American Healthcare REIT (AHR) Q1 2025: Operating Portfolio Drives 15% Same-Store NOI Growth, Pipeline Tops $300M
American Healthcare REIT’s operating portfolio delivered standout growth, prompting a full-year guidance raise and highlighting a decisive pivot toward high-quality senior housing assets. Capital recycling, disciplined expense management, and innovative operator partnerships position AHR for further upside as demographic tailwinds and constrained new supply shape sector dynamics. Investors should focus on the integration of new operator relationships and the pace of external growth execution as key levers for 2025 and beyond.
Summary
- Portfolio Mix Shift Accelerates: Operating assets now drive over 70% of NOI, with continued divestment of non-core segments.
- Guidance Raised on Strong Demand: Upward revisions for both Trilogy and SHOP segments reflect persistent occupancy and rate momentum.
- Capital Deployment Capacity Expands: Over $300 million in awarded acquisitions and disciplined balance sheet set stage for external growth.
Performance Analysis
AHR’s Q1 2025 results underscore the company’s strategic conviction in its operating portfolio, which includes Trilogy, integrated senior health campuses, and SHOP, senior housing operating properties. These segments collectively delivered sector-leading same-store NOI growth, with Trilogy up 19.8% and SHOP surging 30.7% year-over-year. The operating portfolio now represents 71% of net operating income, a structural shift that reflects several years of deliberate capital rotation out of lower-growth medical office buildings (MOB) and triple net assets.
Underlying this growth, occupancy gains, disciplined expense control, and robust rate management were pivotal. SHOP revenue rose 8.8% year-over-year, with margin expansion achieved through a focus on quality of care rather than pure occupancy maximization. Notably, Trilogy’s diversified care model—serving all senior acuity levels—allowed AHR to offset winter flu season headwinds by capturing increased skilled nursing demand. The company’s ability to dynamically manage rate, referral fees, and rent concessions, combined with high CMS five-star quality ratings, further enhanced its value proposition to both residents and payors.
- Operating Portfolio Outperformance: Same-store NOI growth exceeded 20% collectively in Trilogy and SHOP, driving overall results.
- Expense and Margin Discipline: Margin gains stemmed from revenue optimization and reduced concessions, not just occupancy growth.
- Capital Markets Execution: $48 million raised via the ATM at favorable pricing, supporting both balance sheet strength and growth initiatives.
Balance sheet leverage remains conservative at 4.5x net debt to EBITDA, giving AHR ample flexibility to pursue its robust acquisition pipeline and ongoing development projects.
Executive Commentary
"Looking at performance across our diversified healthcare portfolio, we achieved 15.1% same-store NOI growth year-over-year in Q1 2025. This growth was led by our operating portfolio, which includes our integrated senior health campuses, which we also refer to as Trilogy, as well as our senior housing operating properties or shop segments."
Danny Prosky, President and CEO
"During the quarter, we reported normalized funds from operations, or NFFO, of $0.38 per fully diluted share, representing an increase of over 26% compared to Q1 2024. This result was driven primarily by our operating portfolio, which represents 71% of our net operating income and includes Trilogy and Shop, and further supported by our capital markets activity."
Brian Paye, Chief Financial Officer
Strategic Positioning
1. Operating Portfolio as Core Growth Engine
AHR’s business model now centers on its operating portfolio, particularly Trilogy and SHOP, which benefit from secular demographic trends and the ability to flex between skilled nursing and assisted living as market conditions shift. The company’s focus on quality care and outcomes not only supports occupancy and rate growth but also enhances its attractiveness to Medicare Advantage plans, which increasingly reward high-quality operators.
2. Capital Recycling and Portfolio Optimization
AHR continues to divest non-core assets, including older MOBs and legacy triple net properties, reallocating capital into newer, higher-growth operating assets. Dispositions of five properties for approximately $40 million in proceeds, combined with a pipeline of over $300 million in awarded acquisitions (mainly in SHOP and Trilogy), reflect a disciplined approach to portfolio construction and risk-adjusted return optimization.
3. Operator Partnerships and Platform Synergies
Strategic partnerships with regional operators and the leveraging of Trilogy’s platform are central to AHR’s differentiated operating model. Initiatives include sharing Trilogy’s group purchasing, revenue management, and talent development resources with smaller SHOP operators, creating a network effect that enhances operational efficiency and resident outcomes. The introduction of a manager incentive plan tied to AHR stock further aligns operator and shareholder interests.
4. External Growth Pipeline and Market Entry
The $300 million-plus acquisition pipeline is heavily weighted toward off-market and direct-sourced transactions, with an emphasis on newer assets and new operator relationships. This approach expands AHR’s geographic reach and diversifies its operator base, positioning the company for sustained external growth and improved risk dispersion.
5. Development and Supply Constraints
Development activity remains measured, with two new Trilogy projects started in Q1 and more planned for the year. Management is attuned to sector-wide supply constraints as tariffs and high construction costs limit new builds, favoring incumbent operators with existing, high-quality assets. This dynamic should support occupancy and pricing power through the foreseeable future.
Key Considerations
This quarter marks a clear acceleration in AHR’s transformation into a focused, high-growth operator of senior housing and integrated care campuses. The company’s ability to execute on both organic and external growth, while maintaining balance sheet discipline and operational quality, will be critical to sustaining outperformance as sector competition and macro headwinds persist.
Key Considerations:
- Portfolio Quality Upgrade: Rapid shift toward newer, high-margin operating assets, with legacy segments shrinking below 10% of NOI.
- Pipeline Visibility: Over $300 million in awarded acquisitions, with most expected to close in late Q3 or Q4, offering incremental growth potential.
- Operator Integration: New operator relationships and platform sharing initiatives could unlock further efficiency but require careful execution.
- Rate and Margin Management: Dynamic pricing, reduced concessions, and revenue management are driving margin gains even as occupancy fluctuates.
- External Supply Constraints: Limited new development across the sector should support pricing and occupancy for existing assets.
Risks
Execution risk remains around the timely closing and integration of the acquisition pipeline, as regulatory approvals and due diligence can delay or derail deals. Medicaid rate resets, while generally inflation-linked, depend on state-level policy and value-based care performance, introducing some variability. Tariffs and construction inflation could impact development costs, though management expects to offset most expense pressures via rate increases and operational leverage.
Forward Outlook
For Q2 and the remainder of 2025, AHR guided to:
- Raised same-store NOI growth targets: Portfolio now 9% to 13%, Trilogy 12% to 16%, SHOP 20% to 24%.
- Raised NFFO per share guidance: $1.58 to $1.64, up $0.03 at the midpoint.
Full-year guidance excludes the $300 million-plus acquisition pipeline, as timing remains uncertain. Management cited:
- Strong leading indicators, including traffic, leads, and tours, supporting robust demand outlook.
- Expectations for continued occupancy and rate momentum, particularly as the spring and summer selling season ramps up.
Takeaways
AHR’s Q1 marks a decisive inflection in portfolio quality and growth trajectory.
- Operating Portfolio Drives Value: Trilogy and SHOP segments now anchor growth, with sector-leading NOI expansion and quality-driven differentiation.
- Capital Allocation Discipline: Proceeds from non-core asset sales and retained earnings are being recycled into newer, higher-growth opportunities, supporting both organic and external expansion.
- Watch for Pipeline Execution: The pace and integration of new acquisitions and operator partnerships will be central to sustaining outperformance through 2025 and beyond.
Conclusion
American Healthcare REIT’s Q1 2025 results confirm the company’s transformation into a focused, high-growth platform anchored by its operating portfolio and innovative operator partnerships. With robust demand signals, disciplined capital deployment, and sector tailwinds, AHR is well-positioned for continued upside, though execution on the acquisition pipeline and integration of new partners will be key watchpoints for investors.
Industry Read-Through
AHR’s performance highlights the growing bifurcation in healthcare REITs, where operators with scale, quality ratings, and diversified care models are capturing outsized share of sector growth. The company’s ability to source off-market deals and partner with regional operators provides a template for differentiated growth in a market constrained by limited new supply and rising development costs. For the broader senior housing and healthcare REIT sector, the results reinforce the value of active asset management, platform synergies, and disciplined capital recycling as demographic tailwinds accelerate and operational complexity increases.