American Healthcare Reit Sees Recent Trilogy Purchase As Springboard To Further Expansion

Leaders at American Healthcare REIT (NYSE: AHR) believe the company’s recent acquisition of the remaining ownership stake of Trilogy Health Services could fuel future development and capital allocation.

The Irvine, California-based REIT real estate investment trust (REIT) announced the purchase of an additional 24% interest in Trilogy for $258 million in September, making it the operator’s primary owner. 

During a call with investors and analysts on Wednesday covering third-quarter results, CEO Danny Prosky noted the acquisition will “better optimize capital allocation and pursue development of purpose-built facilities” moving forward as the sole owner of Trilogy.

In 2024, Trilogy developed and opened four new campuses and completed three expansion projects.

“We believe that at Trilogy, we will have consistent external growth opportunities every year without the complexities of having a partner in our Trilogy investment,” Prosky said. “We expect to be able to increase our pipeline of growth opportunities and respond appropriately to our cost of capital and return requirements.”

Prosky pointed to Trilogy’s success in revenue management, sales and marketing, recruitment and retention as areas in which Trilogy “outperformed” its operating counterparts in the industry.

Prosky called the acquisition of Trilogy part of the “next chapter” in American Healthcare REIT’s growth. The acquisition was completed through a common public stock offering that netted $471.2 million in gross proceeds.

“We expect this enhanced financial position to provide us further flexibility and capacity to pursue external growth,” Prosky told investors and analysts on Wednesday.

AHR stock came to rest at $26.80, up 3.43% from the previous day’s trading.

The company is mulling growing its managed portfolio segments, Prosky added.

In total this year, AHR has closed on $650 million in new investments, including the Trilogy acquisition, lease buyouts and SHOP acquisitions.

As of Nov. 1, AHR reported 22.6% year-over-year same-store net operating income (NOI) growth compared to the third quarter of 2023, along with a 50 basis-point increase in occupancy compared to 3Q23.

Occupancy was also buoyed by an increase in occupancy at Trilogy campuses in assisted living and memory care that will provide a “solid foundation for sustained NOI growth” moving forward, according to Chief Operating Officer Gabe Willhite.

AHR also reported SHOP occupancy of 89.2%, with the anticipation that demand for long-term care “should only continue to grow,” Willhite said. 

“The level of occupancy gains we’ve achieved so far this year are setting a backdrop for us to drive solid noi growth and margin expansion next year by focusing on further refining our revenue and expense management and our properties,” Willhite said.

In the third quarter, the REIT acquired a portfolio of senior housing assets in Washington state for $36.2 million as part of a five-community transaction with assisted living and memory care. Cogir and Compass Senior Living will manage the communities on behalf of AHR.

The company also acquired a senior living property in the Atlanta, Georgia metropolitan area for $7.5 million, transitioning operations to Senior Solutions Management Group.

AHR is also increasing 2024 guidance, noting that total portfolio, 2024 same-story NOI growth guidance to 15% to 17%, up 300 basis points from the midpoint of this year. Guidance for the company’s SHOP also increased from 45% to 50%.

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