American Healthcare REIT, Inc.

second quarter 2024 earnings conference call. With me today are Danny Prowski, President and CEO, Brian Pei, Chief Financial Officer, Gabe Wilhite, Chief Operating Officer, and Stefan Oh, Chief Investment Officer. On today's call, Danny, Gabe, and Brian will provide high-level commentary discussing our results of operations, financial position, and other recent news relating to American Healthcare REIT. Following these remarks, we will conduct a question and answer session with covering research analysts. Please be advised that this call will include forward-looking statements. All statements made during this call, other than statements of historical facts, 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, including our earnings release furnished yesterday, 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 6, 2024, 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 a 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 and supplemental information package. You can find these documents as well as our SEC filings in the audio webcast replay of this conference call on the investor relations section of our website at www.americanhealthcareread.com. With that, I will turn the call over to our President and CEO, Danny Prosky.

Thank you, Alan. Good morning and good afternoon, everyone, and thank you for joining us today. As we enter the latter half of 2024, demand growth for healthcare real estate remains strong, as evidenced by the performance of our diversified healthcare portfolio during the first half of the year. With 15.7% total same-store NOI growth in the second quarter of 2024, and 14.4% same store NOI growth year to date. Within our four property segments, we continue to observe increased demand from an age and population, which we expect will extend at least into the latter part of the decade. This demand and resulting internal growth within our portfolio is surpassing our original conservative estimates, prompting us to increase our guidance for both total portfolio same store NOI and earnings for fiscal year 2024. Our anticipated same-store NOI growth for 2024 has been increased to a range of 12% to 14%. Revised normalized funds from operations guidance now stands at $1.23 to $1.27 per fully diluted share. Brian will provide more details regarding our revised guidance later in the call. I want to express my gratitude to the entire team here at American Healthcare REIT and our regional operating partners for their commitment to delivering excellent results for all of our stakeholders. Our team's hard work is demonstrated in our quarterly results. Reflecting on the current environment for healthcare real estate, I've spent 32 years working within the healthcare REIT space and have never been more optimistic about our business's growth prospects. The strength we have seen over the last 18 months within our industry is the most robust I have observed and the outlook for our company, at least over the next three to five years, looks extremely promising. When evaluating our portfolio, I believe we are well positioned to continue delivering sector-leading performance within our managed portfolio, which includes our integrated senior health campuses and shop segments. We are particularly excited about our assisted living exposure. Industry data from the second quarter shows that combined assisted living rate and occupancy growth has outperformed compared to other long-term care sectors for 11 consecutive quarters. Industry-wide assisted living occupancy now stands at approximately 85% in the second quarter of 2024, which equals pre-COVID levels. While we have exposure to all long-term care segments, the majority of our portfolio is within assisted living units, and we are seeing the industry trend of AL outperformance within our portfolio. Although our results are further surpassing certain benchmarks. Our same store integrated senior health campus and shop segment occupancies exceeded the industry assisted living occupancy average in the second quarter of 2024. Our same store shop assets coupled above industry average occupancy with accelerating report growth year over year in the second quarter. These results are testament to the quality of our portfolio and the quality of our operating partners. While still early in our history as a traded REIT, we hope that through all the interactions with the investment community, we are establishing ourselves as leaders in both the public markets and the healthcare real estate sector. Nevertheless, with all the additional work, we're not losing sight of the strategic pillars outlined in our last earnings call. Number one, ensuring quality care and positive health outcomes for all residents and patients in our properties. I cannot emphasize enough how important this is to us here at AHR. Number two, committing to strong operating performance through our hands-on asset management approach, utilizing best-in-class regional operators. And number three, demonstrating prudent capital allocation to optimize our portfolio's earnings and intrinsic value, focusing on attractive risk-adjusted returns. Looking ahead, I'm excited to continue executing our plans alongside the entire AHR team to achieve further growth across our diversified healthcare portfolio. I will now turn it over to Gabe to discuss our operational results in further detail.

Thanks, Danny. As Danny mentioned, we're thrilled to see robust levels of demand driving portfolio performance, particularly within our managed segments, which accounts for approximately 60% of our pro rata cash NOI. Within our managed segments, our integrated senior health campuses operated by Trilogy Health Services continue to set the standard for healthcare operations across all levels of long-term care, particularly assisted living and skilled nursing. And you can see this reflected in our 24.1% year-over-year same-store NOI growth within that segment in the second quarter of 2024 compared to the same period in 2023. Trilogy's unique model, purpose-built facilities, and strong reputation have continued to drive demand. Occupancy continued its sequential gains in the second quarter with a 20 basis point increase from the results in the first quarter of 2024. And occupancy continued its climb higher subsequent to the end of the second quarter with spot same store occupancy as of July 26, 2024 at 87.4%. Skilled nursing occupancy in particular remains well above industry average. Although we've seen some seasonality return to that segment, albeit to a lesser extent than historic norms, and not enough to offset gains in other areas. I'm also excited to see the benefits of Trilogy's moat, as I've explained to many in the past, playing out in the results. The unique model and regional scale allow resources to be allocated efficiently across our campuses, providing a stable foundation for further margin expansion with continued top line growth and continued expense management, which naturally ultimately leads to sustained NOI growth. Over the balance of 2024, With demand increasing for all care settings within a campus, skilled nursing, assisted living, and independent living, I expect our integrated senior health campus's occupancy to continue to grow. And of course, incremental occupancy gains would be expected to result in a higher pull through to the bottom line. But again, because of Trilogy's unique business, we actually see multiple levers outside of occupancy growth for optimization and margin expansion beyond current levels. For example, as the operator of choice in its markets. Trilogy can focus on QMICs and value-based care opportunities to provide for top-line growth, completely independent occupancy growth. Another example, Trilogy's industry-leading employee retention, which we've seen improving steadily, provides an opportunity for further expense management. Trilogy is constantly improving the employee experience, which allowed them to eliminate the need for agency nursing completely long ago, and reduces unnecessary overtime expenses and the wasted costs associated with employee turnover. Now, that being said, Trilogy's biggest advantage by far is that Trilogy is known for its high-quality care, and we wholeheartedly believe that people see value in that and, when making a decision, continue to want their loved ones in a Trilogy facility. In our shop segment, we're achieving industry-leading levels of NOI growth by, one, partnering with best-in-class regional operators, and two, as a product of our work repositioning underperforming properties with new operators. Our same store year-over-year shop and OI grew by 49.1% in the second quarter of 2024 compared to the second quarter of 2023, driven by approximately 700 basis points in occupancy gains compared to the second quarter of 2023, and also accelerating REV4 growth above and beyond export growth. Furthermore, and as a credit to our hands-on asset management approach, We're pleased to report that same store NOI margins for our shop segment expanded by 200 basis points from the prior quarter and exceeded 20% in Q2 2024. Similar to our integrated senior health campuses segment, occupancy in the shop segment is trending higher post quarter end with spot same store occupancy as of July 26, 2024 at 88.1%. At these levels, More options become available to our operating partners to drive investment performance and to support further NOI gains in the second half of 2024 and into 2025 and beyond. The strategy moving forward for the team and our operating group, in addition to delivering occupancy gains, will be to further optimize our pricing power where demand dictates and control expenses to deliver further margin expansion from current levels. I continue to believe that partnering with strong operators is the single most important factor driving successful senior housing investments. We are confident that our regional asset management approach steering these results could be successfully expanded upon with other growth opportunities when the time is right and appropriate for us to grow externally. With that, I'll hand it over to Brian.