3:35 P.M. session of Citi's 2025 Global Property CEO Conference. I'm Michael Griffin with Citi Research, and we're pleased to have with us American Healthcare REIT and CEO Danny Prosky. This session is for Citi clients only, and disclosures have been made available at the Corporate Access Desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC25 to submit questions. Danny, I'll turn it over to you to introduce the company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we'll get into Q and A.
All right, thanks, Griff. I appreciate the intro. Real quick, sitting to my left is our Chief Financial Officer, Brian Peay. To my right is Gabe Willhite, who's our Chief Operating Officer, and to his right is Alan Peterson, who's our VP of Investor Relations. So thank you for joining us this afternoon. I apologize for my hoarse voice, but we've had a lot of meetings today. So real quick, American Healthcare REIT is a mid-sized healthcare REIT. So we're at about $4.5 billion of equity market cap, about $6 billion of enterprise value, which kind of puts us right in the middle as far as size of healthcare REITs. We're a diversified healthcare REIT. We focus on clinical healthcare real estate, types of real estate where patients are being seen by providers. We own outpatient medical buildings, assisted living facilities, skilled nursing facilities, and those types of assets.
We've been around a long time. I've been in the space for 33 years, but our company was formed about 12, 13 years ago. We've only been traded about a year. We IPO'd on February 7th of last year, and so we recently celebrated the one-year anniversary of our IPO. I think what stands out among us, what differentiates us from most of our peers is we have a very high percentage, probably the highest percentage of managed long-term care assets, which in our minds is where the best risk-adjusted returns are today. By managed, I mean long-term care assets, assisted living, independent living, skilled nursing, but they're not under a lease structure. They're under a management structure. So as the performance of those assets improves, the bottom line performance, the NOI increase flows to us as opposed to our tenants.
If you look at our earnings growth last year, this year we've guided towards 12% earnings growth per share, which is very, very high. We expect a long runway in the next few years is really because of that large percentage of managed long-term care assets. As far as why to invest in us, I think the theme that I've been trying to promote to everyone is, yes, we are well positioned to generate that earnings growth. We are in the front end of very strong demand growth for long-term care. The oldest baby boomers start turning 80 next year, and that's where we really see the increase in demand grow at a very rapid pace. Every year going forward, we're going to have about 700,000 people turning 80, but only about 20,000 net units of supply are coming on board each year.
So, I think the way to look at it is, yeah, we had a great 2024. We're going to have a great 2025, but we really feel that the next five years we are really poised for really good growth because the demand is there, the demographic wave is in place. And even if construction were to pick up in the next few years, which it's nowhere near doing so, there's a two to three-year lag between when new construction starts until it comes online. And the hole that we're digging ourselves into as far as a shortfall of supply versus demand grows each year as demand outpaces supply at a very, very rapid pace. So don't think of us as a one-year growth story. Think of us as a multi-year growth story. That's really the theme that I would like to make clear in front of anyone.
Danny, thank you for those remarks. Let's dive right into it. The fundamental picture remains strong both from a rent and occupancy growth perspective. You laid out the positive demographic trends. You put out very strong guidance for 2025. I guess what gets you so optimistic that this will be another strong year from a fundamental perspective? And whether it's maybe working with your existing operators, cultivating new relationships, how can you both drive RevPOR and manage ExPOR in order to see that solid NOI margin expansion?
Yeah, so like I said, I've been in the healthcare REIT space for 33 years, and it's always been kind of a slow growth industry. Typically, we've driven, when I say we, I mean the industry as a whole over the last several decades has really driven most of our earnings growth through external growth. Internal growth, whether you're long-term care, whether you're outpatient medical, you're growing your NOI 2%-3% a year typically, and really the only way to really grow your earnings is by doing external growth. You would do large portfolios and you'd have an incremental increase, a fraction of a penny in your earnings. For the reasons I mentioned earlier, over the last few years as well as this year and in my opinion, future years, the majority of our growth in earnings is coming from organic growth.
What we're seeing is not only occupancy growing within our managed portfolios and it's growing at a good clip, but you're seeing RevPOR growth outpace ExPOR growth. And I think that's going to continue. Expenses grew pretty rapidly right after COVID through inflation. It's taken time for revenues to catch up, but now that's flipped. Now, because of the growth in demand and lack of new supply, we're growing our revenues. We're increasing our rates at a faster pace than we're increasing our expenses. And we expect that to continue. So we have the benefit not only of external growth, which is accretive. Our cost of capital has dramatically improved over the last five months to the point where external growth is very accretive for us. And we've already announced several transactions. I expect you'll be seeing more.
But I mean the majority of our growth is still going to be organic because that's just, even if we don't do any external growth, which will not be the case, you're going to see very strong earnings growth from us year in, year out for the next several years.
Maybe then we'll turn next to Trilogy. And for the uninitiated, maybe you can give a brief overview as to kind of the differentiation and value proposition within Trilogy. And then as you see the ability, whether it's to push on the AL side, whether it's to get your Q-Mix up, how should we think about growth in the year ahead for Trilogy?
So for those who don't know us well, our largest investment by far is in a group of assets called Integrated Senior Health Campuses. We also call them Trilogy, who's our operating partner there. This is a portfolio of almost 130 assets in five states: Indiana, Northern Kentucky, Ohio, Southern Michigan, and we just expanded into Wisconsin. Integrated Senior Health Campuses are campuses that offer a wider range of services to seniors. We offer skilled nursing, assisted living, and it even has an independent living component. Unlike continuing care retirement communities, which tend to be much larger and are primarily independent living with the ability to age in place and to assisted living and skilled nursing, these are going to be higher acuity. Much higher percentage is going to be skilled nursing and assisted living. And actually, the movement throughout the facility tends to go in the other direction.
The majority of the admissions come into skilled nursing directly from hospital discharges. It's a short-stay model, very little Medicaid, much higher reliance on Medicare, Medicare Advantage, private pay, and private insurance, and then you tend to see a lot of those residents who come into skilled nursing stay and move into assisted living or independent living. Last month, 40% of the AL admissions came directly from the skilled side of the business, and 70% of the AL and IL admissions have spent time in a Trilogy SNF. So either they came in directly or they came in, got better, went home, and sometime in the future needed AL or wanted IL, and those are really the sides of the business we've been growing at a faster clip. As we develop, we tend to do a lot more development on AL and IL. Still, they still offer skilled services.
It's still a big part of the business. But over the almost 10 years that we've owned Trilogy, we've actually grown the private pay, AL, IL side much faster than we've grown the skilled nursing side of the business. So we've got a captive development line with pipeline development with Trilogy. On a typical year, we start about $150 million worth of development projects. That includes anywhere from two to four new campuses and expansions. And the expansions are either expansions of existing Trilogy facilities where we add on wings if there's demand, if there's a waitlist for any particular type of service at Trilogy, be it memory care, AL, skilled, that they're designed to be added onto to capture that demand. And we've been really growing our independent living villa side of the business.
Whenever we do a Trilogy campus, we try to make sure we have adjacent land available to us. Either we buy it upfront or we make sure we have a purchase option on it. And we put in these duplexes. It's a very popular product type within Trilogy. Much faster build. They take about a year to build versus a new campus takes about two years. And they're almost always pre-leased. So there's really no downtime between when they're complete and when they're occupied. And if you look at the projects we start, usually we start five to six new Villas projects each year. It's a big part of that $150 million of development. So we continue to grow Trilogy at a nice pace. And we also have grown Trilogy by buying out assets that Trilogy operates but does not yet own.
We've done an awful lot of that over the last 10 years. We've probably exercised purchase options on north of 30 assets. We've probably got about another dozen where we have options on them. In some cases, yes, some cases, no, but they're all at market. None of them, we've already exercised all the below-market purchase options that were available to us. But we have a good track record of buying those out at attractive prices. We announced last week that we closed on one of the lease deals. It was a building that was built by a developer. Trilogy leased it, and we bought it out at a nine cap based on our lease rate. So very low risk because we already operate it. We already manage it. It's an asset we've had for years. It's not like there's any underwriting risk. There's nothing to underwrite.
Our budget is our underwriting. It's really just a financial transaction where now we own the asset and we own it at a price that's based on a 9% lease rate based on the lease rate that we were paying, so we're going to continue to do more growth that way. We will grow Trilogy, and we will also grow our SHOP portfolio. That's kind of our second segment of growth that we're focusing on. We announced two new deals that we'll be closing either this month or next month. Those are two transactions totaling about $70 million of AL, IL assets that we'll be adding to our existing base of RIDEA operators. Geographically, they work. We're going to replace the existing operator with one of our existing operators, and we expect good growth on those assets as well. Very nice assets, very attractive going yields with nice upside.
Can you talk a bit, whether it's Trilogy or SHOP, about the rental rate growth you're able to push on the AL side? And then within Trilogy, can you just remind us what percentage is AL, memory care versus skilled nursing?
Okay, so obviously, the last few years we've had very attractive rate increases. Two years ago, we were doing 8%-10%. Last year, we did kind of 6%-8%. This year, we're probably 6%-ish on average and it varies. We've got assets that have a lot of vacancy. Maybe we increase the rates less on those. We've got a lot of assets that are 95%+ lease. Maybe we did a little bit more of an increase there, but I think that's kind of 6%-ish, is what you're seeing versus expense growth of maybe 3% this year, so as I mentioned, we expect revenue growth to exceed expense growth in the foreseeable future. If inflation was to pick up and maybe expense growth was to start increasing again like it was a few years ago, we would make that up probably with higher revenue growth.
So no matter what, no matter what expense growth is, we expect revenue growth to outpace it. With Trilogy, if you look at Trilogy's mix today, about 50% of it is skilled nursing and about 21% of the revenue in total on our Trilogy assets on average is about 21% is Medicaid. Medicaid and Medicare rate increases have been very strong the last few years. Our Medicare rate went up about 6% on October 1st at Trilogy. And our Medicaid rate increases have been very strong as well. A couple of reasons for that. Number one, the rates overall, because Medicare and Medicaid tend to raise rates in arrears based on inflation in prior years. Wage increases in the Midwest were pretty high in 2022 and 2023. So we're able to get pretty good increases in 2024 because of that.
I would say the other reason. Why don't you talk a little bit about the capture we've been seeing on performance-based care, Gabe?
Yeah, I think you're seeing in all the states that Trilogy operates and widely across the United States a focus on value-based care. What value-based care is, is a state deciding that the Medicaid reimbursement should at least somewhat be tied to the quality outcomes of the residents in the building. We've seen states lean into that, especially in the last two and three years, and Trilogy really focused on capturing that opportunity. Trilogy's business model already is to be the high-quality provider of care in the markets that they operate. So they already view this as a key component of their strategy. It's just outperforming from quality of care. What's different is not that they're focused more on care. What's different is that they're actually getting rewarded for it.
The states that leaned in the most tend to think about it as a net-zero type situation where the highest quality providers are getting the add-on and the low-quality providers are actually getting that. Their reimbursement rate cut a little bit to be net neutral to the state, but positive for the outperformers. I think Trilogy right now has captured a sizable component of that opportunity, but hasn't fully unlocked all the opportunity, mainly because the states have made it incredibly complex to do so. There are full-time employees that are operators at Trilogy whose life is dedicated to making sure that not only the quality outcomes are there, that part's actually easier than reporting on what those metrics are to the state and making sure that you're getting credit for all the work that you're doing.
That's a trend I think will continue for a long time in this space, not just with Medicaid, but Medicare has also said. CMS has also said that they want Medicare to get more geared toward a value-based care system as well. So if you're looking for skilled nursing operators and investing in the skilled nursing space, my advice would be focus on the high-quality care providers today. That's going to be the winning strategy for tomorrow. And certainly, Trilogy has proven that they're one of those operators.
I would say Trilogy's rate growth has been pretty consistent both across the skilled side of the business as well as the AL and IL side of the business. 6%-7% increases has kind of been the norm over the last year versus expense growth of back to 3%, which is kind of the historical norm.
Appreciate all the context there. And obviously, this is a bigger question that's still a little bit up in the air, but obviously, we've heard about potential shifts in government payer sources and potential cuts there maybe to Medicare or Medicaid. Do you expect this to, if it were to go through, to have a big impact for either Trilogy or your SHOP or SNF portfolios? And I mean, any comment you can make, I realize that it's still very in flux.
Yeah, so I get this question all the time, had it a lot today. There's really three parts to it. First of all, as you mentioned, we don't know what's going to happen. It seems like every hour somebody comes out with some new pronouncement, and we just don't, we have no clue if they do any cuts to Medicaid and if they do, what they'll be. That being said, I'm of the belief that if there are cuts to Medicaid, it is much more likely to be focused on eligibility for non-seniors. I think you may see a reversal of the Medicaid expansion that we saw as part of the Affordable Care Act, and I'm just guessing here. Of course, I have no idea. Historically, Medicaid for seniors has not been touched because you can't really touch it.
If you start cutting Medicaid reimbursements to skilled nursing facilities, most of them operate on a bare bones minimum margin, and Trilogy will be fine, and I'll get to that in a minute. But most operators, and most of them rely heavily on Medicaid, it's usually a significant component, maybe 70% for your typical skilled operator, and in some cases, the margin is negative on Medicaid, so there's really not much you can cut. Skilled nursing didn't benefit from the Medicaid expansion 10 years ago when the Affordable Care Act kicked in, and I don't think it's going to get hit if there's any reductions to Medicaid. Now, there may be some change to the bed tax. There's been talk about that. May have a marginal impact. We'll have to wait and see. That being said, Trilogy will be fine.
Trilogy only gets about 21% of its revenue from Medicaid, much less than the typical skilled nursing provider. A, they've got a big AL and IL component. B, even their skilled component has a much higher percentage of Medicare, Medicare Advantage, private pay, and private insurance because of their short-stay, higher quality model. Trilogy has the ability to adjust their bed mix. Trilogy facilities are built where the rooms look the same, and you can convert them to skilled. You can put AL, you can put memory care. Whatever the demand is, you can adjust the rooms accordingly. So Trilogy offers Medicaid really as a service to their existing residents. They don't typically accept new outside Medicaid residents.
But if you're in a Trilogy facility and you come in under Medicare as a skilled patient, or if you come into the assisted living as a private pay patient, you know that if you time out of Medicare or if you run out of money, if you live longer than you think and you run out of money, that you're not going to get kicked out, that Trilogy will just move you into one of the Medicaid. Typically, each facility has a wing that's dedicated to Medicaid skilled with double occupancy rooms, and they'll just move you down to the next hall, and that's where you'll be. Now, they don't have to offer that accommodation. They can reduce their number of Medicaid beds if they feel that Medicaid reimbursements are insufficient. And it would be a shame.
It would be unfortunate if people run out of money or time out of Medicare and have to leave Trilogy and hopefully find another facility that accepts Medicaid. Good luck, because if that happens, I don't think there's going to be a whole lot of facilities left. But they can make adjustments accordingly. So we'll have to wait and see. I don't think it's going to come down to that. I think that even if there are adjustments to the bed tax limit, most of the states don't hit that limit anyway. I think states will have to look for ways to keep that reimbursement where it is today because cutting it really isn't an option.
And then we had a question come in kind of around particularly skilled nursing operators. Obviously, probably doesn't apply to Trilogy, but are there any tenant health issues in the portfolio, and do you have any exposure to PACS Group?
Exposure to what?
PACS.
Oh, no, we have no exposure to PACS. We only have, so if you look at our net lease portfolio, it's pretty small in totality. It's well below 10% of our NOI. There's really only five leases. One is to a hospital that's investment-grade credit. We've got two that are AL and two that are skilled nursing. We had a third skilled nursing one. We sold it in December. We just took a look at our overall portfolio and said, "Okay, where do we see risk in the future?" And even though they had very strong rent coverage, these were older, smaller facilities, more rural, mainly behavioral health. They were 97% Medicaid. And we felt that if we ever have a problem with this operator, we'd have a very difficult time replacing them. So we took the opportunity to sell it and reduce our risk.
If you look at what we have left, none of it is to PACS. It's two good quality operators with pretty good rent coverage, and we just don't think there's any risk associated with any of our net lease portfolio, let alone the skilled side.
Getting back to Trilogy before I get to the SHOP platform and acquisition opportunities. You obviously bought out the remainder of Trilogy back in September. The deal was very accretive. How quickly has this been integrated into the existing platform, and were there any synergy benefits as a result of bringing it all in-house?
So there really is no integration. We already consolidated Trilogy. We already managed the entire portfolio. It's really just wiping out minority interest or non-controlling interest for those younger accountants. I just dated myself. So there really is nothing to integrate. It was already fully integrated even beforehand. It's just a piece of a total portfolio that we did not yet own. Maybe I'll let Gabe talk about the synergies because there already were synergies even before. But now that we own 100% of Trilogy, there's a lot more that we can do that we couldn't do when we owned it under a JV structure. So why don't you maybe talk about a couple of those?
Yeah. So for several years now, we've been doing an operator summit where our strategy is to bring together all of our operators from our SHOP and managed portfolio, meaning Trilogy plus all of the other SHOP operators, to an annual summit to kind of share best practices. And invariably, Trilogy is a keynote speaker because they've done something that year that outperformed the rest of the market, and all of our SHOP operators had a lot of questions on how did you do it. So we share those best practices so that our entire portfolio of operators can leverage what Trilogy is doing to make sure that they're operating at the highest level.
What's changed is when we owned before we did the acquisition, when we owned Trilogy, we owned it in a joint venture with governance issues and conflict issues that prevented us from asking Trilogy to leverage its platform to support our other SHOP operators in a kind of a private label back office fashion. That governance issue has gone away since we now own 100% of the Trilogy assets, and the Trilogy manager really only manages for us now and no longer for a joint venture.
What we've asked the Trilogy team to do is think about our portfolio and how we have a higher concentration of regional operators that don't quite have the scale of Trilogy, that don't quite have all the resources that a Trilogy has, and think about what would you want if you were only a 30-building manager that you don't have or you can't afford right now, and how can you offer to support those operators with those things? There's a few really key ways. One is very simple and very low friction. Trilogy's got its own GPO with purchasing power based on its scale that all of our SHOP operators could join and immediately save on expenses. There's no SHOP operator in America that wouldn't want to just lower the costs of their operations in a way that's completely frictionless.
There are a couple of other things that Trilogy does really, really well that we need our SHOP operators to work in the same way that Trilogy does. One is revenue management. Trilogy centralized its revenue management, meaning pricing for each individual senior housing unit is dictated by a central office of Trilogy and no longer a part of ED decision-making solely at the facility level. What that does is allows Trilogy to be very efficient and very dynamic in the pricing of each unit because 2024 was about occupancy growth, and 2025 certainly will be to a lesser extent, but it's going to be a lot about revenue management, revenue capture, and street rate optimization when you're hitting high, high occupancy levels. That's how you're going to get the NOI growth.
Trilogy, from a sales and marketing perspective, has resources that regional operators just don't have to optimize Google search, to do geofencing, to optimize web presence and AI chatbots, and responsiveness to web inquiries. All of that can be done pretty easily from a platform that has the skill to do it and support in these ways. We're working on different ways to kind of take what Trilogy's doing very well, help augment what our SHOP portfolio operators are doing, and add value to the operators as well. That has actually been received very well by the operators. I think a lot of them want to have these resources but can't justify the expense of them.
To the extent we can differentiate ourselves as a capital partner and be someone that can offer a level of support that other capital partners can't, we become a preferred capital partner for the best operators, which is where we want to be.
Yeah. Trilogy, they excel at not only care but also at employee engagement. Their employee retention is far better than anyone else's. Their turnover is less than half of the industry average. That's something they've been working on with the rest of our operators for several years. They were able to avoid outside agency nursing even during COVID, which is almost unheard of. So all those things, we're really trying to leverage our relationship with Trilogy to help improve the operations of the rest of our SHOP operators. And you'll see on our proxy that's coming out next month that we're actually going to be converting Trilogy's LTIP from cash-based to stock-based.
They're going to be rewarded with their long-term incentive based on AHR stock versus cash, which will incentivize them even further to focus on bottom-line performance of AHR, which is not something we're able to do under a JV structure, but now that we own them 100%, we're able to do that.
Thank you for that. And then just one more on Trilogy before we get to kind of the SHOP component. Gabe, I know in the past you've talked about the FlexForce initiative within Trilogy. Can you, maybe for those who might not know, expand on this a bit more, how it's just a differentiator and a value driver for Trilogy?
Yep. Happy to do it. So everybody has heard of agency labor at this point, right? In early 2020, or I guess late 2021, I think is when Trilogy started to see the impact of agency labor on their portfolio, mainly because of the quarantine rules for staff and how long they were at that time. There was a lot of uncertainty about COVID. We had about one month of high agency costs before Trilogy decided to expand on its own internal travel nurse program. So Trilogy employees that were willing to volunteer to sign up to travel to the different Trilogy facilities instead of using third-party agency labor. What that gets you is, one, reduced expense, dramatically reduced expense. By the way, those agency labor fees that you were paying, they weren't all going to the nurses. There was a huge profit margin for the agency labor companies.
So you could still pay the nurses more to travel and still pay significantly less than what you're paying to a third party. Two, the quality is significantly better. There are people that have already been trained in your systems and can come in and help immediately on day one rather than just kind of try to do whatever they can. Three, morale in the buildings. The full-time employees that had to deal with agency labor coming into the buildings really didn't like it. They didn't like that they couldn't be as productive, and they didn't like that they were getting paid more than them, frankly. So to eliminate that, Trilogy created FlexForce all the way up to about 100 employees that were willing to travel to any of the Trilogy facilities.
They benefit from the fact that they have regional concentration, and it's actually physically possible to drive from one facility to another. They were able to get agency labor down to zero in early 2021, I guess it was. That was unheard of in the space. That still continues today, but to a far lesser extent. The labor pressure doesn't exist in the same way it did three and four years ago. I think the FlexForce is now down to about 50 people, and that can be, no pun intended, flexed up and down as need dictates. Right now, actually, we're seeing an interesting thing with the flu being a little bit heavier this year, kind of some issues where the FlexForce has been more important because people have been out with the flu more.
Thanks for that, Gabe. And then probably just finishing up on the transaction market and external growth opportunities. Danny, you mentioned the two SHOP deals that you're under contract to close on so far year to date. Seems like the acquisition pipeline is really robust, as you highlighted on the earnings call last week. Maybe you can give us a sense of the kind of assets you're targeting, whether it's from a stabilized yield or IRR perspective, and then how that compares relative to your cost of capital.
Yeah, so I would say what we're really looking for, and we may go outside this, are assets that are stabilized but with upside, especially if we replace the operator. What we're seeing are kind of going cap rates anywhere from 6.5% to 8%. High quality, I mean, quality is key. We've got a very high-quality portfolio right now. We want to keep it that way. We're not looking to degrade it. But that's really kind of what we're targeting. And you're right, the acquisition market is very robust. There's plenty to look at. And now that we have a very attractive cost of capital, I would expect that to ramp up.
Maybe just as you look at sort of funding sources, you've been tapping the ATM in the fourth quarter. As you look ahead, just given your favorable leverage profile, does it still make sense to fund these with equity component? Would you look to raise debt if it made sense? Maybe that's a balance sheet question for Brian.
The delta between our cost of equity and cost of debt is very, very narrow, much narrower than what you typically see. I think not just for us, but a lot of the REITs. That's why a lot of people are out there issuing equity and paying off debt. That's the same with us, right? We've taken our debt-to-EBITDA down from 8.5x last year to 4.3x now. Pretty significant reduction in our leverage. I think we're very happy at that leverage rate. We may borrow on the line incrementally to acquire. But as you mentioned, we've got an ATM out there. We sold quite a bit of stock in Q4 at a net price of $28.05. Our stock today, last I checked, was north of $30. We think the ATM is still very attractive.
I think you'll expect us. I think our goal is to match fund acquisitions with any proceeds we raise from dispositions as well as ATM proceeds. Keep in mind that our EBITDA is growing at a very rapid pace. Our debt-to-EBITDA, we can take on additional debt while maintaining the same debt-to-EBITDA ratio that we have today.
And you mentioned kind of disposition proceeds. Is that disposition pipeline still mainly targeted toward MOBs? And how do you view the MOB platform within the enterprise as a whole?
So we've been reducing our exposure to MOBs for the last three years. A few years ago, we were 35% NOI from MOB. Today, it's south of 20%. It's not that we dislike MOBs. We just feel that there's much better risk-adjusted returns right now on long-term care versus outpatient medical. Most of what we sold are the buildings we're less excited about holding long-term, kind of smaller, off-campus. We've sold off a lot of those. But there's still another 10 or so that we've got exposed to the market, either under LOI or out there with a broker looking for offers. So I think you'll continue to see us cull our outpatient medical portfolio. And by the way, we've sold a couple of long-term care facilities as well, the ones that we're less excited about.
So we're always looking to improve the quality of the portfolio and the quality of our earnings. So I think you'll expect us to continue to do that year in, year out.
We just had a question come in on that MOB topic. For the properties that you have sold, can you give us a sense of where cap rates are for those MOBs?
It ranges. I think we actually sold a couple at 5% caps. Those were better MOBs where the hospital wanted to buy them. I think we sold a couple last month at around, or last quarter, excuse me, at around 6.6% on average. But I really think you're seeing cap rates mostly to start with a 7% if you look at what it is we're out there selling.
Danny, this is probably a broader platform company-wide question, but is there a terminal limit you'd look to get to for the RIDEA structure within the enterprise? If need be, would you want to be 100% RIDEA, or is this kind of the sweet spot of 60%-ish or so?
We don't have fixed percentages that we're looking to achieve. That being said, as I mentioned, we think the best risk-adjusted returns today are managed long-term care, which is basically SHOP and Trilogy. So I think you'd expect us to continue to see us grow those segments of our portfolio. Last time we checked, it was about 71% of our NOI. I would expect that number to go up, both because we're growing it and number two, because the NOI is growing at an accelerated pace for those assets.
I know we're running up on time here, so I've got two rapid fires to end the session. First one, what is your expectation for same-store growth for the SHOP industry overall, not AHR specifically, in 2026?
I think it could do 8%-10%.
Will there be more, fewer, or the same number of publicly traded healthcare REITs one year from now?
I think it'll be the same, although frankly, I think this should probably be less. I think there should be some M&A within healthcare REITs, but I think it'll be the same.
Great. Thank you so much.