American Healthcare REIT (NYSE: AHR) sees regional nursing home operator Trilogy Health Services as a gold standard for operational lessons to apply across its portfolio and across care settings, and an “operational laboratory” to test out best practices.

That’s according to AHR Chairman and CEO Jeff Hanson, who spoke at the Bank of America Securities Global Real Estate Conference on Tuesday, along with AHR COO Gabe Willhite and Alan Peterson, VP of investor relations and finance for the Irvine, Calif.-based REIT.

The regional operator’s headquarters is drivable to all assets they manage for AHR – they drive culture in the building, and it’s easier for them to recruit staff as a regional operator compared to a national player, said Willhite.

Copying the Trilogy playbook

Willhite touted Trilogy’s advancement opportunities for its staff too, and taking innovation and applying it to all 150 facilities within their ecosystem. Good ideas can come from anywhere at Trilogy and be applied to every building, Willhite said, and execs aren’t afraid to swap a good idea for even better innovation.

“That’s a lesson learned from owning Trilogy for almost 11 years,” said Willhite. “What has really worked at Trilogy? How did they outperform? How do we copy that playbook throughout our SHOP playbook?”

Seniors housing operators looking to implement Trilogy’s revenue management software may work with a visiting Trilogy leader at their building, to work together and integrate systems and leverage Trilogy’s tech.

“The reality is, we’re still at the very early stages, and when you’ve got an operator that’s as good as Trilogy, they’re really an operating laboratory at scale for us,” said Hanson. “The real value proposition is, they’re not just an investment. They’re probably one of our most strategic assets.”

The real goal, Hanson noted, is to take what works well through that “operating laboratory” and apply it to the other 11 operators in AHR’s footprint.

How Trilogy does building development, for one, is something AHR would like to expand to other operators, said Willhite. Trilogy and AHR are working together to develop three to five new campuses per year in the states Trilogy operates in.

This tracks with a conversation Skilled Nursing News had in April with Trilogy’s COO Todd Mehaffey, who discussed seven campuses under construction, with opening dates set for the next two years.

“Those new campuses have expansion opportunities after they’re already up and running. It de-risks the entire development proposition when you don’t build so big, and guess what the demand is going to be,” said Willhite.

Expanding Trilogy’s development expertise

The Trilogy way is to build smaller and have excess land to develop product where the need dictates the product should be, he noted.

“You can add independent living villas, you could expand AL, you could expand SNF. You have optionality on where the demand is showing up and what you want to do with it,” said Willhite. “They’re playing in markets that others couldn’t because of size perspective and efficiency perspective. They also have financially engineered the building.”

Coupled with that is an investment in future leadership, Willhite said. Trilogy gives high-performing staff – mostly leaders that have been brought up in Trilogy’s administrator-in-training program – the opportunity to run a new building how they see fit.

“You’re filling the new building with people who are already a cultural fit, who you’ve already tested out, who you know are good, and that de-risks the whole proposition as well,” said Willhite. “That’s where the regional densification really starts to show its value, in the human capital side of the equation, how long it takes to stabilize.”

Trilogy’s leadership approach has cut down stabilization time by 6 months, Willhite and Hanson said.

Across AHR’s portfolio, leaders are identifying brick and mortar opportunities where there is high demand, high occupancies and excess land. And Trilogy’s team is managing those developments, working with architects to optimize for future operations.

“That’s something that I think we can continue to look at and expand … the low hanging fruit was where we owned land. Step two is looking for where we can buy adjacent land and do even more expansions and get even more benefits out of Trilogy’s development capabilities,” said Willhite.

Trilogy’s expansion and new development projects, and sharing their development knowledge across AHR’s portfolio, is the result of 25 to 30 years of financial engineering, he added.

“Trilogy’s model has the most durable competitive advantage of probably any product in America [in seniors housing] because of the way that they build both different acuity levels under one roof,” said Willhite.