Leaders with American Healthcare REIT (NYSE: AHR) see a variety of avenues ahead for margin growth beyond simply growing occupancy.

Much of that is to do with the “unique business” of Trilogy Health Services, executives from the Irvine, California-based real estate investment trust (REIT) told investors and analysts during an earnings call Aug. 6.

Trilogy manages 128 communities for American Healthcare REIT, with a unit split of about 45% assisted living, 55% skilled nursing. Given that it is an “operator of choice in its markets,” Trilogy “can focus on [quality] mix and value-based care opportunities to provide for top line growth, completely independent of occupancy growth,” said Gabe Willhite, chief operating officer at American Healthcare REIT.

Overall, the REIT reported normalized funds from operations (FFO) in the second quarter of 33 cents per share.

American Healthcare REIT’s stock price closed at $16.67, up 6.5% from the previous close.

Willhite added that Trilogy Health Services has steadily improved worker retention, eliminating the need for agency worker usage, reducing overtime and trimming the “wasted costs” of employee turnover.

Before the Covid-19 pandemic, Trilogy’s net operating income margins were about 19%. Though that is roughly where they still are today, American Healthcare REIT’s management was optimistic the operator would surpass that total, especially as it strives to exceed 90% occupancy in the months ahead.

“I don’t see any reason why that wouldn’t go well into the 90s. It’s a higher margin business [and] probably faster-growing in the long run,” Prosky said.

The REIT currently owns about 76% of Trilogy, with an option to purchase the operator outright by 2025. Looking ahead, American Healthcare REIT CEO Danny Prosky added he sees Trilogy as the company’s “best risk-adjusted return.”

“We’ve been taking our limited capital dollars and really putting it toward Trilogy expansion,” he added.

Prosky noted there are still plenty of opportunities to grow Trilogy, and the REIT is exercising those opportunities through five new independent living villas being under development and a new campus in Michigan. The primary focus will be continuing to grow Trilogy before buying it out, he noted.

“We have to be good stewards of capital,” Prosky said.

The company also noted good results for its senior housing operating portfolio in the second quarter of the year. The company’s same-store net operating income saw a 49.1% increase year over year for the SHOP compared to the same time frame in 2023.

Willhite said the path forward will be to continue focusing on partnering with regional operators and repositioning struggling communities by bringing on new operators. As a result of that strategy so far, the REIT has seen a 49.1% year-over-year net operating income increase compared to the second quarter of 2023.

Occupancy for the SHOP segment registered at 84% during the second quarter of 2024, according to the company’s financial disclosure.

Despite a market full of “tremendous opportunities” that other REITs are capitalizing on, American Healthcare REIT CFO Brian Peay said the company will look to grow primarily through its relationships with regional operators like Trilogy and others.