs.

If you have -- if you try to go out and develop a 50-unit SNF, I don't even know if you can do it profitably. If you do that with 120 units because you have a mix of both, you have access to other markets that other people wouldn't be able to enter and if you're providing great quality of care in all those different acuity settings, you're getting the benefit of it as people move across the continuum.

I think it's important to think about the history and how we got where we are. Trilogy was started 25 years ago by a man named Randy Bufford. Randy was Danny Prosky, our CEO, had a long-standing relationship with Randy Bufford, he knew him for decades. Randy decided that he wanted to build a new and different kind of skilled nursing facility so if anybody here has been to a skilled nursing facility, it's easy to understand that you might think negatively about that. Most skilled nursing facilities are probably a minimum of 30 years old. There's probably a smell associated with them. And the residents tend to stay for a long, long time, and the reimbursement rate that's most prevalent within the building is most likely Medicaid.

The reality is that Randy looked at that model and said, "I want to change this." What I want to do is I want to appeal and attract post-acute stay so somebody who has a fall, somebody who had a surgery and they can't go home because they can't get better at home. They just need a short-term stay in a place where there are nurses, where there is therapy, where they can get their meds prescribed and that they can get better.

So the average length of stay is between 30 and 35 days in the skilled nursing side. Initially, he started out with just skilled nursing beds. And then he realized that if a resident was ready to leave skilled nursing, but not able to go home, he was losing those referrals to an assisted living operator down the street. So I said, "Well, I should probably bolt-on assisted living here, and he did that." And now we have a true continuum of care. We have independent living beds, we have assisted living beds. We have memory care and we have skilled nursing. And the truth is, yes, it can be a continuum of care where somebody comes in initially into the independent living and then eventually, they go to the assisted and eventually, they go to the skilled. But more often than not, as Gabe described, it kind of back -- it kind of ping-pongs back and forth. So we'll get a resonating in from a fall from a surgery, goes into skilled, doesn't go home, moves into the assistant. They live in the assisted for several years. They need another procedure.

They go to the hospital, they get the procedure done. They're still paying for their assisted living bed. When they come out of the hospital, they move into the skilled nursing wing to get better because the nursing care is there for them. So it's really a wonderful combination. And quite frankly, probably and Gabe says this a lot, if you were going to reimagine care, this is how you would do it. You would have it within 1 facility. And so it's how we got where we are. And Trilogy is -- the vast majority of the assets that Trilogy runs were purpose-built, which means they are newer, nicer, average age is 10 to 11 years old. So you're not talking about the old and kind of smelly skilled nursing.

Maybe 2 final points on that because this is pretty important. Trilogy, it's 60% of our portfolio in a lot of ways we go as Trilogy goes. I think they have the most durable competitive advantage in our entire portfolio. To be able to compete with Trilogy in the markets that they have is going to be very challenging for a lot of different people for a lot of the reasons that we just described that are structural and has to do with the physical plan that they've got an advantage on over everybody else on. But two, and I think the most maybe underappreciated part of the entire structure is that we don't have a typical management contract with Trilogy that pays a 5% fee on revenue.

That concept, which we have incentives throughout our portfolio with our other shop operators to address that issue. But none are even close to the alignment that we have at Trilogy that's total bottom line aligned. So their management contract pays a below market fee on revenue, and it's heavily incentive laden with a 3-year LTIP that's based on real EBITDA growth targets that we set. So that brings alignment from just the top line revenue, which can be NOI producing but not necessarily if you bring in a bunch of agency to grow your revenue that is not helpful for NOI. It brings it all the way down to the bottom line. So you're fully aligned on NOI. And it's also paid in AHR stock. We were the first company, I think, in this space to adopt a management company incentive program where we issue them stock.

And the real key to that is it allows them to participate and create alignment and participate in the value creation coming from Trilogy but it also gives them a real financial incentive to help support the other operators in our shop segment. So not all of those guys are as big as Trilogy and sophisticated as Trilogy and have all the resources Trilogy has. By design, we want regional operators that are close to the assets that they manage for us. What you give up when you find those regional operators to sometimes scale and resources, if we can augment those operators with Trilogy scale and resources, we can get the best of both worlds and with our alignment and the contracts we have with Trilogy, we've created the right financial incentives to drive that.

And then maybe on that point of the regional operators, how do you think about how to select new operators to partner with, kind of what goes into your criteria, what goes into your criteria for selecting asset acquisitions beyond just kind of the yield. Is it any features within location or the building product type that you kind of look for. And then how -- what have you learned from operating Trilogy that can help your regional partners that you select kind of optimize their productivity.

Maybe I'll start. So listen, we traditionally select the operator before we select the real estate. We have a painstaking process of underwriting the operators. We are up to 9 operators in our portfolio. We much prefer the regional operators. We think that they bring a certain level of expertise and certainly, you can concentrate within their markets, which allows them to do a better job of marketing, sharing best practices. We will take sometimes years to underwrite a new operator. Last year, we added 2. This year, we may add 1 more.

I don't think you're going to see us at 20 operators anytime soon, given the fact that we're at 9 today. We spend a lot of time getting to know them. We will mystery shop their buildings. We'll go in, we'll see what they look like, how nice they are, how occupied they are. We will track their performance. We will look at their financials. We will get to know the quality of care, their resident satisfaction and their employee satisfaction, which we think are 2 of the biggest drivers for success for an operator.

And ultimately, it takes us quite a while before we're willing to add another operator. The reality is, and this speaks to the acquisition side. As I say, we find the operator before we find the real estate. So we don't go out and find a building and then look around for the operator we want to manage it. We have the operator in tow. In some cases, it's quite exciting. They will bring us buildings. So they may have another capital partner that wants to exit. We have a working relationship with this operator and they'll say, listen, we know that this building is going to sell. If you give a fair price to the existing owner, then you probably can buy this and we can stay on as the operator, which is terrific because now we're talking about off-market deals.

Other times, we will, again, have the operator. We find a building that is in their market. We're working with them on other properties. We will let them -- we will have them tour that building with us. We can get really -- we can sharpen our pencils on the underwriting or the pro formas of that building with the operator in tow, as you can imagine. Sometimes they'll say, listen, we like the building, we like the location, but the unit mix isn't quite right. We probably shouldn't be buying that. And that's great. So we'll walk away from something like that. So we choose the operator before we choose the real estate.

So all of our operators, we encourage to share best practices with each other. What we want to do is be a facilitator of growth for all of them in many different areas. Sometimes that -- yes, that comes from Trilogy and taking best practices from Trilogy and rolling them out to other operators. Sometimes that comes from other operators and pushing them through Trilogy and through our system. I think where Trilogy is going to be most beneficial for the next probably 5 and 10 years is helping the regional operators achieve scale. A lot of -- so if you look at the NIC data, they predict by 2030, we're going to be underbedded by 576,000 units in senior housing.

The cost to develop that many units, they estimate to be $275 billion. You have to triple the size of the largest health care REIT in 4 years in order to meet that type of demand. We need to scale far faster than people appreciate we need to scale. And the regional operators that we're partnered with need to be built to do that. Trilogy has a playbook to scale in that way without quality degradation. So if we can help them execute on that strategy and grow. It will make AHR stronger because what we're really trying to do is pick the winners from an operator perspective and help them get more and more assets and grow their businesses.

And then you mentioned kind of the lack of supply and the projected kind of shortfall of senior housing beds. Does that just provide kind of how do you kind of balance what residents' ability to pay, the ability to kind of increase rate? And then how do you ultimately see that, that shortfall of beds get solved? Is there anything on the regulatory side that you're worried about there?

Good question. Not anything that we've heard about. Our goal is not to price people out of the care that they need. Our goal is to provide the highest quality of care in our buildings so that our operators in our buildings are the preferred ones in the markets that they're in. What that means for rates 3 years from now, I think is anybody's guess, I'm sure that they'll be higher. I think affordability at the top end, if you're providing the highest quality experience, is very strong. I think the boomers have a lot of wealth that's been accumulated through not only their homes, but also through their trading accounts and even through pensions. I don't see affordability as being a problem at the top end of the experience where you're actually providing the best assets with the best operators and the best outcomes.

Yes. I think that's totally right. I mean the average length of stay in assisted living is 2 years. Someone moves in, most typically, they've just sold their house, which has appreciated probably no mortgage on it anymore. They paid it off likely. And so you can imagine whatever they're selling their house for is going to be more than enough for them to be able to afford to move into an assisted living for a 2-year period of time.

And I think most importantly, especially true at Trilogy is we're proving out every day sort of the benefit that the quality of care that they're getting and the value proposition associated with being one of their buildings.

And then just within the SHOP portfolio, how much is AL, how much is IL? What's kind of the optimal mix there as you think about that? And what are kind of the margins of those as you think about those different pieces?

So within our SHOP portfolio, we're a little bit different than others. We're probably more focused on the defensive nature of health care real estate. And that means that within SHOP, you're more focused on assisted living than you are on independent living, assisted living is more a need-based product. You need help with activities of daily living in assisted living and independent living is more of a lifestyle choice. You're probably sick of mowing your yard and taking care of your house and having a windstorm come through and need to fix your roof and all that.

You just want an easier life that's more curated for you. In our portfolio, we're about 80% assisted living and about 20% independent living because we saw through the last recession, when people have a hard time selling their house or even when home values go down, the reluctance to sell your house into a declining market is real.

And that can have impact on occupancy in independent living. It can have impact on the strength of rate in independent living, that assisted living is more insulated from the trade that you get in exchange for that defensiveness is lower margin. So it's -- assisted living is going to be a lower-margin business because you're actually providing a human element, a care element that cost something, you get less flow-through to NOI for every incremental bed because there is a staff requirement for it. But we're willing to make that trade for the defensive qualities of it.

And you're also charging more for assisted -- I mean, to state the obvious.

There's a question that came in kind of on this topic. It's really just the opportunity to improve that operating margin. I mean, you kind of walked through the structural impediments to the margin relative to maybe other sectors. But where do you see the opportunity there on the efficiency side? I'd imagine it has to be on the expense side.

Yes, a little bit. So on the expense side, the biggest expense line item in senior housing is labor always, right? So the first thing you want to do is make sure you're not using agency labor, third-party labor that could be 2x per hour of what a typical person would get paid, and it's not because that person is getting that 2x the agencies, staffing agency is getting that profit so you need to get rid of agency. We've largely done that in our portfolio. I don't see that as a big problem right now. And accordingly, I don't see it as a great opportunity. I think overtime is still higher than it needs to be in the space.

And we're working on things that can push that down, staffing solutions within the senior housing industry, I think, are becoming better. I think AI can play a role in that and help keep your costs down on the labor side of it. But really, there's probably more growth coming on the rate side than there is on the expense management side.

And from a rate perspective, I think across the board, we're seeing people raise rates that are -- the increases are higher than inflation. And I don't think that's going to change anytime soon. I think most operators are trying to get back to a pre-pandemic operating margin which in assisted living was more like a 30% profit margin where today, our SHOP portfolio is in the low 20s.

And then you mentioned a few things there using AI to maybe help with labor efficiencies. Kind of can you talk about how you're using technology kind of broadly across the portfolio as you think about the opportunities to use it within the health care space and provide a better quality of care in addition to labor. And then maybe just within labor specifically, any initiatives that either Trilogy or your regional operators have implemented to kind of improve retention and kind of where does retention sit today relative to maybe pre-pandemic and how has that changed?

Retention is getting better. I think the labor market is better in the markets that we're in. I think Trilogy is obviously very focused on it. The reason is that -- and I got this totally backwards when I started working at AHR 10 years ago. I thought that we were tracking employee satisfaction to just see how employees were talking about the business. It's really canary in the coal mine on what the resident experience is like. If you have happy employees, then those happy employees are providing a different quality of experience for the residents in the building. So that's been crucial for Trilogy's execution for a long time and something that the other operators that we partner with understand and appreciate so we lean into employee engagement.

We lean into employee surveys being useful to judge employee satisfaction. Fixing leadership issues within the community is probably the #1 thing that people ask for and want Trilogy make deep investments into their employees through training and also taking people that have come into the building, maybe facilities maintenance type role and helping them see a real career path at Trilogy.

So I'm not kidding you they have an actual handout that looks like a marketing collateral for employees that shows you here is your path to go from minimum wage person to RN and every single step along the way to get there so that they can see what their career could end up being like at Trilogy that helps when employees feel like you're actually investing in them. And that's why their turnover is less than 40% in their facilities. That's an incredible number for this industry. On the AI front, just to pivot over to that. We're looking at everything that we can do. The real advantage that we have is Trilogy can be a test kitchen of sorts for a lot of different things and also has enough scale to be able to develop proprietary things themselves.

I don't want to, in a public forum give the entire world the exact playbook on what we're doing, but I'll tell you that I think it's going to be very important for revenue management and setting of rates, especially as we move along the next 5 years to be very, very highly occupied buildings, and we're dependent on rate management to drive NOI instead of occupancy gains. I think from a search engine optimization perspective that AI can be helpful and some of the tech solutions that Trilogy is working on can be helpful and can be expanded throughout our portfolio. And I think there's 2 other ways that are kind of interrelated. In the skilled business quoting and getting paid for the services that you provided is an incredible headache and takes a lot of people to do it and do it well. If you can automate that through AI, which Trilogy is doing now and testing, not solely, they haven't reduced head count dramatically to do this.

But I think over the next couple of years, you could see a situation where that becomes the norm and they're using AI to help make sure that they're actually getting paid for the care that they're providing and takes away some of the time that people need to spend working on that. And then the final component, I think maybe it's the most interesting, but we'll take more time. It's just how can you use AI for predictive analytics around care. If you have AI reading electronic health records and understanding, for example, what prescription somebody just went on and you can adjust the care plan accordingly to address issues and predict them before they happen.

So let's say you go on a new prescription that people know will cause dizziness when you first go on it. They can adjust the care plan and say, "All right, when Gabe goes to the dining room, somebody needs to walk with him so that he doesn't have a fall." So it's minimizing the risk of bad outcomes in taking data and even wearable technology to give you vital signs to see what's going on with the residents and actually do something about it before it leads to a worse situation and maybe a hospitalization.

We have a handful of other questions that came in through live QA. So I just want to get to those. One is how is the average stay duration for, I guess, both on the senior housing side developed over time? And do you see a positive impact if people start to live longer, just based off of some of these advancements that are underway right now.

Longer length of stay should mean higher occupancy. So I think that's -- you can see the thread connecting those 2 things. I think the interesting thing, and maybe it's counterintuitive is in the assisted living, your average length of stay is 2 years shorter. In independent living, I would say, it's more like 3 years. But if you're really high-end independent living, I think people are moving into those in even younger age. So that could be even more than 3 years. It could be 5, 7 years. If you believe that it's more difficult to raise in-place rents on residents than it is to raise the street rate then I think you would prefer to have a shorter length of stay and more turnover in your building because you're capturing the loss to lease from the street rate.

If you don't think that's a thing then, yes, longer length of stays would be preferred because of the occupancy effect. So in our portfolio, we're more focused on street rate optimization than we are necessarily pushing the in place because the in-place rent -- and don't get me wrong, we need to pull every lever, and that's important. But there is friction between the people that are in the building, providing care and taking care of residents and what they're willing to do from a rate pushing perspective on the people that have already moved into the building. Less friction, if you're just saying, hey, we're a high-quality provider, let's capture the value of that quality to somebody who's coming in and doing a tour, and you're saying this is our new rate than there is on somebody who's in the building.

Then the other question is, we've touched on this a bit, but maybe more on the federal level. What do you think are the current administration's health care plans? And how could it impact your company?

So the -- we haven't got a question about the minimum staffing rule in a minute. I don't think that's on your list either. So I think from a regulatory perspective, it seems better we don't have the same overhang and concerns that we thought we might before. There were some discussion in the past years about addressing which REITs and private equity can own health care. I think that was an interesting development, and that's much harder at the federal level with the current administration.

Yes. I think the federal government certainly had Medicaid, Medicaid funding on their radar. There was lot of consternation about that. And as predicted, they chose to attack sort of the eligibility side of it as opposed to the reimbursement side for skilled nursing. So it seems as though as an industry, we've been able to withstand any concerns there. I think that the federal government realizes that if they were to cut the funding for skilled nursing stays, by any reasonable amount, I think that they would be putting a lot of companies out of business. The margins on those are very thin. And theoretically, skilled nursing providers should not be getting rich. And so I think that they have understood that from past cuts. So I think we're in a pretty good shape as it relates to reimbursement.

Maybe just on the shop side, we get a lot of questions about when will new supply kind of come back. Do you guys have a view on when we could start to see a material pickup in shop development? And then just kind of with your acquisitions, like where are you acquiring today versus replacement cost in the context of when you think supply could come back, how much would rents need to rise?

Yes, we're getting into the lightning round now. So no, I think we're continuing to be able to buy below replacement cost, but we're certainly approaching it pretty rapidly. I think that construction probably pencils today at the very high end when you're charging really, really high rates. I think that in the more moderate level, I don't know that it pencils today. It all depends on what your cost of capital is and what you're willing to accept from a development yield. I don't know if it makes sense today, but I think it probably will very soon. I think in order to be able to get your desired returns, you probably need to underwrite double-digit rate growth in the next 2 years. And while I think that there is a chance that happens, I don't think it's a guarantee. So my guess is construction probably starts to pick up in 2027, maybe 2028. The reality is it takes a while. Usually takes a year to get permits, 2 years to build and 2 years to stabilize. So the reality for us, having already facilities on the ground is that it's going to be a while before we're going to see much of an impact on our occupancy.

Really rapid fire. Same-store NOI growth versus SNFs -- a couple senior housing next year in '27?

Yes. Well, for a couple of us that are predominantly in the long-term care business, it's going to be good. It's going to be double digits, low double digits. The majority of the health care REITs are more triple net based, so it's going to be much, much lower.

And more fewer of the same number of health care REITs a year from now?

I mean we've all heard what's out there, but there's a couple of companies. The reality is I think there should be fewer, but there's going to be more.

Thank you.

Thank you.

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to American Healthcare REIT Q4 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Alan Peterson, Vice President of Investor Relations and Finance. Please go ahead.

Good morning. Thank you for joining us for American Healthcare REIT's fourth quarter 2025 earnings conference Call. With me today are Jeff Hanson, Chairman and Interim CEO and President; Gabe Willhite, Chief Operating Officer; Stefan Oh, Chief Investment Officer; and Brian Peay, Chief Financial Officer.

On today's call, Jeff, Gabe, Stefan and Brian will provide high-level commentary discussing our operational results, financial position, our 2026 guidance and other recent news relating to American Healthcare REIT. Following these remarks, 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, February 27, 2026 or such other date 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 our Chairman and Interim CEO and President, Jeff Hanson.

Well, thanks, Alan, and greetings to those of you joining us today. Before the team dives into our results, I want to start by addressing the leadership update that we shared earlier this month. As you know, I stepped into the role of Interim CEO, while Danny is on a medical leave of absence. I'm pleased to share that he's at home recovering well and is in good spirits. In fact, he remains engaged. He and I speak regularly each week on the business front, and he's participating in all of our Board meetings virtually while he's on the mend at home.

He intends to return in the relative near term, but it's too early to have timing visibility at this point. By the way, we appreciate the many well wishes sent from our partners and stakeholders. We pass them along to the Prosky family. And for that, he's grateful. So thank you.

For those of you who don't know me well, I served as Chairman since the company's formation and previously led AHR's predecessor companies as both Chairman and CEO. I'm 1 of the 3 co-founders of the companies, and I led this platform for roughly 16 of the past 20 years, alongside both Danny and Mat Streiff, Mat, of course, being our third founding partner and a current board member.

Together, we built this platform over the past two decades with a clear vision, to create a disciplined health care company focused on providing and facilitating high-quality care and superior health outcomes. Our team here continues to reinforce this internally and externally as this vision is actually what drives our performance and long-term value creation, and this foundation remains firmly in place today.

Along the way, Dan, Mat and I have built the executive management team that you know so well today. The rest of the Board and I have tremendous confidence in our team's ability to continue to do what they've done exceedingly well over the past decade, which is to drive the growth and the performance of this REIT.

I want to be very clear at the outset. This is a seamless continuation of the strategy and execution you've grown to expect from this team. My role as interim CEO is one of continuity, support and advisory. There's no change in strategy. Our investment in capital allocation strategy, risk management framework, balance sheet posture and long-term value orientation remain unchanged, and our executive team continues to work very closely with the Board in executing against the established plan.

It's also important to note that I've been engaged as the interim CEO full-time since the day after Danny's medical event. And I can tell you that the organization is operating with the same alignment, focus and clarity of execution as it ever has. One of the company's greatest strengths by the way has always been the depth and the commitment of our people, which is particularly evident during times like this. Importantly, the results you're about to hear reflect the strength of this platform and the depth of our team.

And with that, I'll turn the call back to the team to walk you through the quarter and our outlook. Thank you.

Thanks, Jeff. Operationally, the fourth quarter capped off another exceptional year of outsized NOI growth for AHR. We delivered total portfolio same-store NOI growth of 11.8% in the fourth quarter and 14.2% for the full year 2025. This marks our second consecutive year of double-digit total portfolio same-store NOI growth and it underscores the value of our hands-on asset management approach.

Performance was once again led by our operating portfolio, which is comprised of our integrated senior health campuses, also known as Trilogy and SHOP segments. These segments now contribute 76.9% of consolidated cash NOI for our business where we continue to see the benefits of scale, alignment and operating leverage.

The growth in our same-store operating portfolio in 2025 was driven by three primary things: occupancy gains, disciplined rate management and continued expense controls. Additionally, as occupancies moved higher throughout 2025, each incremental movement contributed to NOI growth and NOI margin expansion as we've seen margins expand 130 basis points and 280 basis points in our Trilogy and SHOP segments, respectively in full year 2025 compared to 2024. That operating leverage, combined with pricing discipline and occupancy is sitting near 90% positions us very well as we enter into 2026.

Focusing on Trilogy, same-store NOI increased 14% in the fourth quarter and 18.4% for the full year. Same-store occupancy reached 90.6% in Q4, up 275 basis points year-over-year. Revenue growth was supported by both rate and also quality mix improvements. And quality mix continues to trend favorably. Medicare and Medicare Advantage penetration increased year-over-year, contributing 220 basis point improvements in both quality mix as a percent of resident days and as a percent of revenue in Q4 2025 compared to Q4 2024.

We believe that this continued shift reflects exactly how Trilogy's proactive approach to aligning its care and services with the right payers best serves its residents. This emphasis on high-quality care and health outcomes continues to be recognized and appreciated by the health systems and Medicare Advantage insurers that Trilogy partners with.

High-quality operators will continue to garner the most demand for growing care needs of the aging population. As we enter 2026, Trilogy is operating at historically strong occupancy levels with embedded pricing tailwinds that give us confidence in delivering another year of double-digit same-store NOI growth in the segment.

Turning to SHOP. This segment again delivered the strongest growth across our portfolio. Same-store NOI increased 24.6% in Q4 and 25.2% for 2025 compared to the same period in 2024. Same-store occupancy surpassed 90% in the fourth quarter, averaging 90.6%, up approximately 290 basis points year-over-year. Combined with solid RevPOR growth, the resulting NOI growth is a testament to our and our operators' focus on high-quality care and outcomes in our investments in the resident and employee experience providing us additional pricing power in the markets we serve. These operational focus areas and investments along with the strong supply and demand imbalance within the long-term care sector have allowed us not to have to meaningfully compromise on any of the levers of revenue growth such as rate or occupancy within our pricing strategies.

Once again, we expect SHOP to continue to lead our portfolio's organic growth in 2026, and this growth will be supported by our dynamic revenue management, which we're piloting with a number of our operators and properties by leveraging the platform that we continue to invest in with Trilogy. I expect that these developments in revenue management that have really been continuously evolving over time to allow us and our partners to capture sustained levels of above average NOI growth well into the next decade.

Finally, I want to thank our operating partners for their commitment to our mission of providing high-quality care and outcomes for the residents they care for. Their standards of care have helped contribute to the great health outcomes and the resulting financial performance we've achieved, which we expect to continue this year.

With that, I'll turn it over to Stefan.

Thanks, Gabe. 2025 was a highly active investment year for AHR. We closed on over $950 million of new investments across our Trilogy and SHOP segments, all in collaboration with our trusted regional operating partners. Our investment philosophy remains consistent. We are focused on relationship-driven sourcing, disciplined underwriting and long-term cash flow durability and growth. The majority of our acquisition volume this year was within SHOP, where we added newer assets in attractive submarkets alongside existing regional operators.

This has now positioned our SHOP segment as the second largest within our diversified portfolio in terms of cash NOI. By design, yet without set allocations, we've shifted more of our portfolio into our operating portfolio segments, which is where we continue to see the best risk-adjusted returns. Nonetheless, we will remain nimble and respond appropriately to any changes that occur in the transaction markets to take advantage of attractive opportunities as they arise.

In many cases, our SHOP acquisitions were relationship sourced or off-market opportunities where we had deep familiarity with the operator and the local market dynamics. We continue to seek opportunities where we know the operator first and can underwrite performance with conviction. Our goal is not simply near-term accretion but sustained NOI growth. This is why we underwrite all our acquisition targets holistically by focusing on market demographics, operator expertise, acuity mix, an age of asset, just to name a few of the many metrics we evaluate to inform our potential risk-adjusted returns.

The detail our team emphasizes allows us to be confident in allocating our dollars today to provide for the best possible near-term and long-term performance outcomes. Additionally, with many of our deals in 2025, we bought the newest asset within the respective markets, and we expect those communities to be market leaders for some time. Data continues to show that new starts and supply growth are at historically low levels, with deliveries of new stock below 1% of existing inventory, giving us conviction in our expectation that competitive pressure in those markets will remain muted.

Further, any incremental supply should be absorbed rather quickly by the growing demand, highlighted by the baby boomer generation turning 80 this year. This dynamic should allow us to maintain market position for the next several years and beyond. In addition to successfully accelerating several previously announced pipeline deals in the third quarter, which enabled us to close approximately $665 million of new acquisitions in the fourth quarter, we have continued to secure and close new acquisitions in the first 2 months of 2026 that will further complement our portfolio.

Year-to-date, we have closed on approximately $117.5 million in new acquisitions within our SHOP segment, and we maintain over $230 million of awarded deals in our pipeline. After a busy end to 2025, we continue to see more deal activity and more properties available for acquisition in 2026 through both off and on market channels, and we are prepared to competitively deploy capital in pursuit of this increasing volume of opportunities.

With regards to development, our pipeline remains focused primarily on Trilogy expansions and campus growth initiatives. These projects are designed to generate attractive incremental yields with limited market risk, leveraging existing campuses to mitigate any operating losses upon opening as well as providing faster cash flow to recycle right back into the new development projects.

In summary, capital allocation remains aligned with our long-term strategy. We believe we are well positioned within the industry with available liquidity and a strong operator network that allows us to source and execute on accretive opportunities.

With that, I'll turn it over to Brian.

Thanks, Stefan. The fourth quarter rounded out a strong year for AHR as evidenced by the growth we were able to achieve. We reported normalized funds from operations attributable to common stockholders, or NFFO of $0.46 per diluted share in the fourth quarter of 2025 and $1.72 per diluted share for all of 2025. That represents 22% year-over-year NFFO per share growth in 2025 as compared to 2024. Importantly, this level of growth was achieved while continuing to improve our debt to EBITDA by nearly a full turn in 2025.

Our earnings growth in 2025 was primarily driven by the double-digit total portfolio same-store NOI growth helped by the accretion from buying out the minority interest in Trilogy back in September of 2024, and additional accretion from the $950 million of new acquisitions. Our acquisitions were completed with a combination of retained earnings and accretively priced equity issuances over the course of the year from our ATM program and the November 2025 follow-on equity offering.

I'm pleased that all areas of the organization contributed to the growth we deliver to our shareholders in 2025 and expect to carry this momentum into 2026.

Looking ahead to this year, we issued 2026 NFFO guidance of $1.99 to $2.05 per diluted share. This implies another year of double-digit NFFO per share growth and only includes the previously consummated 2026 acquisitions that Stefan mentioned earlier of $117.5 million. Our total portfolio same-store NOI growth guidance for 2026 is between 7% and 11%. That range is comprised of the following segment level same-store NOI growth ranges: 8% to 12% growth in Trilogy, 15% to 19% growth in SHOP, 0% to 2% growth in Outpatient Medical and a range of 2% to 3% growth in our Triple-Net Leased Properties segment.

Moving to our capital markets activity and balance sheet. We continue to execute opportunistically in the equity markets during Q4 of 2025. We settled forward equity agreements, raised additional capital via our ATM Program and completed a forward equity follow-on offering in November of 2025. We utilized this accretively priced equity to fully fund the approximately $665 million of acquisitions closed in the fourth quarter, the 2026 investments that have only recently closed and fund our planned 2026 development spend.

As a result, we derisked much of the execution for the growth plans we have in 2026 and maintain ample capacity as highlighted by our 3.4x net debt-to-EBITDA to capitalize and close on the opportunities Stefan's team continues to evaluate. Importantly, this debt-to-EBITDA metric does not account for the approximately $287 million of unsettled forward agreements from our ATM and the November 2025 follow-on offering.

We are entering 2026 from a position of strength. We have operating momentum, capital availability, disciplined underwriting and improving leverage metrics, equipping our team to continue to deliver on our mission of providing and facilitating high-quality care and health outcomes for our residents and creating value for shareholders.

With that, operator, we'd like to open the line for questions.

[Operator Instructions] Your first question comes from the line of Wes Golladay with Baird.

Can you maybe dive in a little bit deeper on the acquisition environment? Are you seeing any, I guess, subsegments, whether it's higher acuity or a little bit lower acuity that is having any cap rate compression or any changes to terms of the management agreements.

Wes, yes, this is Stefan. Thanks for the question. First, let me just say that, obviously, we're very pleased with what we were able to accomplish in volume and quality of acquisitions this year. And I want to just publicly acknowledge the teams here at AHR and our operators for allowing us to do what we could do. I think just kind of directly at your question, we continue to focus on higher acuity SHOP assets. We think that there's a real benefit to focusing on the AL, the memory care side, I think it just allows us to have more confidence in the long-term stability of that asset class.

We do obviously have some independent living in our acquisition portfolio that most of it is part of a continuum of care. But really, at the end of the day, that's maybe 20% of the total units that we're acquiring. I think there is a little bit of variance in terms of what we will see in pricing when it comes to a full continuum asset of AL memory care and IL versus something that might be strictly independent living. Obviously, a little bit lower cap rate on the IL side. But for the most part, we're sticking with the higher acuity asset class. So I think, again, that gives us some advantage.

Your next question comes from the line of Ronald Kamdem with Morgan Stanley.

Just two quick ones. Just starting with the SHOP, thinking about sort of the guidance for this year, baking in some deceleration. I was just trying to think through if you can decompartmentalize in terms of RevPOR and occupancy, how maybe you see this year playing out versus 2025?

Ron. Good morning, afternoon. So the thought is this, we had over 250 basis points of occupancy increase in our SHOP portfolio just in 2025. And the question becomes, are we going to do another 250-plus basis point increase? It's hard to say. I also think it's important to look at where we came from. Same-store NOI growth in SHOP grew 50% in 2024, 25% in 2025. And now the midpoint of our guidance range is 17%. So that's a pretty dramatic growth trajectory for that segment. We do know that we -- the more occupied our buildings get, the more pricing power we have. And at 90.6%, I think, is the same-store occupancy, we have more and more pricing power. You'll see us push rate for the existing residents, but you'll also see us pushing street rates far more aggressively. I think what you're going to see over time is there's going to start to become scarcity in certain markets.

We have a tremendous conviction in the business over the next 5 to 10 years and can pretty comfortably say that occupancies are going to be somewhere between 95% and 100% during that time period, exactly where they end 2026 is sort of remains to be seen. That's I guess. Did you say you had another question?

Yes. I just wanted to hit on sort of Trilogy a little bit as well just because you guys are at 90% occupied. I think you've made some comments about the benefit of quality mix being able to sort of help the business and so forth. I guess, just wanted to get an update on occupancy upside? And how much of that sort of mix shift you think can help sustain pricing?

Yes. Great question, Ron. This is Gabe. So Trilogy's model, as everybody knows, is unique in the space where they've got the mix of skilled nursing, assisted living, independent living, memory care all under one roof in an integrated campus, and that creates different drivers for their NOI growth. We're pretty proud, like Brian said, at the numbers that they put up in 2024 and 2025. And we're very appreciative that we have a strong partner at Trilogy there, so I want to thank them for all their efforts on it.

The key thing with Q mix is going to be shifting to the higher payer sources, which you've seen us do over the last two years, having more people in Medicare setting and Medicare Advantage settings helps and fewer in the Medicaid setting helps. We're also augmenting the existing campuses with more villa projects, which you can see in the development pipeline there pushing even more earnings growth through on the senior housing side and shifting the mix to more private pay globally.

All those levers are things that Trilogy can use to drive the overall NOI performance, and it's difficult to predict exactly which way they're going to go. I can tell you that we're going to optimize for NOI growth. We're not going to sacrifice rate for occupancy. We're not going to sacrifice occupancy for rate. And we're going to make sure that Trilogy is pulling every lever that they have to continue to grow the business as they've demonstrated they can do.

Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

I just want to go back to the same-store NOI growth outlook for Trilogy, recognizing it is a little bit lower than where you started last year straddling kind of the last 2-year starting point. I do recognize the occupancy is higher today, but Gabe, you did highlight the flow-through benefits at these levels. So I guess what are some of the moving parts to drive that upside versus the initial range that has kind of been a tailwind for you guys the last couple of years?

Yes. Great question, Austin. I appreciate it. There are a number of different ways that things can break where I think with Trilogy, we've got upside potential that's disproportionate to downside risk. I do not see us going backwards in occupancy, but the velocity of occupancy gains could outpace even what we think, especially in the post-acute business where historically, there have been pressures on length of stay from both a Medicare and a Med Advantage plan perspective. Those seem to be normalizing. If that trend holds true, then I think you can expect some upside in our occupancy assumptions.

The same is true about Med Advantage plans and the rates that we're getting there as well. 2025 was a tremendous year for optimizing rate around Med Advantage plans and primarily driven by one particular contract. If we had get more attention on that front, and we've got more partners that are recognizing and leaning into Trilogy's quality of care, I could see outsized growth coming from that lever as well.

And then on the private pay side, what Trilogy has going on with revenue management is pretty unique. They've built a proprietary platform within their system, a solution that can price each unit dynamically in real time based on a number of attributes that they load into the program. They also can take micro market data real time and load that into the system. And they could push that information. They have a way to push that information through to the people that needed the most that are actually in the building. All of those things combined, I think, give them a strategic advantage, a competitive advantage on the revenue management front. And if we can push that throughout our platform to our other SHOP operators, I think it will benefit AHR as a whole.

That's really helpful. I mean are you able to offset the lower rate growth environment from the government reimbursement side of the business with the private pay portion and just through the mix shift opportunity you highlighted to drive that flow through? Or is it going to take more time, I guess, depending on -- you said, you kind of can't predict kind of the demand, but the contracts are in place to set it on the right path, I guess, directionally?

That's a great question, Austin. That's the one that we all wish we had a crystal ball that was perfect to be able to tell where we go from here. There are scenarios where they can make up for it, I think, absolutely. But a lot of things would have to break Trilogy's way in order for that to happen. And I think it would be too speculative to be helpful for us to predict that those things would all break our way.

Your next question comes from the line of Michael Carroll with RBC Capital Markets.

Gabe, I wanted to circle back on your comments regarding the revenue management system. I know in your prepared remarks, I think you're highlighting some pilot programs of kind of rolling that out to some of your other SHOP-related partners. I mean, can you kind of help us understand where you are at in that process of rolling out that program? And have those partners started to see some type of benefit related to that yet?

Yes. Thanks for bringing it up, Mike. I think it's an important differentiator for AHR as a whole, and it really stems from our unique partnership with Trilogy. So let me back up for a minute. With Trilogy, we've got, I think, an unparalleled alignment within the space, where the management agreement with Trilogy is highly incentivized based on an LTIP. And that LTIP is paid in AHR stock. We were the first people in the space to adopt the management equity plan that fully aligns our company's performance with the currency we're using to pay Trilogy's long-term incentive.

What that did was really unlock a financial incentive for the Trilogy platform to help support our other shop operators. So now if they're doing extra work and investing in more time and effort and resources into helping our other SHOP operators perform better, they're actually participating in the value creation from that work. That was the catalyst for revenue management, and how that could be spread through our SHOP portfolio, but there are other areas where that can work as well. That can work in sales and marketing, search engine optimization, that can work in recruitment, employee engagement. It can work in enrichment for residents.

There are a lot of different things that we're trying to test out to see how we can grow the platform value by partnering with Trilogy. And also some of our other operators that have great programs that can be spread throughout our operating platform to others through means that we can be a conduit for. So where we're at in that process is still too early for us to release the results from it. I think the people that are using it are both ends of a different spectrum. One is good operators that are very highly occupied, where the strongest lever for NOI growth is going to be revenue management in '26 and '27, '28, as they kind of pick up the pricing power from that very high occupancy.

The other end of the spectrum is people who maybe have rates that are on the lower end of market and the markets that they're in and understanding why that exists, and if we can solve it with a revenue management tool then we'll just have another quiver or arrow in the quiver to use in these situations throughout our portfolio.

And then what operators are finding this most successful? I mean I'm guessing that some of the bigger ones you have are probably not going to want or need this type of help. But are you starting with a few operators today and you plan on rolling it out to the majority of your operators down the road if it's successful with these first few?

That's exactly right. We take a view that all of our partnerships with our operators are collaborative. We're not going to force anybody to use anything that they don't find to be helpful. If they're already maximizing their revenue management programs and they've already tapped into it as far as they can go, great. That's what we fully expect them to do. If they're smaller regional operators that feel like they're resource constrained, that don't have a full IT team to build out a proprietary program like Trilogy has, that's where we can be helpful. That's where we can help give them the resources they need to outperform the market.

Your next question comes from the line of Nick Yulico with Scotiabank.

In terms of the acquisitions, the awarded deals, the $230 million in the pipeline, I know those aren't in guidance, but can you just give us a sense for like the potential timing of those? And what is delaying the closing since I know -- I think you said some of those had been in place in the pipeline since the third quarter.

Yes, this is Stefan. Well, I guess, just to address the first thing, it's not a delay of closing. Just to kind of go back to where we were when we last talked about on this call about acquisitions. At that time, we had about $580 million that we had closed through the point of the earnings call. Since that time, in the last 3.5 months, we've closed on about $500 million of acquisitions and added and closed on -- yes, closed on $500 million of acquisitions. And then in addition to that, we've added to our pipeline.

So if you look at what we said in the third quarter call, where we had over $450 million of pipeline, we've actually added somewhere around $275 million to that today. It's a -- I mean, I will say that the pipeline is robust. The deal activity is very high. There's always a slowdown that happens in December and through the middle of January on the marketed deal side. But even despite that, we've seen a lot of activity happening over the past 4 or 5 weeks where new deals have been coming out. And on top of that, we we've been working with our operators on off-market deals.

So there's a lot of deal flow. There's a lot of things that we are reviewing right now. And the pipeline is very dynamic. So I would expect that we're going to continue to be very busy reviewing deals that we think make sense for us and being very competitive on the ones that we really want to chase.

Okay. And then just second question is on -- and again, going back to Trilogy segment, and when you guys break out the revenue by payer and bed type, as we think about the different buckets there that are, let's say, tied to the CMS rate that's going to be coming out in the next month or so. Can you just remind us sort of how this is going to work from a rate standpoint, how it plays out this year? Like how much that's going to dictate a portion of the revenue, as you explained on that page versus on the Medicare Advantage side, whether that's sort of in reaction to that rate just as people think about kind of the comfort level and where rates could be and how they impact Trilogy this year when you will have more visibility on that?

Sure. So the main drivers off of the Medicare rate that's coming out in April are going to -- obviously, they're going to be Medicare and Medicare Advantage. So everybody can figure that part out about it. What's more nuanced and probably more helpful, Nick, is that within that Medicare rate, there is a mix shift even within the resident that comes in through Medicare. And Trilogy will optimize even within that payer source to find people with acuities that they feel like they can take care of well. So that's why you see a rate on the Medicare rate on that page in our supplemental, that's 5.2% when the national average increase was closer to 3%. So that's the acuity shift. And that can be helpful for revenue growth, that can be helpful for NOI growth and that can be helpful for margin expansion.

On the Med Advantage side, those contracts typically price off of a percentage of Medicare as well. So the Medicare rate increase will flow through to Medicare Advantage. The dynamic part of that payer source though is that their individual contracts with different Med Advantage plans throughout the Trilogy portfolio, and there are a lot of them. All of those contracts are negotiated separately as a discount to the Medicare rate. And that's what you're seeing when you see the Medicare Advantage per patient day rate increase relative to the Medicare rate, we're basically shrinking the discount that's being applied from Medicare Advantage plans, and that's Med Advantage plans leaning into the quality at Trilogy.

So Trilogy's 5-star rating is over 4 for its entire portfolio on an overall basis and over 4.8 for quality measures. Those numbers are far higher than other national providers and probably industry-leading on both counts. Those are the numbers that the Med Advantage plans are looking for when they're leaning into quality and trying to figure out we can really manage the cost of this residents' care the best and deliver the best quality of care for them.

Your next question comes from the Juan Sanabria with BMO Capital Markets.

Just hoping you could talk a little bit more about the investment pipeline and what year 1 yields you expect. Given what you're seeing, what's kind of already locked and loaded, and what's being marketed. And as part of the acquisition strategy or goals if you're trying to move up "quality spectrum" to higher demographic type seniors that can afford higher rent increases or how you're thinking about affluence and importance there.

Yes. Thanks for the question, Juan. So I think to the first part of your question, I would say that we have seen, on an aggregate basis, if you look at what we have been buying right now, pricing that's in around the high 5, low 6 number, stabilizing in the 7s. I think it's fair to say that there has been some cap rate compression that has occurred over the past few months. But I think that's still a pretty accurate reflection of where things are.

In terms of how we're looking at our acquisitions, and what we're trying to achieve, our strategy has not changed. We are focusing on newer, higher-quality properties. We're continuing to focus on higher acuity communities. And of course, there is always going to be a component that's related to the demographics and the ability for those markets to have the ability to continue to pay higher rents as they move up. But I think that's also just a reflection of what kind of assets we're buying in terms of that higher quality. It's certainly our buildings that -- and communities that are much younger, much newer, fresher buildings.

Residents are looking for something in that model. And I think as this population of future residents comes to fruition, there is an expectation that they are going to have a high-quality experience. So I would fully expect that, that is a population base that we will continue to be focused on just based on the type of assets that we're acquiring.

Juan, this is Brian. I would add to that. We're in a really advantageous position with our cost of capital. It allows us to buy buildings that are -- we call -- we're calling them value add, but it's not value add in the traditional sense that it's an old building that's falling down that you got to spend a bunch of capital on it. Instead, it's more likely a new vintage 2017, 2018 construction, maybe the developer still owns it. They were finally able to get out whole, and we were able to buy those.

They're undermanaged. They could be in the 70% occupancy range, and it's in a market that we know, and we have a trusted operator that we feel very confident that they're going to be able to fill those things up. So we don't need to buy stabilized assets in order to get the returns that we want over time. They can come in a little lower, but we have full expectation that they're going to be in the 7s, if not maybe even better than that.

Great. And then just as my follow-up, curious on both the SHOP and the Trilogy segments on the NOI flow-through of incremental revenue with both segments kind of just over 90%, and how we should be thinking about that going forward?

Yes. It's a range, Juan, this is Gabe, depending on how occupied you are. So at the high end of occupancy rates, you can maybe get 70%, 80% flow-through to NOI on incremental occupancy and SHOP. Same thing is true really in Trilogy's assisted living, memory care and independent living. On the post-acute care at Trilogy in the skilled side of the business, there's obviously lower pull-through because every patient needs a certain amount of hours of care per day. They're still -- don't get me wrong, there's still margin expansion that can come from that incremental occupancy that should be accelerating as you get to the higher occupancy levels because you're probably fully staffed as you get higher and higher up, but it won't be to the same extent as the SHOP portfolio because of the component of care.

Yes. Similarly, on the SHOP side, as you can imagine, the margins on the additional resident that moves in once you're above 90%, 95% occupancy, the pull-through is dramatic and Gabe sort of even referred to some of those numbers. In the AL side, it could be between 40% and 70% depending on your occupancy because at some point, you become fully staffed. You probably don't need to buy too much more incremental food for residents. Certainly, your insurance costs didn't go anywhere, your property taxes didn't go anywhere. So the pull-through is dramatic. And then on the IL side, which is definitely a much smaller component of our portfolio. I mean you're north of 70% pull-through on those.

Your next question comes from the line of Michael Goldsmith with UBS.

Maybe just on some of the like unstabilized or undermanaged properties that you are purchasing. Can you provide color to like what goes into turning around a SHOP asset that has been mismanaged? What makes your incoming operator different than the prior operator? And what are your operators going to do differently that the prior operators couldn't accomplish?

Well, in many cases, it's experience, right? It's being -- having a presence in that market, having the experience of operating in those markets on scale, knowing what the demand levers are, how to market properly, how to hire the right staff, the right regionals to oversee those communities, building in the processes that they might have in place adding to the resident and the employee experiences.

I mean there's a lot of different ways that I think someone with experience and the values that we see in our operators can change how those assets and communities are being managed. And the bottom line is you want great care, you want the employees to have a good experience, and you want the residents to also have a good experience. And I think our operators are prime to do that. They've got the ability to implement those in all the communities that we're acquiring.

And I'd add to that, Stefan, I'd echo everything you just said. When we're partnering with operators on this, we're looking for experienced people that know how to run the business, know how to manage labor and expenses in addition to all the things that Stefan is talking about. And what we're seeing is that the outsized demand growth is actually having an impact on the transition time. So because you've got this pent-up demand for -- or maybe not pent-up demand is the right word, but surging demand for the product.

If you can bring in a new operator and show people that are coming in for tours and seeing the building that you've got a great resident experience, you can fill the building up faster, and you can turn it around quicker than you have been able to in the past. And that is a very compelling investment opportunity for us.

Got it. And as a follow-up, many of the SHOP players have been talking about a slight increase in competition for transactions. Can you talk a little bit about what you're seeing? And then in addition, does your relationship with Trilogy insulate you a little bit given you're able to deploy $370 million into Trilogy assets in 2025? And how should we think about Trilogy investment trends going forward?

Well, let me start with just your answer about competition. I mean -- your question about competition. I think it's fair to say that there has been an increase in those that are pursuing SHOP, both from the other health care REITs and also from private equity. I think where our advantage lies is in the fact that about half of our acquisitions are being done on an off-market basis. We are working very closely with our operators, and they are bringing us potential transactions that they only know about because they have capital partners on the other end that are maybe looking to exit. Maybe they have assets themselves that they're at a point where they would like to recapitalize. So we have been able to, through our relationships, really grow our pipeline through those off-market assets that are available.

On the Trilogy front, I'll take that one, Stefan. So it was an atypical year that we can't promise will happen again. So we had a lot of deals that we did with Trilogy that Trilogy was already managing for different capital that we had the opportunity to go out and recap with an operator that we completely trust 100%, sometimes in situations where the assets weren't even stabilized yet, so that we were confident in the growth profile from developments that we were doing through the pandemic. That's probably not repeatable. A lot of those opportunities we've already taken advantage of.

What is repeatable, and what we do have an advantage on is the development capabilities of Trilogy. So like Brian mentioned earlier, there's $150 million to $200 million a year of development with Trilogy that we're essentially not competing with other capital partners for. So you can strip out the developer economics. In some cases, you can strip out the general contractor economics and those flow through directly to AHR and to the Trilogy management team that has an LTIP that's aligned with AHR stock price, so they participate in the value creation for the work there as well.

Your next question comes from the line of Farrell Granath with Bank of America.

I guess my first question was really just about the bridge between your normalized FFO growth and then your total same-store NOI growth and potentially on the other side of it, the total NOI growth that we could potentially expect especially in the SHOP segment when thinking about the acquisitions that you performed in 2025.

Yes. So listen, stopping short of giving you precise numbers, I can just give you a couple of things to keep in mind. On the SHOP side, because we only adjust our same-store pool once a year at the beginning of the year, there's a tremendous amount of SHOP assets that were sourced and purchased in 2025 that are not going to be in the same-store pool this year. And by the way, if you look at the supplemental at Page 10, you can see that the total portfolio is less occupied than the same-store portfolio. And that's really sort of tied in with that, what I described earlier, which was we're bringing in buildings that were undermanaged, they were underoccupied. And now we have an operator that we trust, and we feel very confident they're going to be able to fill those buildings.

So I feel good about the non-same store, their ability to grow and all of those dollars and all that growth is going to inure to the benefit of the shareholders. They're just not going to show up in the same-store ratios. On the SHOP side, it's approximately 60% of the portfolio that's in same-store. On Trilogy side, I think it's 83%; 81%, 83%, something like that. So there's less non-same-store assets. And as you can imagine, those non-same-store assets were buildings that we took out of service because we wanted to add a wing or we took it out of service because we're adding patio homes. And that happens quite quickly. And by the way, the returns on those are dramatic and very beneficial to the bottom line.

So generally speaking, I think that the non-same-store assets are going to perform well this year. You might even argue they're going to perform better than the same store. But the good news for us and the fact that we don't adjust the same-store pool except for at the beginning of the year that everything we bought in 2025 is going to be in the 2027 same-store growth. And so I would anticipate those numbers to be very positive as well. So we're talking about multiyear growth, bottom line.

Great. And I believe you've been addressing this throughout the call, but just really wanted to nail it down. When thinking about the investment opportunity and especially with the pacing that you're able to be deploying your capital into these RIDEA-type structures, either through adding investments into Trilogy or into SHOP. How is that comparing to what you were able to do in '25, especially since now we've seen other peers have actually been increasing potential investment volumes for '26. Just trying to get a sense about where things could potentially shake out.

I feel like you're trying to round about the questions for me to give you guidance. But I will say this. So obviously, if you look at how we acquired our portfolio, or how we -- how our acquisitions laid out last year, it was a little lumpy. Obviously, a lot of it came in the back end. I think you're going to see something that's a little more even over the course of this year. And I think I would just add, we are going to be looking at a lot of opportunities.

We are going to be finding those that make sense for us. We're going to continue to be underwriting in a disciplined way that will provide us with high-quality assets and long-term performance. And we have the capital. We can compete, and I think we also have a great reputation as a buyer. So I think that, along with the fact that we are seeing more product available in the market, so far this year will lead to some very good things for us.

We're certainly aware of expectations for acquisition volume this year. I would tell you that we want to make certain we're not making bad deals. And if you think about the evolution of the underwriting, I think it may be evolving slightly. And what I mean by that is, it's not as though Stefan's team has immediately switched from being very conservative to overly aggressive. It's more a factor of when we were buying things in 2024 and 2025, we put in there some level of growth -- immediate growth in those. And what's happened is exactly that. We have seen that growth already in '26. We've seen the growth in late '25.

So what that means is that they can continue to evolve their underwriting and be slightly less conservative. I think the other thing that he has mentioned a number of times, Stefan, that there's going to be enough volume out there, and there are going to be deals that are going to match up with our underwriting, with our needs, with our cost of capital, with our operator base and especially when we're bringing in such a huge chunk of those off-market directly through our operating partners. I give ourselves a pretty good shot at doing well this year on the acquisition volume.

Your next question comes from the line of Seth Bergey with Citigroup.

Good to hear about Danny is at home and doing better. I guess just to start off, you kind of mentioned some of the real estate that you're targeting wanting kind of maybe newer vintage assets in good locations and that all makes sense. I guess you touched on this a little bit with wanting to partner with operators that have experience. But just kind of given the alignment that you have with Trilogy and some of the revenue management tools that you've kind of discussed on the call. Would you kind of look for maybe less experienced operators to partner with where you can really kind of use that know-how that Trilogy has to kind of improve results and kind of drive higher returns on kind of with lower quality operators?

That's a very interesting question. I think what I would say to that is, we don't necessarily want to go into a situation where we're basically developing the operator. We want to go forward and build with operators that have a proven track record. That is certainly the more sure and safer play for us. Obviously, there are probably a lot of great smaller operators out there that given the right resources, they could do some great things. But for us, I think we really want to focus on those that have the history and can prove -- and have proven themselves out.

Yes. And I'd add to that, Seth. I think the question is really getting at what's the value that we can derive from Trilogy's platform to help support people, and that's come in a kind of a different angle than what you're talking about. It's not newer operators that are new to the game that have to build out their platforms and get good at what they do. It's taking smaller regional operators who maybe don't have the scale and resources that 150 facility Trilogy platform does, and saying, "hey, we're picking the winners and losers. You're obviously a winner. You know how to deliver great experience for employees and for residents, how can we help you scale and grow with you? How can we be the preferred capital partner for those best operators who want to grow because we know that the industry is going to demand growth from the best operators, and we're here for it."

And then just as a kind of a follow-up. You've kind of talked on the revenue management tools that Trilogy have. You've talked on the operating leverage and on kind of the skilled side, some of the revenue optimization from the different payer sources. When you kind of think about kind of the margin expansion that's been about 300 basis points in SHOP, how much of that kind of do you attribute to kind of just the natural inherent operating leverage in the business, and how much of it is kind of the operating platform that you guys have with Trilogy.

Great question. I think that what you're seeing so far is great operators that we've selected that are doing exactly what we want them to do, which is perform at a high level. We, for years, had operators summits and more recently created quarterly touch points with our operator groups to get together to share best practices, just for their own benefit, so they can start to build their platforms out and make sure that they're cutting edge because this is a very innovative business that's always changing and you can always get better at.

I think some of that is picked up in the performance. But the Trilogy platform value is not fully realized and not fully baked. I think we're in early stages of where we can go with that platform. And hopefully, we'll have more to talk about in the next several quarters.

Your next question comes from the line of Michael Stroyeck with Green Street.

Within SHOP, what are you seeing in terms of seasonality so far in the first quarter? And how much of an impact on occupancy from seasonality is currently baked in the guidance?

Yes. Good question. Last year, there was -- the flu had a meaningful impact on the portfolio. And although our move-in volume was as high as it had ever been. The move-outs were disproportionately high, and that was pulling overall occupancy down. So far, through early 2026, we're seeing much less of a flu impact. It's still -- I don't -- I think none of us in this room feel comfortable calling it that we're all the way past all the risk associated with the flu season. But so far, we're getting through it better than we did last year, and occupancy is not deeply impacted at least through February.

Great. Then maybe one on the triple-net portfolio. There's a pretty steep decline in hospital coverage during the quarter. I know it's a small part of the portfolio and one of the tenants has had pretty thin coverage for some time. But can you maybe just provide some color on what drove that sequential step down and if there are any concerns with rent payments there?

Sure. Yes. Look, that hospital that we own in Southlake, Texas, it's a suburb of Dallas. The tenant is Methodist of Dallas, which is a AA- rated -- credit rated hospital system. They guarantee the lease. They vote with their dollars. They actually own along with the doctors, they own 9% of the hospital. They have personally invested upwards of $25 million of their own money into our building, which is really nice when people are willing to do that.

So they're quite committed to this asset. The volatility is tied to the fact that these guys are really shifting this hospital from a surgical hospital to a community hospital. They have added an emergency medicine. They've added a stroke unit more recently. They've added nuclear medicine, and I think the next phase is Orthopedics. And so from any given month to quarter to the next, it's going to move around quite a lot. They're very committed to the building and the lease is guaranteed. So I feel quite comfortable with the risk profile on this one. They have a purchase option. It triggers in 2030. I would find it hard to imagine they would not wind up buying.

I will turn the call back over to Jeff Hanson, Chairman and CEO, for closing remarks.

Well, thank you, operator, and thank you, everyone, for investing the time to join us today and for your continued support and confidence. It's much appreciated. I know that Danny is on the call as well. So we're looking forward to his return at the appropriate time. And in the meantime, the team remains focused on executing our strategy and creating long-term value for our shareholders. And with that, thank you.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Ladies and gentlemen, thank you for standing by. My name is Colby and I'll be your conference operator today. At this time, I would like to welcome you to the American Healthcare REIT Q3 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Alan Peterson, Vice President of Investor Relations and Finance. Please go ahead.

Good morning. Thank you for joining us for American Healthcare REIT's Third Quarter 2025 Earnings Conference Call. With me today are Danny Prosky, President and CEO; Gabe Willhite, Chief Operating Officer; Stefan Oh, Chief Investment Officer; and Brian Peay, Chief Financial Officer. On today's call, Danny, Gabe, Stefan and Brian will provide high-level commentary discussing our operational results, financial position, changes related to our increased 2025 guidance and other recent news relating to American Healthcare REIT. Following these remarks, 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, November 7, 2025 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 President and CEO, Danny Prosky.

Thank you, Alan. Good morning or good afternoon, everyone, and thank you for joining us on today's call. I am very pleased to report that the third quarter was another very strong quarter for AHR. We continue to build upon our strong first half momentum, generating same-store NOI growth of 16.4% across the total portfolio, marking our seventh consecutive quarter of double-digit same-store NOI growth portfolio wide. This performance once again reflects the depth and quality of our portfolio, our strategic initiatives, which include leveraging our platform across our operating portfolio, the strength of our regional operating partners and the enduring demand tailwinds that support health care real estate.

Within our operating portfolio, our RIDEA structured segments, which include our integrated senior health campuses, also known as Trelegy and our SHOP segment continued to drive outsized growth which is the result of our team's proactive and hands-on asset management approach. As I look across our industry, I maintain my conviction that this is the best operating environment for long-term care that I have seen in my entire 33-year career. This is most evident to me when reviewing our strong RevPAR growth and the fact that Trilogy and SHOP same-store occupancies are currently above 90% and continue to trend in a positive direction.

Shifting to our external growth activity. We're executing diligently on scaling our operating portfolio with our regional operating partners. In aggregate, we have closed on over $575 million of acquisitions year-to-date, all of which is within our RIDEA segments. Among these new acquisitions, I'm happy to announce that we're expanding our highly curated stable of operators. We introduced 2 new relationships to our group of operators this year, which will broaden our geographic diversification while reinforcing our focus on operators that share our values, including a strong employee culture, ability to deliver ongoing outsized financial performance and most importantly, a keen focus on delivering high-quality care and results for our residents.

I'd like to congratulate Stefan and the entire investment team, along with Ray Oborne and his senior housing asset management team again as they have continued to identify and acquire a tremendous volume, a very high-quality managed senior housing assets. These acquisitions not only provide immediate earnings accretion to AHR, these assets should also provide strong ongoing organic earnings growth for years to come. Along with the acquisitions I just noted, the team has continued to backfill our pipeline of awarded deals, which now stands at well over $450 million.

These transactions are expected to close in the fourth quarter and early 2026. As we execute on our external growth plans, we continue to demonstrate discipline and remain opportunistic in our capital markets and capital deployment activity, which should drive further earnings accretion in 2026 in future years. We're now on track to grow normalized FFO per fully diluted share by 20% over last year, while also continuing to improve our balance sheet metrics and leverage profile.

As Brian will note during his remarks, our net debt to EBITDA at the end of the third quarter is now down to 3.5x. Our strategy remains consistent. We are not simply chasing near-term accretion, we are building durable long-term growth through operating alignment with best-in-class regional operators, disciplined capital allocation and capital markets activity, while always putting resident care and outcomes first.

Finally, I'm proud to note that in September, we published our inaugural corporate responsibility report publicly disclosing the governance, social and sustainability priorities that have long been embedded in AHR's culture. This milestone reflects our belief that responsible stewardship and performance are inseparable. Before turning the call over to Gabe, I want to thank the entire AHR team and our operator partners for their exceptional work.

Together, we are executing with precision and purpose for all AHR stakeholders, providing high-quality care and outcomes for residents, which is leading to strong financial performance for our shareholders. And now, Gabe, over to you.

Thanks, Danny. Operationally, the third quarter of 2025 was another strong quarter for us with outstanding results across the business. Once again, we delivered sector-leading same-store NOI growth compared to the third quarter of 2024. Not only did we sustain the momentum from the first half of the year, but we also built a solid foundation for continued success with strong occupancy gains in the third quarter prior to entering what's historically a slower winter season. That being said, occupancy trends into the fourth quarter suggest that seasonality could be muted due to the accelerating demand growth from the baby boomer population.

Now let's dive into our results in more detail, starting with Trilogy. Same-store NOI grew 21.7% year-over-year Occupancy averaged 90.2% in Q3, up more than 270 basis points from last year, while average daily rate increased roughly 7%. That performance reflects not only continued pricing power, but also ongoing improvement in quality mix. Within Trilogy, its high quality of care and outcome standards continue to drive outsized demand as residents, families and now to an increasing degree, Medicare Advantage plans, seek out the highest quality of care providers.

Trilogy is continuously working to add to and also to optimize its Medicare Advantage partnerships with the plans most aligned on quality, which is, in turn, increasing access for residents to Trilogy and driving more Medicare Advantage census growth across the Trilogy portfolio. We expect this may shift to drive robust revenue growth that reflects the strength of the platform for 2 primary reasons. One, Medicare Advantage reimbursement rates are significantly higher than other reimbursement sources and growing faster than other sources; and two, increasing accessibility for Medicare Advantage plans provide a tailwind for continued census growth.

So for example, Medicare Advantage accounted for 7.2% of total resident days at Trilogy during the third quarter, an increase from 5.8% a year ago. It's a great example of how Trilogy has proactively leveraged high-quality care and outcomes to identify the best partners and ultimately create economic value and yet again demonstrates Trilogy's remarkable ability to utilize many different operational and strategic levers in order to drive continuously strong growth.

Turning to SHOP. Same-store NOI increased 25.3% with RevPAR up 5.6% year-over-year and NOI margins expanding nearly 300 basis points to 21.5%. We also achieved record move-in activity during the spring and summer seasons. And for the first time, like Danny mentioned, our SHOP same-store spot occupancy is currently above 90%. Those gains were achieved without significantly sacrificing pricing discipline, reinforcing our view that the secular demand for long-term care remains durable especially for the highest quality operators as residents and families continue to invest in superior care and service. As demonstrated by our operating portfolio results, fundamentals remain extremely favorable. Construction starts across senior housing remained near historic lows, while demographic growth in the 80-plus cohort accelerates.

These structural supply-demand imbalances should support a multiyear runway for further occupancy gains, rate growth and NOI growth. As we move into the winter months, we're confident and we're well positioned to maintain the occupancy gains achieved through the busier spring and summer selling season. Overall, we continue to view this as the early innings for long-term care demand growth that's being captured most effectively by operators with scale, quality outcomes and a strong regional presence. Trilogy and our SHOP partners certainly exemplify that.

I'd like to thank each of our operator partners for their enduring commitment to their residents and their employees and their contributions to another very successful quarter for AHR. We know we could not deliver these results without them.

Finally, our team is actively executing on our strategic initiatives designed to enhance our operating platform. Our strategic alignment with Trilogy unlocks unique opportunities for outperformance and value creation. For example, we're leveraging Trilogy's centralized revenue management system across other operating partners. The analytics and also the operational strategies and functionality from that program which combines a multitude of factors, including market rates, occupancy, unit-specific attributes and discount control features have already contributed to our growth at Trilogy by optimizing revenue, especially with respect to highly occupied facilities, which we know is a category that's rapidly expanding.

We're in various pilot phases with our regional operators to extend this tool among other initiatives we've identified across our operating portfolio. We continue to view this as a differentiator and a key component of our strategy as we plan for rapid expansion and look to support our regional operators as they scale to meet this transformative growth opportunity. I'll now pass it to Stefan to discuss our external growth activity.

Thanks, Gabe. Since our last call, we have been very active, closing a number of transactions while continuing to backfill the pipeline with equally strong and high-quality investments. In doing so, our investment strategy remains unchanged as we continue to focus on accretive, relationship-driven growth. We're emphasizing opportunities where we have long-term conviction in the operators and markets and where our capital can directly improve care outcomes and long-term asset performance.

During the quarter, we completed approximately $211 million of acquisitions and closed approximately $286 million of new investments subsequent to quarter end, bringing our year-to-date closed acquisitions to over $575 million within our operating portfolio. These transactions expand our exposure to high-quality assets in strong regional markets and deepen existing relationships with trusted operators. A key highlight of our recent activity is our new partnership with -- well Quest Living, who now manages 4 communities we acquired in California and Utah.

Wild Quest aligns closely with our mission to deliver best-in-class resident care through integrated wellness-focused environments. Bequest will complement our current shop exposure on the West Coast allowing us to access new submarkets that screen attractively within our investment framework and offering us the ability to underwrite potential acquisitions that will leverage Well Quest core care competencies as a high-quality, needs-based senior living operator. Well Quest rounds out the new operator relationships we previewed earlier this year and between Well Quest and -- great Lakes management, it has already allowed our team to evaluate even more potential off-market opportunities. which is something we strive to do with all our trusted regional operating partners.

Beyond acquisitions, we continue to optimize our portfolio mix. During the quarter, we executed $13 million of noncore dispositions, further concentrating our capital and assets within our operating portfolio that can deliver superior risk-adjusted returns. Our team has not slowed in identifying new opportunities to complement our existing investments year-to-date. -- as we maintain a pipeline of over $450 million in awarded deals that are still in the due diligence process or that we have added since we provided an update in early September. We expect to close this awarded deal pipeline by the end of 2025 or early 2026.

On the development front, we started several new development and expansion projects this quarter. Our in-process development pipeline now consists of projects with a total expected cost of roughly $177 million, of which we have spent approximately $52 million to date. We believe that these projects should extend our multiyear growth runway at attractive yields and the mix of new campuses, independent living billers and wing expansions should provide solid income at various points over the next few years allowing for predictable cash flow that will translate to retained earnings for future new development starts to help mitigate future funding risk.

To summarize our executed investment strategy thus far and our future plans, -- we are deploying capital deliberately, favoring operating partnerships where we see the best risk-adjusted returns, prioritizing newer assets and maintaining discipline on underwriting. We believe this strategy will prove resilient as we scale across our operating portfolio with our various partners, and we expect it will generate strong, sustainable returns next year and in the future years to come.

With that, I'll turn it over to Brian.

Thanks, Stefan. The third quarter of 2025 was another very solid quarter of organic earnings growth disciplined execution of external growth by acquiring assets that we expect will provide sustainable earnings for years to come as well as select capital markets execution. We achieved normalized funds from operation of $0.44 per fully diluted share in Q3, reflecting a 22% increase year-over-year. This increase was made possible by greater than 20% same-store NOI growth from our operating portfolio segments, which continues to propel our earnings. Additionally buoyed by the strong initial performance from the assets we've added to the portfolio over the last 3 quarters.

Given our visibility into Q4, we and the solid results achieved year-to-date, we are increasing and narrowing our full year 2025 NFFO guidance to a range of $1.69 to $1.72, from $1.64 to $1.68 per fully diluted share, implying growth in excess of 20% year-over-year at the midpoint. This increase is driven by increased organic growth expectations and as we enter the remainder of the year with RIDEA spot occupancy north of 90% across our operating portfolio. As such, we are increasing our total portfolio same-store NOI growth guidance to a range of 13% to 15% from 11% to 14%. This increase is comprised of the following changes to segment level same-store NOI growth guidance.

Integrated senior health campuses increased to a range of 17% to 20%, reflecting continued strength at TRILOGY, SHOP increased to 24% to 26% and as a result of the solid occupancy momentum through the summer selling season. Outpatient medical increased to 2% to 2.4% from the prior range of 1% to 1.5%, given positive renewal activity. triple-net leased properties increased to negative 25 basis points to positive 25 basis points. During the quarter, we sold approximately 2.9 million shares through our ATM program for $116 million in gross proceeds. -- and we settled 3.6 million shares under a previously announced forward sale for another $128 million. We also entered into new forward agreements totaling 6.5 million shares for $275 million in gross proceeds, providing additional funding flexibility as we pursue external growth opportunities.

Our disciplined capital markets approach allows us to match equity inflows with investment timing, minimizing dilution, preserving optionality and building further capacity to continue adding high-quality assets to our portfolio. That discipline has also allowed us to continue to improve our balance sheet even as we've executed more than $0.5 billion of accretive acquisitions this year. Our net debt-to-EBITDA ended the quarter at 3.5x, representing a 0.2x improvement from the end of the prior quarter and a 1.6x improvement from the third quarter of 2024. Stepping back, 2025 is shaping up as another milestone year for AHR, defined by a significant organic earnings growth continued deleveraging to provide capacity to scale our portfolio with our regional operating partners.

As we enter the final quarter, our focus remains on maintaining this momentum and positioning the company for another strong year in 2026. With that, operator, we'd like to open the line for questions.

[Operator Instructions] Your first question comes from the line of Ronald Kamden with Morgan Stanley.

Congrats on a great quarter. Just one quick one and a follow-up. I think the 90% spot occupancy, I think, was sort of a key marking point for investors -- and the thesis was always that, that would be operating leverage at this point to continue the growth going. So I just wonder if you could talk about just how much more occupancy upside do you see from here realistically in the portfolio and the pricing strategy as you sort of hit this point to continue to maximize growth.

All right. Well, I'll go ahead and start with that one. So I would say the maximum upside from 90 to 100 is 10%. So that's our MAX. I get asked all the time, where do you think you're going to be at the end of next year? What is the maximum? The truth is, I don't know. What I've been saying all along is I expect over the next few years and over the past couple of years, which we've already seen, that we're going to see all of the metrics continue to move in our favor just because of the supply-demand fundamentals, right? We've -- we've seen occupancy go up. We've seen RevPOR go up. We've seen margins, NOI, et cetera.

I expect over time that will continue. I don't necessarily think that every single quarter is going to have higher occupancy than the prior quarter. We've seen a lot of that, but we did see a little bit of a downtick at the beginning of this year because of flu at our SHOP portfolio. Obviously, Trilogy did very well in Q1 because of the skilled side of the business. It's now early November. -- it's only been a little over a month since we ended the quarter. So far, I can't say that anything has made me feel differently with what we've seen. That being said, we've got the holidays coming up. And we oftentimes see a little bit of a downturn right before the holidays.

I can tell you that we consistently see Trilogy skilled occupancy drop a little bit right before Christmas, and then it picks up during the first 10 days of January. That seems to happen every year. I expect the trend will continue. I expect us to continue to be able to price at a rate higher than inflation. I've been -- I think it's going to be around 200 basis points, sometimes a little more, sometimes a little bit less. But I think if you're seeing 3% inflation, I think we should be able to price at a 5% increase or better. Clearly, as occupancy goes up, it gets a little bit easier to do that. And I expect that the positive trend will continue. As far as the maximum and the amount, it's really hard to say.

Great. And then if I could just get a quick follow-up in there. Clearly, you guys have been busy on the external growth front in terms of starts, acquisitions, the pipeline. But I guess my question is just a Wall Street on article about a large PE player, maybe you been selling some senior housing. Just -- can you talk about the competitive environment, has gotten more competitive given some of the unlevered returns that you guys are getting in the space.

Yes. So I saw that article as well. I know that at least 1 of the acquisitions we did was from that seller. It may be more, but I know one for sure. I think that you've seen maybe a little bit more people buying, but I'd also think -- I'll let Stephane comment because he's closer to it than I am. I also think you've seen more opportunities as as results improve across the industry, I think you've seen more people come to market as the buildings that they've developed, let's say, in the last 5 or 10 years, start performing better and better. I think you've seen more assets come to market. So demand may have ticked up a little bit, but I think supply has as well. I don't know, Stefan, what do you think?

I think that's exactly right. I think what you've been seeing is a lot of folks have been holding out on selling and kind of waiting for the performance to improve before they make a move. And now that's happening, some of these private equity groups that have maybe even gone beyond into their expected fund life are now making moves to take these assets out to market. So it's -- I think you are seeing a bigger number of assets or a larger group of assets that are being put out in the market. But I also think that this is right there, and it's a difficult business. And so groups are -- it's a hard market to enter into, and it takes a long time for you to learn this business, and I don't think they're just going to jump in without being diligent about how they're approaching this market or this industry.

Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

So I want to go back to a topic from last quarter and something Dave, that you hit on a little bit in your prepared remarks. And just kind of help me understand the step down a little bit in ADR growth this quarter versus last quarter. specifically within that skilled segment of Trilogy. And would you just expect over time a Medicare Advantage to continue to improve on a sequential basis given that partnership that you had previously put in place.

Yes. Austin, thanks for the question. It's a good one. Trilogy has got a lot of levers to pull within the average daily rate in their skilled business. And part of that is like what we've talked about, optimizing quality mix to prioritize Medicare and Medicare Advantage plans. -- and deemphasize lower reimbursement sources because Trilogy provides a high quality of care that comes with a high expense. And so they're trying to optimize from those payer sources. So obviously, they're prioritizing Medicare and Medicare Advantage plans.

As you get to higher and higher occupancy, it's easier to have for that prioritization process to take place. And even within those 2 different Medicare driven payer sources with Medicare Advantage plans, you have pricing that varies considerably among the different plans that you partner with. What Trilogy is doing now is trying to find the Medicare Advantage plans that align with them on quality and are really willing to provide a reimbursement that matches up with the quality that they're providing. So I do think that they'll have more flexibility, and they are constantly reevaluating which plants they're partnered with and whether the rate makes sense. And I do think they'll have a sustained ability to optimize those partnerships and in turn, really drive rate with Medicare Advantage.

On the negative -- more negative side, Medicare is not growing as fast as it was last year because it's always retroactive to inflation and inflation has just come in. So last year's rate increase for Medicare was over 6%. This year, the national rate is going to be 3.2%, I think Trilogy is going to be a little bit above that, not materially. And so that would be a little bit of a growth headwind for Q4, but we do expect it to be at least partially offset by gains in Medicare Advantage.

That's very helpful. And then maybe sticking with Q mix, should the improvement in Q mix within Trilogy be a driver of both NOI growth and margin expansion as that continues to improve? Or is the trade-off and higher rate and offset to the higher senior housing margin portion of it?

Yes. So it doesn't take away from senior housing, right? The senior housing beds are separate from the skill beds. But I think what you'll see is you'll see more Medicare and Medicare Advantage and less private and Medicaid. And certainly, you're going to see higher NOI and higher margin with Medicare and Medicare Advantage than you will with private pay and Medicaid. [indiscernible] and that's truly makes a decision to convert a wing from scale, those are separate lines of business. Does that make sense?

Yes. No, that's helpful. I mean I was talking about the entire component because the margin step down sequentially within [indiscernible], same-store pool. I recognize there's some short-term expense maybe headwinds in there, but just talk in kind of bigger picture and over time, given the fact that I think the resident days component of senior was up over 200 basis points sequentially. And yet that margin stepped down. And I'm just trying to get a sense of how that trends over time because, obviously, the rate you're getting on the senior housing piece within Trilogy is much lower than the rates within the skilled component. So just trying to balance those 2, but understand how that flows to the bottom line as well.

Yes. So as I kind of start off by saying earlier, I expect margins will continue to improve. It doesn't mean they're going to go up every single quarter over the prior quarter. I mean clearly, the margin was better this year than the same quarter last year. You're right, it did tick down a little bit for Trilogy over Q3 and I'm sorry, versus Q2, excuse me. I think we saw something pretty similar to last year. Several things happened in Q3 that affect the margin. It's not 1 item. They purchased a lot of flu vaccines, for example, in Q3, which is considerably the number of beds they have. It's a big dollar number, but they don't get the revenue until they administer those shocks later on in the year. I think there's a component also related to employee health insurance where employees tells you self-insure, so employees go through the deductible and there's a little bit more cost to Trilogy. It's really a bunch of things of that nature.

The Q2 margin was jumped up considerably versus Q1, so I think it's a combination of those things. Over time, I would expect the margin to continue to improve. It doesn't mean we're not going to have one quarter where the base drops a little bit from the prior quarter.

And keep in mind, Trilogy, sorry, is Midwestern concentrated, right? So the winter months come with higher expenses just related to the weather and things like that. But to Danny's point, I think it's spot on. We're not sacrificing margin to go into different mix here. We do expect that to result in higher margin.

Your next question comes from the line of Michael Carroll with RBC Capital Markets.

I wanted to touch back on Gabe's earlier comments in his prepared remarks about leveraging Trilogy's revenue management system with your existing SHOP tenants. I mean, how much of the portfolio of that traditional SHOP portfolio is currently utilizing Trilogy software here. And can you provide some examples on how that's driving better results? I mean are we seeing that in the numbers today?

Mike, it's a great question. I think we're uniquely positioned, like I said, I think it's a differentiator for us to have the type of alignment we do with a platform like Trilogy, who does it at a really high level for those that don't know, we've got a really unique incentive plan with Trilogy where they have -- we have the first of its kind, manager equity plan where we issue their incentive compensation using the currency that's AHR stock. So we've completely align their incentives to support our other shop operators in a way that's pretty unique to us.

What that does is gives Trilogy, a financial incentive to meet with our operators to let them know what their best practices are, and that's been going on for years. We took it this year to the next level where we've got assessment tools and also dashboard capabilities that we can roll out from Trilogy's platform to our shop operators as they desire to participate in it. I don't want to overstate where we're at right now. I don't think the numbers today are fully reflective of the benefit of that Trilogy platform. We're still in pilot phases with operators on that. I think what you'll see is over the next year and 24 months, probably an outsized input from Trilogy's platform as we really start to lean into it and optimize for it. And it's not going to be just limited to revenue management.

It's going to be sales, marketing, search engine optimization, it's going to be employee training, employee retention strategies. It's going to be potentially IT solutions. And even today, we're leveraging Trilogy's development capabilities because they've got internal development to identify opportunities within our existing SHOP portfolio, where we can basically copy the expansion strategy that Trilogy has been using effectively to expand very highly occupied buildings on land that we already own and derisk the development with really high IRRs.

Unfortunately, not a ton of dollars available in that way, but we're just incrementally growing in every way we can and really leaning into Trilogy's platform in any way we can.

Yes. So we've already identified the first non Trilogy campuses. We will be utilizing Trilogy's development arm to do expansions and [indiscernible].

And to be clear, to get out in front of maybe your follow-up question, Mike, we're not planning to do ground-up development with other operators through Trilogy at this point. that's not what -- that's not the strategy. It's really to take opportunities that currently exist within the portfolio to expand on buildings that we already own.

How receptive are these operators to having the system kind of rolled out into their platform? And I guess, how difficult is it to actually implement? I mean, are we talking about a few quarters here to kind of get it implemented? Or is it a longer-term process?

It's a great question. I think the reason why we're partnered with the operators that we are is because they're very good with being very good, certainly comes a reluctance to have somebody else tell you what to do. They certainly are reluctant to having REITs tell them how to run their businesses, and I completely understand why they want to run them the way they do. it's, I think, far easier when you see somebody like Trilogy, who's also an operator who's gone through the same things that they have, who has the same issues that they have, but can demonstrate that they executed at a high level on certain things. I don't expect Trilogy to be de facto operating for other operators and using every one of these different verticals and strategies to push through to them to force them what to do.

What I do expect is for us to be able to identify certain soft points in certain operators and be dynamic in it and suggest, hey, if Trilogy can help you in this particular issue, please utilize them and do it. It also, I think, will be really helpful for operators that need to scale. So we prioritize regional operators because we think it provides better quality outcomes for our residents and you can control the culture better, provides upward mobility for your employees, there are a lot of benefits that come from it. What you sacrifice a little bit of scale and resources. If we can augment what they already do well with just some back office support and more resources to help them scale, I think it's a benefit for both and people are more willing to partner with Trilogy on those initiatives as well.

And by the way, I would just add to that, that this is really a lifelong journey. -- mean Trilogy was a great operator when we bought into them 10 years ago. They're a much better operator today. And I would anticipate that they will continue to learn and grow and change. evolve and all of those things would be available to our operator base.

Somewhat more receptive than others.

Your next question comes from the line of Farrell Granath with Bank of America.

My first question is about your pipeline. So I know this last quarter and then this quarter, we've been seeing an acceleration from the 300 to 450 -- so I was wondering if you could add a few comments about that momentum and how to think about that going forward?

Yes. Thanks for the question. So I think if you think back to where we were a year ago, we were basically doing acquisitions where we had the inside track and then the opportunity for us to start doing external growth came about, and we were really just ramping up our pipeline at that point. So I think I think what you're seeing now is the fruits of that and also the fact that we have added 2 new operators to the mix. So it's been a very, I'd say, linear progression in terms of how we've gotten here. But I think what we're seeing now is kind of where we expected to be, and it's giving us, I'd say, a strong end to 2026 -- or '25 and then a good start for 2026.

Yes. So, I can't tell you what we're going to do in '26. But I can tell you that we're going into 2026 with a much more robust pipeline than when we entered 2025 simply because our stock didn't reprice until late 2024 to the point where external growth became very attractive. But I feel pretty good about 2026.

Okay. And I also just wanted to get any updated thoughts on your MOB portfolio, seen an improvement in performance also with the guidance bump, but we've also seen peers selling large trucks of MOBs. I was curious if your thoughts around reinvesting yields for the sale of MOBs or if you're content with the current performance.

So this is Danny, Farrell. So we started selling MOBs for maybe 5 years ago, and we've sold about 1/3 of them. I believe at the peak, we had about 112. And I think today, we're somewhere in the 70% range, give or take. Now we've sold a third as far as number of buildings. It's less than 1/3 as far as NOI because we sold the worst third, right? We sold the smaller ones, the ones that had less growth. I think you're seeing a little bit of benefit there in our growth with NMB. It's actually ticked up. And [indiscernible] COVID, we were about 35% MOB from an NOI perspective. Last quarter, we were under 17%, and I expect that number will continue to go down. Number one, we're divesting MOBs, although we've divested -- we're always going to be selling a few -- we've sold most of them, but I think there's a few more that we'll be selling probably this year and next.

And of course, we're growing our RIDEA side of the business, both Trilogy and SHOP at a much faster clip. So it's not we've already been selling MOBs and redirecting that cash into seniors housing. I expect we'll continue that. Now the MOBs that are remaining are ones we like -- they tend to be more institutional, larger, better buildings, and I think we'll see more growth out of those than we would have seen from the ones we've sold. So we're not necessarily looking to just get out of the business, but it's certainly not where we see the best risk-adjusted returns today. We haven't bought an MOB in years.

Your next question comes from the line of Michael Stroyeck with Green Street.

Mike? We touched on this a bit already, but within the Trilogy business, the percentage of resident days coming from Medicare, Medicare Advantage has declined modestly as the year has progressed. I guess, is there a seasonality component to that? Or has it become, I guess, incrementally more difficult to push occupancy from those payer sources in recent months?

You're exactly right, Mike. There's a seasonality component to it. So typically, the trough of occupancy for skilled nursing is in September each year. You see through the summer months, kind of occupancy declines a little bit and then ramps and peaks in Q1 of the year, kind of in the colder seasonal months. What we're seeing, though, this year is less seasonality than what we typically do. And that's what's driving Trilogy's 270 basis point plus occupancy increase year-over-year.

All right. And that same, I guess, seasonality applies to like the payer sources. Is that fair?

Yes.

Okay. And then I guess, sticking with Trilogy, with the higher acuity versus last year, how much have they had to increase head count in recent quarters? And -- and how quickly would Trilogy be able to pull back on expenses if there is a scenario where it does become harder to achieve additional increases in acuity.

Honestly, I couldn't tell you exactly how much head count they've added. I can tell you that when they have to flex their staffing they typically do it with their Flex Force or with additional hours as opposed to additional staff. So they have -- they set up their own travel nurse organization right around during COVID -- and basically, if they need more or less staffing, they utilize those Trilogy travel nurses to flex the forest up or down. It's not so much that the higher and let people go. It's more that they flex their existing staff.

Yes. And keep in mind, Trilogy's turnover is industry-leading, which is to say it's less. So it's around -- it's in the 40% range. Traditionally for their peers, you're going to see 100% turnover rate. And it's strictly because Trilogy is such a great operator that they're able to retain their people. But I bring that up to say that essentially, hiring is a perpetual process at Trilogy. They are constantly replacing those 40% that are leaving and constantly trying to improve the workforce. And part of that is census driven, but it's more just a perpetual way of life there.

[Operator Instructions] Your next question comes from Alex Fagan with Barrett.

Maybe to speak for the first one, can you speak about the deal volume and the competition for the newer senior housing that you have identified? And how often are you likely to compete with the other public REITs for deals in your market?

It doesn't feel -- I mean, to find you're closer to it than I am. It doesn't feel like it's all that often. We tend to do smaller transactions, 1 building, 2 buildings as opposed to $0.5 billion or $1 billion deals. It doesn't mean we haven't done those and we went through those in the future. But it's -- with the deals that we're competing on, a lot of them are brought to us through our operating partners. I mean, a significant percentage are brought to us to our operating partners. So when I look at who's bidding, yes, there's some of the other REITs out there. But more often than not, it's going to be a non-REIT competitor. I don't know, Stefan, what would you add?

Yes. I mean, I would echo that. About half of what we're -- what we have in the pipeline close have been deals that have been off market. And -- that's one of the advantages that we have certainly had with the addition of Welwest and -- great Lakes to our operator pool is that not only are we diversifying into new markets and opening ourselves up to finding other locations that -- and markets that we like that we can buy -- but we've also been able to partner with them on a number of deals where they are just -- they're bringing them to us directly.

As far as other marketed deals that we're competing on, I mean, it is really a mixed bag. I mean we're seeing -- we are occasionally seeing the REITs. We're occasionally seeing other PE that have been in the space for a while. And sometimes we're seeing local investors or local operators as well.

Second one, maybe to invert an earlier question, -- but are there any best practices from regional operators that can help Trilogy, especially in new markets like Wisconsin? Is the -- can it be a 2-way street, -- has it been a 2-way street.

That's a good question. I mean, I'm sure they have. And we have an operator or summit every year where a big chunk of it is talking about best practices. I'm trying to think of some of the specific things. Gabe, if you can call or Stefan.

Yes. I mean the operator Summit is very well attended. And I think regardless who is in the audience, whatever operators up there talking about their best practices, they're getting good attention. I mean we have definitely seen some some cooperation and partnering with -- between some of the operators and how to work on specific parts of the operations or when it comes to maybe bundling versus unbundling pricing and things like that. So there are definitely been several occasions where we've seen our operators benefiting from each other's knowledge and experience.

Your next question comes from the line of Michael Goldsmith with UBS.

Now that we're seeing more shop deals come in, can you talk a little bit in more detail around the acquisition strategy? Do you have a view of independent living versus system living versus memory care? And then are you targeting unstabilized deals or stabilized deals? Are you just more agnostic, just trying to get more understanding of the strategy going forward.

I would say all of the above. Our acuity probably -- I think certainly in comparison to Welltower and Vetcos, I would say we probably have a higher acuity portfolio, more AL and memory care, although we have IL and we acquire IL. It's not that it's all AL and memory care. We're really looking for quality buildings that will continue to provide good earnings growth for the next 5 years. not just what can we buy today at a 7.5% or 8% cap that will be immediately accretive -- and it's a mix. I mean most of what we bought last year and this year tends to be a newer product. A lot of it built in the last 10 years. not all of it, we prefer newer buildings, but there hasn't been a whole lot of development over the last 5 years. So there's not as much new product as there has been in years past. We've got some stabilized stuff that was in that we are at a more stabilized cap rate, and there's a lot of newer assets, some stuff that just -- if you look at the 5 building portfolio we did with Trilogy, 4 of those buildings only opened within the last year. So they're all new but they're not yet stabilized.

And with the stabilized buildings we're getting a lower in-place cap rate, you're getting more growth opportunity. You're getting a situation where once it's stabilized, you're going to get a higher yield and something that's already stabilized, and a lower price per unit. You're going to get more of a discount to replacement cost on something that's unstable versus something that's stable. So it's a mix, but we're always trying to find assets that will continue to provide good organic earnings growth in '26, '27, '28, '29, et cetera.

Got it. And maybe just as a related follow-up. Just maybe can you talk a little bit more about the process and what you're focused on? Are you focused on the operator? Or are you building a data platform to analyze acquisitions in micro markets on certain demographics or incomes or home values, -- just trying to get an understanding of where the focus is?

So I'll start off, and then I'll let Stefan finish, give him the hard part. But what I would say is that we tend to identify the operator before the building. We are more likely to work with owner existing operators and say, "Look, here's an opportunity in your market. And by the way, when we go see it, they'll be with us. What do you think of this building. Oftentimes, they know it, maybe they've managed it in the past. -- or, hey, what's in your market that you think we can go out there and try to buy before it goes to market. It's -- we typically don't find a building and then put it under contract and then say, okay, now let's figure out who's going to operate it?

So we tend to go after the operator before the building. And in the case of -- great Lakes and Welk West, we identify them way before we went out and found buildings. We worked with them to help build the portfolio, and that's why we've already got a substantial number with each operator. But I don't know -- and I know the processes are different, Stefan, but maybe you can give a little bit more light on that.

Yes. I mean, that is the main point. And that's exactly what we've been doing in terms of going to the operator, identifying the operator -- and that's why we've had that strategy. It is really to find the operator who has the expertise in certain markets and regions. And then from that point, identify potential communities that we might want to acquire. And we are doing that hand-in-hand with our operators. We -- if something comes to us on a marketed basis, literally, the first thing that we do is we go and we talk to our operator in that market, and we ask them what they think about it. And if it's interesting enough, we'll underwrite it together. We'll go out and tour the property together. And really go from beginning to end through the process all the way through transition to make sure that we're fully aligned on every community that we're acquiring.

And we feel much better conviction when we can do it in this manner than if we were just trying to do it on our own and identifying properties and then going out and trying to find the right operator to us, that it needed to be reversed. We had to be working with the operator first.

Your next question comes from Seth Bergey with Citi.

I guess I just wanted to follow up a little bit on the pipeline. A kind of existing pipeline, is that primarily with existing operators in Trilogy -- or is that -- are there any kind of other new operators that we should be thinking about that you're looking to kind of add to the mix?

I think it's all existing operators in Trilogy. There's nothing in our pipeline that is -- that would be an operator outside of our existing [indiscernible].

Including [indiscernible], of course, now considering them existing operators.

Yes. And then I guess just following up a little bit around the kind of competition just as senior housing continues to perform well. Are you seeing any changes kind of with asset pricing as we kind of look at the opportunity set?

I think as I mentioned earlier, really, we have not seen much of a shift. Perhaps there's been maybe a moderate uptick. But quite frankly, it's been very stable. I think buyers are -- they're still being very efficient in how they're underwriting. We haven't seen any kind of further in terms of driving up pricing on a consistent basis.

And with no further questions in queue, I'd like to turn the conference back over to Danny Prosky, President and CEO, for closing remarks.

All right. Well, thanks, everybody, for joining. We really appreciate your interest. And obviously, if there's any follow-up questions, feel free to reach out, be it myself, Brian, Alan, and we're always available. Thanks a lot. Have a great weekend.

This concludes today's conference call. You may now disconnect.

All right. Thank you, everyone, for joining for the American Healthcare REIT Roundtable. My name is Farrell Granath, and I'm the co-lead for healthcare REITs alongside Jeff Spector for the BofA REIT team. I'm joined here today with AHR, President and CEO, Danny Prosky, who can introduce his team and kick it off with an overview.

All right. Well, thank you very much, Farrell, and thank you, everybody, for sticking around for -- I think, at the last session. I'm not quite sure. I'm Danny Prosky. I'm the President and CEO of American Healthcare REIT. With me up here is Brian Peay, our Chief Financial Officer; and then Alan Peterson, our VP of Investor Relations. I think most people here know who we are by now. We IPO-ed about 1.5 years ago. BofA led our IPO, probably why they gave us such a nice room. We appreciate it. Thank you for our meetings.

We're a midsized but growing diversified health care REIT. I think what really separates us the most is our investment in Trilogy, which is more than half of our NOI. It's an integrated senior health campus model, mix of skilled nursing assisted living, independent living. I think most people here probably are familiar with Trilogy. A lot of you may have been out to see it already. I think as opposed to just explaining the entire company, I think the one theme I've been leaving everybody with, not just at this meeting, but on other calls I've been on is that I've been in this business 33 years since 1992. This is by far the best operating environment I've ever seen. I think almost everybody will agree with that. I've never seen REITs be able to put up these types of organic earning growth numbers. Those of us that have a significant exposure to managed long-term care, companies like Ventas, Welltower, us, we're 75% RIDEA. We've shown outsized growth over the last couple of years because of just the imbalance between supply and demand.

Baby boomers start turning 80 next year. The growth in demand for long-term care is going to continue to explode probably for 15 years. New supply has been very, very stale. I mean new construction starts over the last 7 years have been very low as a percentage of existing stock. We monitor that every quarter when the [indiscernible] comes out with their data. It seems like construction starts still haven't really moved up.

I imagine they will eventually. But I think we've got a multiyear runway where demand is going to continue to outstrip supply. For that reason, RevPOR growth should exceed export growth. Occupancy should continue to increase. Margins should continue to improve as well as NOI, which those things drive. So very bullish on our firm and on the space for the next 5-plus years. With that, I'll probably open it up to questions.

All right. And as a reminder, please jump in with any questions. This is supposed to be open. And if anything, a little casual end of the day, [indiscernible]

No hold.

Let's focus on occupancy. So at the end of the second quarter, you're coming in with spot occupancy about 87.5%. Hopefully, I wrote that down correctly. I'm curious, what are you seeing in terms of the acceleration, especially now that we are within the peak leasing season or coming to the end of the peak leasing season. Have you continued to see acceleration through the quarter?

Yes. So I would -- we've been publicly stated at this meeting and other conversations that June was a very strong month. So if you look at our Trilogy had a very strong Q1, mainly because of flu, right? It was good for Trilogy. Their skilled nursing side of the business showed very strong growth in Q1.

Rest of the SHOP portfolio, we actually saw a little bit of a drop -- we firmly believe that's flu related with a much stronger flu season. I think we've gotten a little lazy as far as infection control after COVID, we did a really good job there. Flu came roaring back this year. I think we continue to see a slight drop in occupancy in April, turn around in May. June was very strong, and we already put out our -- obviously, our Q2 numbers.

July and August were very strong. We feel very positive about the growth we've seen so far in July and August. Obviously, too soon to say in September. But we haven't given any guidance yet for what we expect by the end of Q3, but I think our numbers as well as everybody else should be really good for Q3.

Can you remind those that maybe aren't as familiar with within Trilogy, any additional frictional vacancy due to the SNF aspect of the business?

Yes. So Trilogy has a mix of AL/IL and skilled nursing, roughly 50% skilled, roughly 50% AL/IL, not exactly. But on the AL/IL side, it's very similar to the rest of our SHOP portfolio. I get the question all the time, well, how high can occupancy go? What can margins get to? They're going to continue to move up. I don't know how high and how fast.

I don't see why we can't get into the mid-90s, maybe even higher when we have buildings already now that are well above 95%. It's going to continue to drive up margin. I don't know exactly at what point, but I expect continued improvement, not just because of occupancy, but because of RevPOR growth as well and change in mix.

On the skilled side, Trilogy, it's a short-stay model, right? Mostly Medicare, Medicare Advantage. There is a Medicaid component. It's small and shrinking. They don't -- Trilogy doesn't accept new Medicaid patients. The Medicaid beds that they offer are really a service to their Medicare as well as their AL residents where they know that, hey, if for whatever reason, I time out of Medicare or I run out of money, there should be a Medicaid bed available to them. They'll have one wing that's Medicaid beds with double occupancy. No guarantee.

They don't make any promises, but they try to make those beds available on an as-needed basis. For that reason, because it's a much -- the average length of stay at Trilogy is 3 to 4 weeks on the Medicare side, on the post-acute side, mostly hospital discharge patients, you're always going to want some -- you're going to want some availability there. You don't want to take it up to 98%, 99%.

You want beds available to accept especially Medicare, which is the highest daily rate. So what is the optimal occupancy for Trilogy on the skilled side? Probably 92%, 93% is my best guess. They have assets that are 100%. Now fortunately, for Trilogy, because they are so big and have such a good concentration of assets, this facility may be full, but there's probably another 15 miles away that has availability.

So they can offer -- they centralize their admissions. They work closely with hospital discharge departments in order to accommodate those discharges. And they may not have availability here, but they probably have one not too far away. So that's the important thing is that they have that availability for those higher-paying Medicare as well as the higher-paying Medicare Advantage. Not all Medicare Advantage payments are the same. Some pay more, some pay less. They clearly give priority to those with the higher rates.

And that's a great segue into -- on this last quarter, you spoke about your Medicare Advantage resin stays is now up to 7.2%. And I'm curious, how does that compare to previous trends? And where can you see that going? Are you seeing an increased demand or the ability to bring in the payer mix of more Medicare Advantage?

So clearly, Medicare -- I mean, if you look at Medicare Advantage versus Medicare overall, you got more people on Med Advantage now than in regular Medicare. Trilogy still has a higher mix of standard Medicare because they get preferential treatment to standard Medicare.

Now, the Medicare Advantage side has been growing and the RevPOR growth has been very strong there because, a, they're able to push contract rate because they have enough market power in their markets. to tell the insurers, hey, if you want to admit into Trilogy, you need to pay at least this amount. If it's below that, we're just not going to accept your residents.

And by the way, if it's between that amount and a higher number, we'll give you a benefit's available. But if it's not, it's -- you're going to get -- we're not going to get preferential treatment over someone that pays a higher rate. So the insurers are forced to push their rates up because their insureds demand access to Trilogy facilities. Just like they want access to certain doctors. They want to be in Trilogy facilities. They are newer, nicer, better outcomes, less recidivism, probably near their home than other options.

So for that reason, you've seen a higher -- an increase in Medicare Advantage days and a drop in private pay as well as Medicaid days. Now the private pay Trilogy tends to be lower acuity as opposed to Medicare and Medicare Advantage. So the rate is kind of in between a Medicaid rate and a Medicare Advantage rate. I expect that trend will probably continue as Medicare Advantage rates get closer and closer to Medicare rates based on our contracts.

I'll pause if anyone has questions on that. I think that's a really interesting part of your business that you're able to potentially...

Medicare Advantage and your ability -- like your success in pushing Trilogy's success in pushing up rates, like how far can you push that? Because you're really negotiating like, hey, you want versus end up coming back to the hospital. It's going to cost you way more. like how far do you think you can see those rates increase?

Well, pressure on -- for example, there have been some articles in the news about certain Medicare Advantage providers whose 5-star ratings under pressure. And signing a contract with Trilogy is one way to improve those 5-star numbers. Trilogy has higher staffing, better outcomes, but certainly better 5-star ratings than pretty much anybody out there.

So that has helped us. I think it's the availability that really helps us as occupancy grows, as availability of beds become scarce, they're going to find that if they don't pay a good enough rate, they're not going to have access to Trilogy even if they have a contract. I think all those things combine to help Trilogy push up the rates. And so Medicare Advantage, it's always going to be a percentage of Medicare. So -- but maybe it used to be 85% and maybe that percentage moves up to 92%, 93%. The higher it is, the more likely they are to be able to admit into a Trilogy facility.

And you won a big Medicare Advantage contract with a provider.

We do.

Is there opportunity to do that with the other large providers?

I think it's not just new contracts. I think it's improvement on existing contracts. Those things combined. We have a lot of contracts. Some are national, some are regional, some are by state, some are just by building. But scarcity allows us to push those rates up. So -- and by the way, we will sometimes negotiate outside of the contract. If we don't have a contract, we'll take your resident, but this is the rate you need to pay. We will do that as well. So it's really just adjusting your mix based on what makes the most sense.

And then in terms, we were just speaking about the RevPOR potential within Trilogy. Can you also address that in your SHOP portfolio and where you currently are today in your occupancy and where you can see that going?

Yes. So if you look at the trend in our supplemental, you can see that if you look at, call it, '23 or '24, huge increase in occupancy in our SHOP portfolio as well as Trilogy. Trilogy did really well as well. I think in one quarter, we had 600 basis points of increase, give or take.

RevPOR increased as well, but not as much. Last year -- this year over last year, you saw a shift there. Yes, occupancy increased over the prior year, but RevPOR grew tremendously. So what you've seen is you've seen a focus -- occupancy is important, but we've been -- as occupancy increases, we've been focusing more and more on the revenue per occupied bed, less incentives as far as paying outside like a place from mom, outside places like that, no more free first month rent, no more -- no initial payment when you move in, facility fee, et cetera, things like that. So we've been much more -- we've been asking our operators to focus much more on RevPOR as opposed to occupancy, and you can see that in the results.

You guys recently changed [indiscernible].

Yes. So the question there is -- so Trilogy is our largest and best operator. They've got the best systems in place. And it's not just on the financial performance side, it's also on the quality of care side, which I think is just as important, if not more so. But now that we own 100% of Trilogy and now that we've converted Trilogy's LTIP from cash-based to stock-based, so effective January 1 of this year, we had to get shareholder approval for this. They're getting their LTIP, which is -- so their compensation program is very similar to ours. It's an STIP based on kind of meeting your budget, and it's an LTIP based on 3-year performance that we set in advance.

Now it's pays in stock. So whatever the stock price was on January 1, that's set, any appreciation, they get the benefit of that. So they are now incentivized to focus not just on the performance of Trilogy, they're really incentivized to focus on overall AHR performance. So we're utilizing them more and more. It's not like this is new. We have an operator summit every spring. Trilogy has been a big part of that summit for the last several years as far as their ability to improve employee satisfaction, employee retention, reduce reliance on agency nursing, reduce overtime.

I think they've had a huge impact on helping the rest of our operators improve performance, and you've seen that in your numbers. But now they're incentivized even more. So revenue management is just one example where they brought it in-house. They use much more of a kind of an airline hotel model as far as resetting the rates daily, differentiating between quality of rooms. So a bedroom with a view is going to go for more than a 1-bedroom without a view, things like that.

So those rates aren't set at the facility, they're set at corporate. I think you'll see us be able to utilize more of those types of systems with the rest of our operators. Those are the things we're trying to do, and we can do that now that we own 100% of Trilogy. Anything I missed, Brian on that? I know that's -- there's a lot to unpack there.

Yes. I mean, look, the lowest hanging fruit is global purchasing, right? That's pretty obvious. But the fact of the matter is that Trilogy's platform is of tremendous value to our existing shop operators. And our shop operators, in a lot of cases, think of themselves as many Trilogy's and they are hoping to deploy Trilogy's best practices and become like the next Trilogy. So it's a great opportunity for us.

Is it accepted widely across operators to take on this new dynamic?

Yes. So some operators are more open to it, others not as much. We have a regional approach. Most of our operators are regional. We like that. We think the performance is better when they're near the assets. We don't have any of the -- we don't have like Brookdale or anybody like that in our portfolio. We do have one that's pretty national that we started out as a regional and they got bought by this national firm. They've done a great job.

We've actually given them more business. So I'm not saying we'd never look at someone bigger. I think the smaller shops are probably more open to it than the larger shops. They have a bigger back office. They have better systems in place. But I've been to these -- I go to these operator symposiums. I use the EF Hutton analogy when Trilogy speaks, people listen. The performance speaks for itself.

So I guess, generally across your portfolio, how much of potentially dynamic pricing is already rolled out across all the operators?

I think it's in stages, right? And I think the days of -- well, here's your rate sheet January 1, this is your rate sheet for the rest of the year, you're seeing less of that. Now the rate sheet changes monthly or weekly or quarterly because as you grow your occupancy, you should be looking at your rate. If you're at 99%, 100% with the wait list, maybe your street rate should be higher. So I think everybody is doing a better job with that. Certainly, our management contracts provide incentive for people to focus on bottom line performance, not just top line revenue or occupancy.

I guess there's also been a key focus on operating leverage, especially once you pass that 90% occupancy. And I was wondering if you can give any more context of what you in your business are able to see when it comes to bottom line incremental NOI.

Yes. So that's -- we get that question in every meeting practically. How high can you take occupancy? How much incremental margin do you have? Obviously, there's not a line where once you pass this line, your incremental margin goes from A to B. It's a spectrum. So clearly, with higher occupancy, your incremental margin grows. If you're going from 99% to 100%, I mean, how much additional costs are you incurring? Your fixed costs are fixed.

Are utilities and maintenance costs going to go up, food costs a little bit? I mean the vast majority of that is probably going to drop to the bottom line. So -- and it depends a lot on the level of service. Obviously, independent living, much higher margin, much higher incremental margin than skilled nursing. And assisted living is somewhere in between.

Now I can give you my estimate. I don't know exactly what it is. I think on independent living, it's probably -- as your occupancy is high, it's probably very high. It's 85%, maybe 90%, maybe higher. On AL, it's probably 60%, 65%. On skilled, it's probably 30%, 35%. Remember, skilled, it's a much higher daily rate, but you're bringing in a higher acuity resident, they're going to need more care. You bring in a new skilled patient, you're going to need to care for that patient. It's not like you could just spread it across everything. So lower incremental margin, but a much higher daily or monthly rate, however you want to look at it. So bottom line NOI may actually be higher even though the margin is much lower.

[indiscernible]

Well, I mean, on the -- the U.S. Yes. So on the Medicare and Medicaid is government reimbursement. As far as affordability, we typically think about it more on the senior housing side versus the skilled nursing side. I mean we do have private pay within skilled nursing. Typical private pay resident is someone who ran out of Medicare, wants a couple of extra days, so they pay privately to stay a little bit longer.

Sometimes, they're a long-term resident who needs to run out of money before they can go on Medicaid. It's a mix. On the AL/IL side, yes, the monthly rate is going up. It's going up faster than inflation. I expect that to continue just based on supply and demand. I would argue that depending on your level of need, $5,500, $6,000 a month might sound high. But if you need assisted living, you're going to need -- you can stay home and you can continue to pay your property taxes and your -- maybe if you have a mortgage, your mortgage, your maintenance, your insurance, your utilities, your food costs.

If you need help, if you need care, if you need someone to check in on you 2, 3 times a week for an hour, that might be affordable. If you need somebody there 8 hours a day, 7 days a week, that gets expensive. So I don't necessarily think it's an option to just -- well, AL is too expensive. I'm going to stay home. If you could stay home, you'd stay home. Nobody wants to be in assisted living.

Maybe you move in with a loved one or some other friend, that guess -- that's a possibility, too. But it's need-based. It's not like, yes, it's $500 a month too expensive, so I'm not going to do it. If you can avoid it, you probably avoid it regardless of the price. I think it's more affordable. If you look at the cost of staying home, that's not cheap either.

[indiscernible].

Yes. So we would not have done this deal with another operator. I've known Trilogy since about 2000 when I was at Healthpeak, which then was called Healthcare Property Investors. It was a long time ago. They were actually a tenant of ours. We own 7 other buildings. We own 7 buildings and they were our tenant. So I've known Randy Bufford, the founder for a very, very long time.

Their model, they built it right. They did it incrementally over almost 30 years. They stuck to their knitting, their levels of service, their geography, which I think has been a key component of how they built it. They didn't say, well, we want to be in 40 states. They started out in Kentucky, went in Indiana, in Ohio, then Michigan, and now we're adding Wisconsin. They've always focused on the care component first, which we've worked very hard to push out that mantra to the rest of our base of operators.

Yes, we like to meet budget. Yes, we like NOI growth. But quality outcomes has to come first. If you cannot provide good quality care, you're going to pay a price in the long term, even if short-term earnings look better. People talk about, oh, it's RIDEA SNF. Isn't there a higher risk? Well, we haven't seen it. We've owned them for 10 years. The -- they do a much better job handling any PLGO claims than anybody else. The performance is there.

And their focus on employee satisfaction, employee retention, quality patient care. Their employee turnover is in the low 40s, typically 40% to 45% a year. That sounds high. Industry average is 80% to 100%. A big part of their success is their employee experience. And that's another thing that we've used to export to the rest of our operators -- thing that we've used to export to the rest of our operators and for [indiscernible] employees, 100% turnover a year is tough to deal with.

And yes, there's a very high correlation between employee satisfaction, employee retention and resident satisfaction. As you can imagine, seeing the same caregiver over and over and over has a huge impact on that resident's experience.

[indiscernible]

And we don't pressure them. We don't tell them, oh, look, guys, your margin needs to be higher. So do this. Quality patient care comes first.

[indiscernible]. It seems like the number of nurses that we have is too low in the next 4, 5 years.

Yes. So the question was regarding labor, how are they dealing with, I think, primarily with the nursing staff. So of course, labor was a big problem 2, 3, 4 years ago, right? Post-COVID, they're used to 40%, 45% turnover. They were running probably in the 70s. I'm not sure how high they got, but much higher than they were used to. We saw it at AHR. We have almost -- we have very little turnover normally, but it picked up post COVID.

The labor situation has been good the last 1.5 years, knock on wood. We're back to kind of your normal 3% annual raises. That being said, it's -- when you ask what the #1 issue is in this industry, it's labor. Even during COVID, labor was the #1 issue. It wasn't COVID. So it's very important that we be the place that people want to work. And I think they've done a good job of that.

Our retention -- our turnover is mostly at the lower wage levels. It's not at the nursing staff. It's certainly not at the administrative level, where a lot of the employees are very, very long term. It's more at the lower wages, it's maintenance, food service, things like that. It's going to be an issue, but I think Trilogy is better positioned to deal with it than virtually any other operator.

I think like the differential between like working at McDonald's versus working Trilogy like on the lower end, does that grow?

I think it's -- that's been a big factor in the turnover there. If we're paying someone $17 an hour and McDonald's will pay $20, that person is going to look at that as an option.

Do you feel like that's what's happened?

No, I think that was a big problem 3, 4 years ago. We had to raise rates significantly on the low end. I don't think that's as much of a problem as it was in 2022 and 2023.

It seems like now they're starting to pay like a decent premium.

Yes. And I think -- look, overall, I think it's -- I'm not sure if we pay a big premium. But I mean, McDonald's needs to pay more than Trilogy in order to attract employees. I would rather work at Trilogy in foodservice than I would at McDonald's in foodservice. I think most people would agree with that.

One of the really interesting things about Trilogy too is that the opportunities that exist there. What I mean by that is you may come into a Trilogy facility, start your employment there in the kitchen, but you have higher aspirations for your career. Well, Trilogy trains thousands of CNAs every single year. And that really creates tremendous loyalty for those people.

You've given that person a whole new path for their career. And similarly, because of that regional densification of the Trilogy models, there are opportunities for growth, maybe not in your campus, but 1 campus over or 2 campuses over. Let's say, you're a young and up-and-coming Executive Director, but you're an assistant and your Executive Director is not going anywhere.

Well, guess what, we just finished building another campus, and we're going to open it up, and we'd like to offer you the opportunity to be the Executive Director over there. So the turnover that we talk about at 40% is really at the lower levels. The higher levels see the opportunity that's available to them within Trilogy, all of which is creating that employee satisfaction and that stickiness.

Yes. When we offer tours at Trilogy. We have one next week, which I think is already fully booked. But Alan can arrange that, anybody wants to go out to see Trilogy facilities. Biggest investors in our firm are typically those that went out and visited Trilogy and understand the story. I cannot -- I've seen a lot of -- I've been many, many Trilogy tours. You hear the same story over and over again. You meet the Head of Marketing or the ED or the Assistant ED. I started out as a food server 25 years ago or I started out doing maintenance 30 years ago. I cannot tell you how many times I've heard that story.

If you're ambitious and you want to work hard and you want to learn, you have opportunities there. And just as Brian mentioned, anytime Trilogy opens up a new campus, which we do 2 to 4 a year, creates a lot of growth opportunities within Trilogy. You don't need -- if you want to be promoted and grow your career, you don't need to leave Trilogy. There are opportunities in Trilogy to do so. Yes.

[indiscernible]

So we're very comfortable. We do about $150 million a year on average of development at Trilogy. And that's a combination of 2 to 4 new campuses, several campus expansion projects and probably 4 or 5 villa projects per year. We're very comfortable at that rate. Could we push for more? We probably could. But what we don't want to do is grow Trilogy to the point where it becomes detrimental to their overall business.

Every time they open up a campus, they do shift staff around, as Brian mentioned, creates a lot of opportunity. They have a SWAT team that kind of comes in for the first couple of months to get things going. But do they really want to open 8 campuses a year? I'm not sure that's such a good idea. I think Trilogy would agree. They're compensated based on their overall performance. Their goal is to maximize that performance. Growing too big, too fast probably doesn't help that.

And then in terms on your external growth and the acquisitions, can you address your current pipeline and if you've made any progress from what you were just announcing on the Q2 earnings call?

Yes. So our stock got to the point late last year where it made sense to take a look at outside acquisitions. Congratulations goes to our investments team. They've done a great job in the last 9 months, really growing that pipeline. We -- at the end of Q1, we talked about what we've closed, and we said we had well over $300 million in the pipeline. We closed a lot of that in Q2 or at the end of -- at the beginning of Q3. We came out at earnings and said, hey, despite the fact that we closed all these deals, we still have well over $300 million in our pipeline.

I think, Alan, we just announced -- we updated that to over $350 million. Those are awarded transactions, not necessarily under contract. Deals that we feel we're likely to close, but there's no guarantee. No guarantee we'll close them this year. Some may go into next year. However, if we're saying over $350 million, we wouldn't say that unless we were very comfortable that we could meet or exceed that number in addition to what we already closed so far this year.

So we did $650 million last year. Most of that was buying out Trilogy, that $500 million piece that we did not yet own. The other 2 large transactions were deals where we were the mezz lender. We were able to take over that real estate and the cost of our mezz at a fraction of replacement cost. A lot of the stuff we're doing this year is also deals that we didn't really have to compete for the 2 Trilogy deals that we closed -- well, 3 really with the lease buyout are all deals that we were the likely buyer there, and we really didn't have to compete with anybody else on the outside.

And we have a lot of SHOP growth within our pipeline, a lot of one-off deals, small portfolios, newer, larger, higher-quality assets. That's really what we're focusing on, assets that will provide good organic earnings growth into '27, '28, '29 and '30. That's what we want to do is we want to continue this runway of strong organic earnings growth, really, which I think our investors are looking for.

Can you give us the sense of the average volumes?

Well, there's -- I can give you a range, right? So there are deals where we are 92%, 94%, not even 95% occupied. Our investment team is usually underwrite it down to 92%, 93% if it's above that, which I think, is a level of conservatism they're used to in the past. I'm not sure it's necessary today. I -- they are so conservative that I would be shocked if we don't beat the underwriting on every deal they've done this year.

We're -- I really like deals that are newer, just opened are maybe 70%, 75% occupied. The current yield is obviously not going to be high in those deals. However, the price per unit will be very attractive. And I have a high level of confidence in our operating partners that they will fill those up quickly.

We've seen them do that already. I think it's a combination of having confidence in the operating partners we have as well as the overall environment we're in. We are in a very positive environment. Demand growth is outpacing supply growth. So I think on those deals, even though the going yield may not be as high, I expect that the stabilized deal will probably be a little bit higher than the assets we're buying today that are currently stabilized. Either way, I expect RevPOR growth to outpace export growth regardless, whether it's well occupied or not as well occupied. If you're asking me what the average is, it's probably in the mid- to high 80s.

And what is your appetite in terms of acquiring larger portfolios versus having either smaller portfolios or ones you deal?

Yes. So we would do larger deals as well. Those tend to be more aggressive from a pricing perspective. You got a different type of competitor out there, as you can imagine. We've looked at some. We bid on one, a very large high-quality deal a couple of months ago. Very expensive, very high price per unit. It was 96% occupied. We got outbid as we expected. But we're okay with that.

As much as we like the portfolio, we felt that it probably would not be additive to organic earnings growth in the outer years, unlike the stuff that's currently in our pipeline today as well as the stuff that we already own.

So we're looking at some larger transactions. I'm not saying we don't need to do larger deals at our size. We are very comfortable growing the way we've been growing for the last couple of years, doing smaller deals. It doesn't mean we won't do larger deals as well.

Do you think 2026 is really the turn of external growth where you could see that volume continue to increase all the way through?

It's hard to predict what happens next year. Look, we can increase our volume, no problem. We just need to pay more, right? I mean, we're not going to compromise on quality, but we could be more aggressive on pricing if we so chose. I mean, based on where our cost of capital is today, I mean, we probably have the second best cost of capital in our space. We can be very competitive.

We haven't found the need to do that, but we can if we want. We're going to have strong earnings growth if we do no acquisitions. We can stop acquiring today for the next 3 years, we can do no new external growth, and we're still going to have strong earnings growth just based on the in-place organic earnings at our facilities. So there's no pressure for us to do external growth, but we intend to keep doing it.

Do you feel like underwriting assumptions are conservative, too aggressive?

I honestly think we're probably being too conservative today. I mean, we're still underwriting 3% rent growth. That's not -- that's too conservative. Brian and I talk about this all the time. We'll get our underwriting sheet. And I look at price per unit, I look at what stabilized yield is in-place yield, et cetera. And then I see trailing 12 cap rate versus forward 12 -- sorry, trailing 3 cap rate versus forward 12.

Oftentimes, the forward 12 is lower than trailing 3 because they're currently 95% and our underwriting team assumes it drops to 93%. I get while we did that in the past, I don't necessarily think you need to do that today. So I think we'll probably have them get a little bit more realistic on a go-forward basis just because of where things stand today. And what we're seeing, we used to be -- we almost always replace the operator with one of our favorite group of operators.

It used to be first 3 to 6 months, you see a drop in performance. Anytime you make a switch like that. We're not seeing that now. Usually, performance improves within a month. So I think we need to probably adjust our underwriting a little bit.

But having said that, I don't think that it's resulting in us being able to buy less property than we need and should be buying today. But if we can beat up these underwriting as hard as we are and it still pencils, I think these are really good deals.

Why do you think like -- because it just seems like in general, senior housing buyers all kind of have this like 3% growth and you have this -- like why do you think -- is it just because they've been burned in the past.

Well, most of our investment team has been around a long time. It's not -- these are not newbies. And yes, they've been -- in 2014, if you underwrote 3%, you may not have been getting it because there's so much new supply hitting the market. So it's just -- it's a conservative bent that everybody has gotten used to that probably needs to be looked at.

Yes. It's easy to forget that there was so much supply back in 2012 through '16, '17, number one. Number two, inflation wasn't what it is right now. And so underwriting a 3%, it wasn't a guarantee you're going to get it.

All right. And now we're on to our 3 rapid-fire questions.

Do you think something [indiscernible] what they are?

Do you want more?

In Ohio, the lawsuit that went [indiscernible] Medicaid. Do you still have problems through?

Yes. Yes, a big part of our Medicaid Advantage is value-based payments, and that's growing and that's here to stay. So Ohio had a situation where they set their reimbursement in a certain way. Then when it kind of made the payments, they treated it differently. There was a lawsuit. It wasn't -- we weren't involved in the lawsuit. It was some other operators that said, well, this is what you said you would do. This is what you need to do. They won the lawsuit. There will be -- they'll probably appeal it or who knows what they'll do.

There will be some retroactive payments due to Trilogy. We have an estimate for '23. I assume we'll have -- we'll get some money back for '24 and maybe '25. Would not be surprised if they -- these rules change all the time, right? -- part of the problem with billing for these value-add payments is you have to understand how it's -- and they change all the time. Different states have different criteria and they change them all the time. You have to be able to track it and bill it, which is hard to do.

Trilogy can do it because of their size and scale. It's harder for other operators. So they may very well go ahead and say, okay, well, now we're changing the rules, just to be clear, this is how we're paying. And it's based on staffing. It's based on 5-star rating. It's based on recidivism. It's based on all kinds of different things. So -- and it changes. So I think we'll probably see some benefit from that.

We are not assuming we get some permanent increase in reimbursement. If it happens, great. But we didn't report it someone else did. So we didn't go out there and say, "Oh, look at all the money we're getting yet. I did see the report on that this morning. I think he probably picked it up at Nick's my guess.

So you don't think there going to be an increase in the actual [indiscernible] is that true?

Maybe I think it's going to continue to trend up, but I don't think there's going to be this hit this positive effect that's going to be there long term. And maybe, but we don't basically forecast for that.

All right. Speedy. When the Fed starts to cut, do you expect borrowing rates for long-term debt to decline, stay flat or potentially rise?

I think they've already declined, assuming that's going to happen. There's other things affecting long-term rates just besides what the federal funds rate is. I think it's much more a function of is there a recession, what is growth? What is the employment number? What is the employment situation like? I think they'll stay around where they are. I don't expect a big -- unless we have a recession, I don't think they'll go down considerably. I'd love to hear your opinion.

Yes, yes. I think, obviously, we have seen the movement in the 10-year. I think that's been constructive. I would be willing to bet that the banks are going to get a little bit more aggressive on lending next year. And as a result, spreads are going to come in. So I think generally, there will be lower long-term cost of borrowing.

All right. Last year, the majority of companies stated that they are ramping up spending on AI initiatives. How would you characterize your plans over the next year, a higher, flat or lower spend?

Higher.

I can't spell AI.

Do you believe same-store NOI for your sector will be higher, lower or the same next year for the sector?

Same-store NOI in total?

Yes.

Higher.

That sounds good. All right. Thank you so much.

All right. Thanks.