Negative Points
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Trilogy same-store occupancy stepped down about 50 basis points sequentially in Q2, reflecting typical seasonality, which could temper growth in the near term.
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Skilled nursing occupancy within Trilogy declined 70 basis points sequentially, partially offset by strength in senior housing but indicating some softness in that segment.
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The company faces potential expense pressures from seasonal utility costs in the Midwest, which could impact margins in Q3.
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G&A expenses are expected to increase due to stock compensation tied to the higher stock price and investments in platform talent, which could pressure earnings growth.
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The company’s aggressive acquisition pace may raise integration risks, as it onboards new operators and expands into new regions like the Northeast, requiring careful execution to maintain performance standards.
Q & A Highlights
Q: What drove the deceleration in controllable costs within Trilogy, and is the sub-2% growth rate sustainable or transitory? A: Gabriel Willhite, President and COO, stated that the Trilogy team made expense management a major focus starting last year and has executed exceptionally well through the first half of 2026. While there are seasonal factors to consider, such as utility costs in the Midwest between Q2 and Q3, the strong performance is driven by effective execution across multiple components of the business, not just one area.
Q: Can you quantify the NOI upside opportunity from applying the Trilogy operating platform to the SHOP portfolio? A: Gabriel Willhite, President and COO, explained that it is difficult to attach exact dollar figures to the platform’s value, but highlighted a multimodal approach to operator support. This includes capital for reinvestment, data and analytics, Trilogy’s support in revenue management, sales/marketing, and employee experience, as well as innovation forums with 11 operators. He pointed to the strong results16% NOI growth at Trilogy and over 20% same-store NOI growth in SHOP for the tenth straight quarteras evidence of the platform’s effectiveness.
Q: What is the biggest opportunity for Trilogy over the next three to five yearsrevenue, expenses, or adding beds? A: Gabriel Willhite, President and COO, cited a mix of factors. He emphasized continued occupancy growth, the increasing importance of their proprietary revenue management software as the portfolio fills up, and the ability to grow revenue per bed on the skilled nursing side through payer mix optimization. He noted Medicare Advantage rate growth of 8.4% year-over-year. Additionally, Trilogy’s development capabilities, including five new campuses under construction and modular expansions of existing campuses, provide a strong growth runway.
Q: What is driving the significant increase in acquisition volume, and are you seeing more product come to you? A: Stefan Oh, Chief Investment Officer, attributed the increase to a combination of factors. He noted a general uptick in deal flow from groups attracted by cap rate compression and improved operator performance, as well as a growing number of off-market deals coming directly to AHR due to strengthened operator relationships. He emphasized that the company remains disciplined in its underwriting and that the increased volume reflects more opportunities that fit their criteria, not a relaxation of standards.
Q: How do you approach onboarding new operator partners, and what is the decision-making process? A: Stefan Oh, Chief Investment Officer, explained that most new operator relationships stem from long-standing prior relationships, which provides deep insight into their operational history. The selection process is highly selective, focusing on operators who provide the highest level of care, hospitality, and employee experience. The decision to onboard a new operator is also driven by geographic targets and the availability of suitable opportunities in those markets that fit both the portfolio and the operator’s strengths.
Q: Has there been any change in your view around selling more or all of the outpatient medical portfolio to accelerate growth in senior housing? A: Jeffrey Hanson, Chairman and CEO, confirmed that the company’s focus and capital are squarely on the generational opportunity in SHOP and Trilogy. He noted that AHR has already sold one-third of its outpatient medical buildings, reducing its attributable NOI from the mid-30s to sub-13%, with a path to sub-10% quickly. He stated that the company is always evaluating alternatives to drive shareholder value and will continue to sell these assets.
Q: What are the key initiatives you plan to implement as the permanent CEO, and how long do you intend to stay in the role? A: Jeffrey Hanson, Chairman and CEO, outlined four core areas of focus: 1) acquisition velocity while maintaining high standards, 2) onboarding industry-leading talent across the organization, 3) tapping into Trilogy to drive innovation across the broader portfolio, and 4) aggressive expansion of relationships with existing operators. He described his tenure as “mission and job driven,” not a typical perpetual CEO role, and stated that success will be measured by how rapidly the next generation of leadership takes the company forward. He indicated the timeframe should not be measured in months or a few quarters, but also not in years.
Q: Can you quantify the remaining potential for expansion of the current Trilogy portfolio? A: Gabriel Willhite, President and COO, stated that there are more opportunities than people understand. He noted that Trilogy currently has about 30 communities with excess land owned or with a direct path to ownership, which could support villa expansions. At a pace of 5-6 villa projects per year, this represents a multiyear runway. He also mentioned opportunities to add wings to existing buildings and stand-alone memory care villages, concluding that there are at least five years plus of controlled opportunities at the current pace.
Q: What are the underlying assumptions for the raised SHOP same-store NOI growth guidance, particularly regarding RevPAR and occupancy? A: Gabriel Willhite, President and COO, explained that the portfolio is not homogenous. For higher-occupied buildings, the strategy is to push on rate, with expected rate increases between 4% and 6%. For lower-occupied buildings, the focus is on growing occupancy, potentially with small move-in specials. Expense control is a universal focus. He emphasized that the approach is very specific to each building and submarket.
Q: What returns are the recent senior housing acquisitions delivering relative to prior years, given the capital flowing into the space? A: Stefan Oh, Chief Investment Officer, stated that despite buying higher-quality assets, underwriting and yields have not changed, with initial yields in the mid-5s to low 6s and stabilized yields of 7% or above. Jeffrey Hanson, Chairman and CEO, added that cap rate compression seen in late 2025 and early 2026 has stabilized over the last several months. He highlighted that the assets are in core infill markets with high barriers to entry, and more than half of the pipeline is value-add with an average occupancy of 82%, while the stabilized assets average in the low 90s, still offering operating leverage.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
