American Healthcare REIT is “bullish” on the prospects for senior living and skilled nursing over the next several years, President and CEO Danny Prosky said on Friday’s earnings call with investors. 

The REIT’s senior housing operating portfolio, or SHOP, offers “significant upside potential due to our ability to capture further occupancy and rental rate growth, …  due to strong growth in demand, coupled with less new supply, as a result of a meaningful pullback in construction starts in recent years,” Prosky said. 

The Irvine, CA-based real estate investment trust’s investment in Trilogy Health Services is working out well for AHR, Prosky said. Last month, AHR executives said that the company is considering buying the remaining 26% of Trilogy that it currently does not own.

“Trilogy’s occupancies are already generally very high in the industry, roughly 300 basis points higher than the [National Investment Center for Senior Housing & Care] average for both assisted living and skilled nursing. And we were happy to see Trilogy continue to trend well above the industry average,” Chief Operating Officer Gabe Willhite said.

AHR executed several operator transitions across the portfolio in 2023 and recently completed its most recent planned operator transition within the SHOP segment, Willhite said, by “establishing our first relationship with Heritage Communities, who took over management of two of our assets in Nebraska earlier this month. We’ve already started to see the benefit of those transitions, and we believe that we’re well positioned to unlock more value in 2024.”

Additionally, since the fourth quarter ended, the REIT closed on the acquisition of a senior housing portfolio in Oregon consisting of 856 beds across 12 communities. The management agreement will be the AHR’s first with Compass Senior Living, the company noted in a press release issued in conjunction with the earnings call.

AHR proud to be listed

In February, American Healthcare REIT completed an offering of 64.4 million shares of common stock and subsequently listed those shares on the New York Stock Exchange.

“We are proud to be part of the listed REIT community and are as optimistic as ever about the prospects for our business,” Prosky said.

The purpose of the initial public offering “was not only to provide liquidity to our existing shareholder base, but also to use proceeds from the offering to improve our balance sheet,” Chief Financial Officer Brian Peay said. “We raised nearly $773 million and utilized the net proceeds to pay down $721 million of shorter-term and floating-rate indebtedness at a weighted average interest rate of approximately 7.5%, which will result in significant interest expense savings going forward and a large reduction in floating rate debt outstanding.”

Looking at the year ahead, Peay said, the REIT is issuing full-year guidance for normalized funds from operations of $1.18 to $1.24 for fully diluted shares outstanding. That guidance assumes total portfolio same-store net operating growth 5% to 7%.

“As we look ahead, we will maintain a conservative approach to leverage while being selective regarding external growth opportunities,” the CFO said. “The offering and debt repayment were transformative for our capital structure, and we believe that the embedded growth within our SHOP and [integrated senior health campus] segments will allow our leverage profile to continue to improve.”