Q4 2025 National Health Investors Inc Earnings Call

February 27, 2026

Operator: Greetings, and welcome to the NHI Q4 2025 Earnings Webcast and Conference Call. At this time, all participants are on a listen-only mode, a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Dana Hambly, VP of Finance and Investor Relations. Sir, the floor is yours.

Speaker #2: If anyone should require operator assistance during the conference, please press *0 on your telephone keypad. And please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Dana Hambly, VP of Finance and Investor Relations.

Operator: If anyone should require operator assistance during the conference, please press star 0 on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Dana Hambly, VP of Finance and Investor Relations. Sir, the floor is yours.

Speaker #2: Sir, the floor is yours. Thank you, and welcome to the National Health Investors conference call to review the results for the fourth quarter of 2025.

Dana Hambly: Thank you. Welcome to the National Health Investors Q4 2025 conference call to review the results. On the call today are Eric Mendelsohn, President and CEO; Kevin Pascoe, Chief Investment Officer; John Spaid, Chief Financial Officer; and David Travis, Chief Accounting Officer. The results, as well as notice of the accessibility of this conference call, were released after the market closed yesterday in a press release that has been covered by the financial media. Any statements in this conference call, which are not historical facts, are forward-looking statements. NHI cautions investors that any forward-looking statement may involve risks or uncertainties that are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call.

Speaker #2: On the call today are Eric Mendelsohn, President and CEO; Kevin Pascoe, Chief Investment Officer; John Spaid, Chief Financial Officer; and David Travis, Chief Accounting Officer.

Speaker #2: The results, as well as notice of the accessibility of this conference call, were released after the market closed yesterday. In a press release that's been covered by the financial media, any statements in this conference call which are not historical facts are forward-looking statements, NHI cautions investors that any forward-looking statement may involve risks or uncertainties and are not guarantees of future performance.

Dana Hambly: The results, as well as notice of the accessibility of this conference call, were released after the market closed yesterday in a press release that has been covered by the financial media. Any statements in this conference call, which are not historical facts, are forward-looking statements. NHI cautions investors that any forward-looking statement may involve risks or uncertainties that are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call.

Speaker #2: All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended December 31, 2025.

Dana Hambly: Investors are urged to carefully review various disclosures made by NHI in its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI's Form 10-K for the year ended 31 December 2025. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireit.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been furnished on Form 8-K to the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release. I'll now turn the call over to our CEO, Eric Mendelsohn.

Speaker #2: Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireet.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been furnished on Form 8-K to the SEC.

Dana Hambly: In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules, which have been furnished on Form 8-K to the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release, together with all other information provided in that release. I'll now turn the call over to our CEO, Eric Mendelsohn.

Speaker #2: Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release. I'll now turn the call over to our CEO, Eric Mendelsohn.

Speaker #3: Good morning, and thanks to everyone for joining us today. We completed the year with a solid fourth quarter that generated normalized FFO per share growth of 8.9% compared to last year.

Eric Mendelsohn: Good morning, thanks to everyone for joining us today. We completed the year with a solid Q4 that generated Normalized FFO per share growth of 8.9% compared to last year. The SHOP platform is central to our investment thesis and was a core contributor to the quarter as total NOI increased by 125% year-over-year and 48% sequentially. Cash rental income from our triple net portfolio increased by approximately 7%, primarily due to acquisitions, while interest income declined by 19% in the Q4 due to loan payoffs and pay downs. Reflecting on the full year results, we delivered growth in Normalized FFO per share of 10.6% and total FAD growth of 13.7%. This exceeded the midpoints of our initial 2025 guidance by approximately 6% and 5%, respectively.

Speaker #3: The shop platform is central to our investment thesis, and was a core contributor to the quarter as total NOI increased by 125% year over year and 48% sequentially.

Speaker #3: Cash rental income from our triple net portfolio increased by approximately 7%, primarily due to acquisitions, while interest income declined by 19% in the fourth quarter due to loan payoffs and paydowns.

Eric Mendelsohn: Cash rental income from our triple net portfolio increased by approximately 7%, primarily due to acquisitions, while interest income declined by 19% in the Q4 due to loan payoffs and pay downs. Reflecting on the full year results, we delivered growth in Normalized FFO per share of 10.6% and total FAD growth of 13.7%. This exceeded the midpoints of our initial 2025 guidance by approximately 6% and 5%, respectively.

Speaker #3: Reflecting on the full-year results, we delivered growth and normalized FFO per share of 10.6%, and total FAD growth of 13.7%. This exceeded the midpoints of our initial 2025 guidance by approximately 6% and 5%, respectively.

Speaker #3: Shop NOI increased by approximately 57% compared to 2024, with 7.6% same-store growth and 6,00,000 from transitions and acquisitions. Our cash rental revenue increased by approximately 10% year over year with contributions both internally and externally.

Eric Mendelsohn: SHOP NOI increased by approximately 57% compared to 2024, with 7.6% same-store growth and $6 million from transitions and acquisitions. Our cash rental revenue increased by approximately 10% year-over-year, with contributions both internally and externally. We announced investments of $392 million in 2025, which was well above our initial guidance of $225 million and was our most active year since 2016. This included investments of $218 million in the Q4 alone, setting the company up nicely for strong acquisition growth in 2026.

Speaker #3: We announced investments of $392 million in 2025, which was well above our initial guidance of $225 million, and was our most active year since 2016.

Speaker #3: This included investments of $218 million in the fourth quarter alone setting the company up nicely for strong acquisition growth in 2026. In fact, we've already closed on one deal this year for $105.5 million, our largest shop acquisition to date.

Eric Mendelsohn: In fact, we've already closed on one deal this year for $105.5 million, our largest SHOP acquisition to date, and we have an active pipeline of over $488 million, with an additional $111 million under signed letters of intent. The industry tailwinds for senior housing have never been more favorable, there's little evidence to suggest that this will change in the next several years. According to NIC MAP, there were fewer than 25,000 units under construction in Q4, which represents just 2.2% of total inventory and the lowest level since 2012. This shows no signs of reversing as new unit starts are less than 1% of inventory, the lowest level since NIC MAP started reporting this information in 2008.

Speaker #3: And we have an active pipeline of over $488 million, with an additional $111 million under signed letters of intent. The industry tailwinds for senior housing have never been more favorable, and there's little evidence to suggest that this will change in the next several years.

Speaker #3: According to Nick Math, there were fewer than 25,000 units under construction in the fourth quarter, which represents just 2.2% of total inventory and the lowest level since 2012.

Eric Mendelsohn: According to NIC MAP, there were fewer than 25,000 units under construction in Q4, which represents just 2.2% of total inventory and the lowest level since 2012. This shows no signs of reversing as new unit starts are less than 1% of inventory, the lowest level since NIC MAP started reporting this information in 2008.

Speaker #3: This shows no signs of reversing, as new unit starts are less than 1% of inventory—the lowest level since Nick Math started reporting this information in 2008.

Speaker #3: Meanwhile, demand is accelerating as the first baby boomers turn 80 this year. NHI is well positioned to capitalize on this long-term generational growth. We continued a methodically invest in our shop capabilities as we significantly expand our presence in private pay senior housing operations where we see the greatest risk-adjusted returns.

Eric Mendelsohn: Meanwhile, demand is accelerating as the first baby boomers turn 80 this year. NHI is well positioned to capitalize on this long-term generational growth. We continue to methodically invest in our SHOP capabilities as we significantly expand our presence in private pay, senior housing operations, where we see the greatest risk-adjusted returns. We're adding to talent rapidly. We currently have 35 employees, which is a 46% increase from our average employee count in 2022, when we established our SHOP platform. Including the recent February acquisition, we've increased our SHOP investment by 106% in the last 12 months to approximately $740 million. This has increased our annualized SHOP NOI contribution to 12% of total annualized NOI from 4.5% at the end of 2024.

Speaker #3: We're adding to talent rapidly. We currently have 35 employees, which is a 46% increase from our average employee count in 2022 when we established our shop platform.

Speaker #3: Including the recent February acquisition, we've increased our shop investment by 106% in the last 12 months to approximately $740 million. This has increased our annualized shop NOI contribution to 12% of total annualized NOI from 4.5% at the end of 2024.

Speaker #3: As outlined in our guidance, we expect that 70% of our investment activity this year will be allocated to SHOP, which, coupled with strong organic growth, should continue to drive SHOP NOI contribution exponentially higher.

Eric Mendelsohn: As outlined in our guidance, we expect that 70% of our investment activity this year will be allocated to SHOP, which, coupled with strong organic growth, should continue to drive SHOP NOI contribution exponentially higher. Similar to our approach in the triple net portfolio, we are targeting SHOP investments at need-driven senior living communities in secondary suburban markets, where we have a better understanding of the local dynamics that most impact operations. We are seeking partners that have demonstrated an ability to deliver outstanding resident satisfaction, which we believe is achieved by attracting and retaining mission-driven employees. Frankly, we've been overwhelmed by the interest in partnering with NHI, which creates a larger talent pool for us and lowers the risk for new investments.

Speaker #3: Similar to our approach in the triple net portfolio, we are targeting SHOP investments at need-driven senior living communities in secondary, suburban markets where we have a better understanding of the local dynamics that most impact operations.

Speaker #3: We are seeking partners that have demonstrated an ability to deliver outstanding resident satisfaction, which we believe is achieved by attracting and retaining mission-driven employees.

Speaker #3: Frankly, we've been overwhelmed by the interest in partnering with NHI, which creates a larger talent pool for us and lowers the risk for new investments.

Speaker #3: From a financial standpoint, our target markets tend to see fewer buyers than the primary markets, allowing NHI to find stabilized properties at attractive yields in the 7 to 8 percent range.

Eric Mendelsohn: From a financial standpoint, our target markets tend to see fewer buyers than the primary markets, allowing NHI to find stabilized properties at attractive yields in the 7% to 8% range. We expect near-term NOI growth in the first few years in the high single-digit to low double-digit range, which produces strong rates of return in the low to mid-teens. NHI's financial strength is very conducive to supporting growth and bolstered by our fortress balance sheet. Our leverage is less than 4x net debt to adjusted EBITDA, and we have plenty of dry powder. Our demonstrated ability to access attractive debt and equity capital creates a real competitive advantage for NHI in maintaining and growing the pipeline, as market participants can be confident in our ability to finance deals quickly and with limited closing risk.

Speaker #3: We expect near-term NOI growth in the first few years in the high single-digit to low double-digit range, which produces strong rates of return in the low to mid-teens.

Speaker #3: NHI's financial strength is very conducive to supporting growth and bolstered by our fortress balance sheet. Our leverage is less than four times net debt to adjusted EBITDA, and we have plenty of dry powder.

Speaker #3: Our demonstrated ability to access attractive debt and equity capital creates a real competitive advantage for NHI in maintaining and growing the pipeline, as market participants can be confident in our ability to finance deals quickly and with limited closing 2026 outlook, we issued guidance last night that included normalized FFO per share growth of 1.2% at the midpoint.

Eric Mendelsohn: Regarding our 2026 outlook, we issued guidance last night that included Normalized FFO per share growth of 1.2% at the midpoint. This is clearly not where we view the core growth rate of the company. Recall that in 2025, results benefited from several items that we do not view as recurring, which John will address in more detail. When adjusting for these items, we estimate that our normalized growth rate is in the 5% to 6% range. The midpoint of our 2026 NFFO per share guidance implies a 2-year CAGR of approximately 6%. Further, this year's guidance includes approximately $111 million of dispositions of non-strategic assets. While we are continually reviewing the portfolio, the early year timing and unusually large size of the dispositions impact this year's growth by an incremental and estimated 1.5%.

Speaker #3: This is clearly not where we view the core growth rate of the company. Recall that in 2025, results benefited from several items that we do not view as recurring, which John will address in more detail.

Speaker #3: When adjusting for these items, we estimate that our normalized growth rate is in the 5% to 6% range. The midpoint of our 2026 NFFO per share guidance implies a two-year CAGR of approximately 6%.

Speaker #3: Further, this year's guidance includes approximately $111 million of dispositions of non-strategic assets. While we are continually reviewing the portfolio, the early year timing and unusually large size of the dispositions impact this year's growth by an incremental and estimated 1.5%.

Speaker #3: From a big-picture perspective, NHI is in a great position to drive exceptional long-term FFO per share growth and create sustained value for shareholders.

Eric Mendelsohn: From a big picture perspective, NHI is in a great position to drive exceptional long-term FFO per share growth and create sustained value for shareholders. We are investing in the people and resources necessary to scale our future growth, particularly in SHOP, with estimated NOI growth of over 105% in 2026, before consideration for new investments. Our financial strength gives us flexibility to pursue significant external growth, and the senior housing industry fundamentals have never been more attractive. In short, we're as enthusiastic as we've ever been. Before I turn the call over to Kevin, I want to welcome our newest board member. We announced this week that Lilly Donohue has joined the NHI board of directors.

Speaker #3: We are investing in the people and resources necessary to scale our future growth, particularly in SHOP, with estimated NOI growth of over 105% in 2026 before consideration for new investments.

Speaker #3: Our financial strength gives us flexibility to pursue significant external growth and the senior housing industry fundamentals have never been more attractive. In short, we're as enthusiastic as we've ever been.

Speaker #3: Before I turn the call over to Kevin, I want to welcome our newest board member. We announced this week that Lily Donohue has joined the NHI Board of Directors. As many of you know, Lily served as the CEO of Holiday Retirement from 2016 to 2022, overseeing a portfolio of more than 300 independent living communities in 46 states.

Eric Mendelsohn: As many of you know, Lilly served as the CEO of Holiday Retirement from 2016 to 2022, overseeing a portfolio of more than 300 independent living communities in 46 states. She brings an extensive and diverse set of skills to the NHI board, and her deep experience in senior living operations obviously makes her a great fit for us in these early stages of our growing SHOP platform. I'll now turn the call over to Kevin. Kevin?

Speaker #3: She brings an extensive and diverse set of skills to the NHI board and her deep experience in senior living operations obviously makes her a great fit for us in these early stages of our growing shop platform.

Speaker #3: I'll now turn the call over to Kevin. Kevin.

Speaker #4: Thank you, Eric. Starting with investment activity in the pipeline, NHI had a great year in 2025 with $392.4 million in announced investments at an 8.1% average initial yield.

Kevin Pascoe: Thank you, Eric. Starting with investment activity in the pipeline, NHI had a great year in 2025, with $392.4 million in announced investments at an 8.1% average initial yield. As Eric noted, the Q4 was particularly active, with investments of $217.5 million, and 2026 is off to a solid start. In February, we announced our largest SHOP acquisition to date of $105.5 million for 9 properties in Kentucky, South Carolina, and Tennessee. We expect an initial NOI yield for the first year of approximately 8% and 7.6% when including routine CapEx. Allegro Living Management is the new manager for these properties, so we expect some transitional impacts in the first year, but forecast solid double-digit growth in year two.

Speaker #4: As Eric noted, the fourth quarter was particularly active with investments of $217.5 million in 2026 is off to a solid start. In February, we announced our largest shop acquisition to date of $105.5 million for nine properties in Kentucky, South Carolina, and Tennessee.

Speaker #4: We expect an initial NOI yield for the first year of approximately 8%, and 7.6% when including routine CapEx. Allegro Living Management is the new manager for these properties, so we expect some transitional impacts in the first year, but forecast solid double-digit growth in year two.

Speaker #4: Allegro is an affiliate of Spring Harbor Management, whom we have worked with since 2024 and has extensive experience in these suburban markets that Eric described earlier.

Kevin Pascoe: Allegro is an affiliate of Spring Arbor Management, whom we have worked with since 2024, and has extensive experience in these suburban markets that Eric described earlier. Our total investment with Spring Arbor is now $227 million, and we are looking at opportunities to continue to grow with them. On that note, the pipeline is as active as ever, which gives us confidence that we can meet or exceed last year's total investments. We currently have $110.6 million under signed letters of intent, primarily in SHOP, and we are evaluating an incremental pipeline of $488 million, all in senior housing. This figure excludes any portfolio deals, but I'll add that we are reviewing several of these large potential investments.

Speaker #4: Our total investment with Spring Harbor is now $227 million, and we are looking at opportunities to continue to grow with them. On that note, the pipeline is as active as ever, which gives us confidence that we can meet or exceed last year's total investments.

Speaker #4: We currently have $110.6 million under signed letters of intent, primarily in SHOP, and we are evaluating an incremental pipeline of $488 million, all in senior housing.

Speaker #4: This figure excludes any portfolio deals, but I'll add that we are reviewing several of these large potential investments. We expect that the acquisition environment will remain incredibly strong for several years, which necessitates that we understand how each of our properties either fits or doesn't fit within NHI's strategic outlook.

Kevin Pascoe: We expect that the acquisition environment will remain incredibly strong for several years, which necessitates that we understand how each of our properties either fits or doesn't fit within NHI's strategic outlook. As a part of this ongoing process, we have planned dispositions of 7 buildings with 6 different operators. These properties are not strategically important, we believe that we can better reallocate our resources to focus on relationships with much more growth potential. Turning to our operating performance. Total SHOP NOI increased by 124.9% compared to Q4 2024, due to the transition of 7 properties on 1 August and the acquisition of 4 properties on 1 October. The same-store NOI on the 15 legacy Holiday properties declined by less than 1% year-over-year, but increased 8.7% sequentially from Q3.

Speaker #4: As a part of this ongoing process, we have planned dispositions of seven buildings with six different operators. These properties are not strategically important, so we believe that we can better reallocate our resources to focus on relationships with much more growth potential.

Speaker #4: Turning to our operating performance, total shop NOI increased by 124.9% compared to the fourth quarter of 2024 due to the transition of seven properties on August 1st and the acquisition of four properties on October 1st.

Speaker #4: The same-store NOI on the 15 legacy holiday properties declined by less than 1% year over year, but increased 8.7% sequentially from the third quarter.

Speaker #4: For the year, our same store NOI increased by 7.6% and our 2026 guidance contemplates a 7 to 8 percent increase which is more heavily weighted to the second half of the year as occupancy recovers in the 16 units we discussed last quarter come back into service in May.

Kevin Pascoe: For the year, our same-store NOI increased by 7.6%. Our 2026 guidance contemplates a 7% to 8% increase, which is more heavily weighted to the second half of the year, as occupancy recovers and the 16 units we discussed last quarter come back into service in May. The 11 properties that we transitioned and acquired contributed $4.1 million to the Q4 SHOP NOI and are performing in line with expectations. We expect double-digit NOI growth from this group as it enters the same-store portfolio later this year and early next. Across the triple net portfolio, we are generally experiencing the continuation of solid trends with no rent concessions, continued collection of deferred rents from Bickford in excess of expectations, and stable occupancy and EBITDARM coverages.

Speaker #4: The 11 properties that we transitioned and acquired contributed $4.1 million to the fourth quarter SHOP NOI and are performing in line with expectations. We expect double-digit NOI growth from this group as it enters the same-store portfolio later this year and early next.

Speaker #4: Across the triple-net portfolio, we are generally experiencing the continuation of solid trends with no rent concessions, continued collection of deferred rents from Bigford in excess of expectations, and stable occupancy and EPA DARM coverages.

Speaker #4: Cash lease revenue increased approximately 7.2% year over year driven primarily by acquisitions successful transition of properties formerly operated by SLM in annual escalators. Deferral collections of 1.9 million actually decreased by 17% compared to the fourth quarter of last year, which re-regard as a success as our outstanding balances have largely been collected at this point and we do not expect to report on this metric going forward.

Kevin Pascoe: Cash lease revenue increased approximately 7.2% year-over-year, driven primarily by acquisitions, successful transition of properties formerly operated by SLM in annual escalators. Deferral collections of $1.9 million actually decreased by 17% compared to the Q4 of last year, which we regard as a success, as our outstanding balances have largely been collected at this point, and we do not expect to report on this metric going forward. While total collections declined, the Bickford repayment increased by 38% to $1.5 million in the Q4, and they had an outstanding balance of $7.6 million at December 31st. We continue to expect that Bickford's cash rental revenue will increase in total dollars at the April 1st rent reset, and we'll be able to provide more details on the next conference call.

Speaker #4: While total collections declined, the Bigford repayment increased by 38% to $1.5 million in the fourth quarter, and they had an outstanding balance of $7.6 million at December 31st.

Speaker #4: We continue to expect that Bigford's cash rental revenue will increase in total dollars at the April 1 rent reset, and we'll be able to provide more details on the next conference call.

Speaker #4: The pipeline continued to be active with triple-net senior housing deals as we don't think every property is a fit for shop. We are also getting more creative with certain targeted lease underwriting to maintain flexibility for potential shop conversions.

Kevin Pascoe: The pipeline continued to be active with triple net senior housing deals, as we don't think every property is a fit for SHOP. We are also getting more creative with certain targeted lease underwriting to maintain flexibility for potential SHOP conversions. As an example, we purchased a property in Jamison, Pennsylvania, for $52.1 million, which is now operated by Priority Life Care. Priority is a new relationship for NHI, but they are a well-established operator with over 60 properties across 12 states. The lease is unique as it's a 5-year lease at an initial yield of 8%, plus a revenue participation feature that could add another 25 to 50 basis points. There are also provisions in the agreement that would convert the property to SHOP, which we anticipate triggering.

Speaker #4: As an example, we purchased a property in Jameson, Pennsylvania, for $52.1 million, which is now operated by Priority LifeCare. Priority is a new relationship for NHI, but they are a well-established operator with over 60 properties across 12 states.

Speaker #4: The lease is unique, as it's a five-year lease at an initial yield of 8%, plus a revenue participation feature that could add another 25 to 50 basis points.

Speaker #4: There are also provisions in the agreement that would convert the property to shop, which we anticipate triggering. That concludes my remarks, and I'll now turn the call over to John to discuss our financial results and guidance.

Kevin Pascoe: That concludes my remarks, and I'll now turn the call over to John to discuss our financial results and guidance. John?

Speaker #4: John?

Speaker #5: Thank you, Kevin. And hello, everyone. This morning, I'll provide details on our fourth-quarter and full-year results, review our financial strength—including our updated leverage policy—and conclude with our financial outlook for 2026.

John Spaid: Thank you, Kevin, and hello, everyone. This morning, I'll provide details on our Q4 and full year results, review our financial strength, including our updated leverage policy, and conclude with our financial outlook for 2026. I'll be using average diluted common shares for all per share results. For the quarter ended 31 December 2025, our net income per share was $0.80, a decrease of 15.8% from the prior year. Recall that in the prior year period, we recognized a $6.3 million non-cash gain related to derivative accounting for forward equity sales agreements, as well as the $5 million gain on sales of real estate. For the 12-month period ended 31 December 2025, our net income per share was $3.02, compared to $3.13 in the prior year.

Speaker #5: I'll be using average diluted common shares for all per-share results. For the quarter ended December 31, 2025, our net income per share was $0.80.

Speaker #5: A decrease of 15.8% from the prior year. Recall that in the prior year period, we recognized a 6.3 million non-cash gain related to derivative accounting for Ford equity sales agreements as well as the $5 million gain on sales of real estate.

Speaker #5: For the 12-month period ended December 31, 2025, our net income per share was $3.02, compared to $3.13 in the prior year. Our NAREIT FFO results per share for the fourth quarter and full year, compared to the prior year periods, decreased 1.6% and increased 2.2% to $1.22 and $4.65 per share, respectively.

John Spaid: Our NAREIT FFO results per share for Q4 and full year, compared to the prior year periods, decreased 1.6% and increased 2.2% to $1.22 and $4.65 per share, respectively. The prior year period's NAREIT FFO benefited from the aforementioned $6.3 million gain from derivative accounting. Our Normalized FFO results per share for Q4 and full year increased 8.9% and 10.6% to $1.22 and $4.91 per share, respectively, compared to the prior year periods. Several one-time items helped us achieve these great Normalized FFO results. During the year, we recognized gains from equity method investments of $3.7 million, up from $0.4 million in the prior year.

Speaker #5: The prior year period's NAREIT FFO benefited from the aforementioned $6.3 million gain from derivative accounting. Our normalized FFO results per share for the fourth quarter and full year increased 8.9% and 10.6% to $1.22 and $4.91 per share, respectively, compared to the prior year periods.

Speaker #5: Several one-time items helped us achieve these great normalized FFO results. During the year, we recognized gains from equity method investments of 3.7 million up from 0.4 million in the prior year.

Speaker #5: We also recognized a 3.4 million benefit to our credit loss reserves compared to a credit loss expense of 4.6 million in the prior year.

John Spaid: We also recognized a $3.4 million benefit to our credit loss reserves, compared to a credit loss expense of $4.6 million in the prior year. Finally, we recognized $3.9 million in cash rental income upon lease terminations, which excludes non-cash write-offs for straight-line rents receivable and excludes non-cash rental income related to operations transfers attributable to the Q3 SHOP transition properties, which benefited both Normalized FFO and FAD. FAD for the Q4 and full year, compared to the prior year periods, increased 11.1% and 13.7% to 57.9 and $232.1 million, respectively.

Speaker #5: Finally, we recognized $3.9 million in cash rental income upon lease terminations, which excludes non-cash write-offs of straight-line rents receivable and excludes non-cash rental income related to operations transfers attributable to the third quarter's SHOP transition properties.

Speaker #5: Which benefited both normalized FFO and FAD. FAD for the fourth quarter and full year compared to the prior year periods increased 11.1% and 13.7% to 57.9 and 232.1 million dollars, respectively.

Speaker #5: As Kevin noted, NOI from our 26-shop property shop segment for the quarter ended December 31st increased 124.9% to $7.3 million compared to the prior-year period.

John Spaid: As Kevin noted, NOI from our 26 SHOP, property SHOP segment for the quarter ended 31 December, increased 124.9% to $7.3 million compared to the prior year period. Our 15 property same-store SHOP portfolio, NOI declined 0.9% to $3.2 million from the prior year Q4, but was sequentially up 8.7% from the Q3. Subsequent to the end of the year, we added an additional 9 properties to our SHOP segment, which brings our total investment in SHOP to $740 million. Our 2026 guidance, released last night, included our NOI expectations for these properties to be $39.6 million at the midpoint.

Speaker #5: Our 15-property same-store SHOP portfolio NOI declined 0.9% to $3.2 million from the prior year fourth quarter, but was sequentially up 8.7% from the third quarter.

Speaker #5: Subsequent to the end of the year, we added an additional nine properties to our shop segment. Which brings our total investment in shop to $740 million.

Speaker #5: Our 2026 guidance, released last night, included our NOI expectations for these properties to be $39.6 million at the midpoint. We believe that the 5.4% yield on our current in-place SHOP invested capital continues to represent substantial NOI growth upside for the company.

John Spaid: We believe that the 5.4% yield on our current in-place SHOP invested capital continues to represent substantial NOI growth upside for the company. I'll talk more about our 2026 guidance in just a moment. Interest expense for Q4 was down 6.4% year-over-year, while weighted average common diluted shares was up 5.4% to 47.9 million shares, as a result of the company's greater use of equity in lieu of debt to fund new investments over the last year. Cash G&A increased 39.9% to $6.6 million compared to the year earlier period, while legal expense declined $0.4 million. During the quarter, we closed on new investments totaling $217.5 million.

Speaker #5: I'll talk more about our 2026 guidance in just a moment. Interest expense for the fourth quarter was down 6.4% year over year, while weighted average common diluted shares was up 5.4% to 47.9 million shares as a result of the company's greater use of equity in lieu of debt to fund new investments over the last year.

Speaker #5: Cash G&A increased 39.9% to $6.6 million compared to the year-earlier period, while legal expense declined $0.4 million. During the quarter, we closed on new investments totaling $217.5 million.

Speaker #5: For the year, we made $392 million in new investments. The highest level since 2016. This volume reflects both the success we have with converting existing loans into fee-simple ownership as well as the redeployment of over 93.3 million dollars in other loan investment payoffs during the year.

John Spaid: For the year, we made $392 million in new investments, the highest level since 2016. This volume reflects both the success we have with converting existing loans into fee simple ownership, as well as the redeployment of over $93.3 million in other loan investment payoffs during the year. Our net deployment of new investment capital represents a 42% increase year-over-year. During the quarter, we settled approximately 600,000 common shares from our Q2 2025 forward ATM equity activity, with proceeds of approximately $46.2 million at an adjusted forward price of $71.87 per share after fees and forward costs.

Speaker #5: Our net deployment of new investment capital represents a 42% increase year over year. During the quarter, we settled approximately 600,000 common shares from our Q2 2025 Ford ATM equity activity for proceeds of approximately $46.2 million.

Speaker #5: At an adjusted forward price of $71.87 per share after fees and forward costs. At December 31, 2025, we had remaining escrowed Ford equity proceeds of approximately $44.5 million available to us in exchange for the future delivery of 600,000 common shares at an average price of $69.23 per share.

John Spaid: At 31 December 2025, we had remaining escrowed forward equity proceeds of approximately $44.5 million available to us in exchange for the future delivery of 600,000 common shares at an average price of $69.23 per share. We ended the year with $19.6 million in cash on our balance sheet, $496 million in revolver capacity, and also had $315.8 million available on our ATM, assuming the settlement of our forward equity sale agreements. Our balance sheet ended the Q4 in great shape. Our net debt to adjusted EBITDA ratio was 3.8x for the quarter, and our available liquidity was approximately $875 million, attributable to the cash on our balance sheet, excess revolver, forward equity, and additional ATM capacity.

Speaker #5: We ended the year with $19.6 million in cash on our balance sheet for our $96 million in revolver capacity, and also had $315.8 million available on our ATM, assuming the settlement of our Ford equity sale agreements.

Speaker #5: Our balance sheet ended the fourth quarter in great shape. Our net debt to adjusted EBITDA ratio was 3.8 times for the quarter, and our available liquidity was approximately $875 million.

Speaker #5: Attributable to the cash on our balance sheet excess revolver, Ford equity, and additional ATM capacity. We are also announcing today a change in our leverage policy.

John Spaid: We are also announcing today a change in our leverage policy. We are lowering our leverage policy from a range of 4 times to 5 times to a range of 3.5 times to 4.5 times net debt to adjusted EBITDA. Our lower leverage policy reflects the importance we place on our investment-grade rating and also reflects the changes to our debt service coverage ratios in this higher for longer interest rate environment. Let me now turn to our dividend and guidance. As we announced last night, our board of directors declared a $0.92 per share dividend for shareholders of record 31 March 2026, and payable 1 May 2026. Last night, we introduced our full year 2026 guidance, I previously touched on some of our SHOP expectations.

Speaker #5: We are lowering our leverage policy from a range of four times to five times to a range of three and a half times to four and a half times net debt to adjusted EBITDA.

Speaker #5: Our lower leverage policy reflects the importance we place in our investment grade rating and also reflects the changes to our debt service coverage ratios in this higher-for-longer interest rate environment.

Speaker #5: Let me now turn to our dividend and guidance. As we announced last night, our board of directors declared a 92 cent per share dividend for shareholders of record March 31st, 2026, and payable May 1st, 2026.

Speaker #5: Last night, we introduced our full year 2026 guidance, and I previously touched on some of our shop expectations. For 2026, we expect NARED FFO and NFFO per share at the midpoints to grow 6.9% and 1.2%, respectively.

John Spaid: For 2026, we expect Nareit FFO and FFO per share at the midpoints to grow 6.9% and 1.2%, respectively. We expect total FAD at the midpoint to grow 7.8% to $250.2 million. Our full year 2026 guidance includes $230 million in additional future investments and an average NOI yield of 7.8% and price approximately 70% in SHOP investments, which we believe is a conservative assumption for the year. Excluded from our guidance is any assumption for the early resolution of our NHC lease, which matures December 31, 2026. Negotiations are ongoing, and we expect to have more to report as the year progresses.

Speaker #5: We expect total FAD at the midpoint to grow 7.8% to 250.2 million dollars. Our full year 2026 guidance includes 230 million dollars in additional future investments and an average NOI yield of 7.8% comprised approximately 70% in shop investments, which we believe is a conservative assumption for the year.

Speaker #5: Excluded from our guidance is any assumption for the early resolution of our NHC lease, which matures December 31st, 2026. Negotiations are ongoing, and we expect to have more to report as the year progresses.

Speaker #5: Capital market activity in our initial 2026 guidance currently only reflects the settlement of our remaining forward equity and the retirement of our upcoming debt maturities using proceeds from our revolver.

John Spaid: Capital market activity in our initial 2026 guidance currently only reflects the settlement of our remaining forward equity and the retirement of our upcoming debt maturities using proceeds from our revolver. However, we expect our capital market activity to adjust as required to meet the company's liquidity needs due to changes in the timing and the amount of our investments and dispositions.

Speaker #5: However, we expect our capital market activity to adjust as required to meet the company's liquidity needs due to changes in the timing and the amount of our investments and dispositions.

Speaker #5: So once again, thank you for joining our call today. That concludes our prepared remarks, so with that, operator, please open the lines for questions.

Eric Mendelsohn: Once again, thank you for joining our call today. That concludes our prepared remarks. With that, operator, please open the lines for questions.

Speaker #1: Thank you. At this time, you'll be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad.

Operator: Thank you. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions. Thank you. Our first question is coming from Joanna Gajuk with Bank of America. Your line is live.

Operator: Thank you. At this time, we'll be conducting our question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we pull for questions. Thank you. Our first question is coming from Farrell Granath with Bank of America. Your line is live.

Speaker #1: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #1: And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #1: Thank you. Our first question is coming from Pharrell Granath with Bank of America. Your line is live.

Speaker #2: Thank you. Good morning. I first just wanted to start off with a question on the same-store shop guidance for 2026. I know that last quarter there were some commentary around taking corrective measures and that we could potentially expect double digits in 2026.

Joanna Gajuk: Thank you. Good morning. I first just wanted to start off with a question on the same-store SHOP guidance for 2026. I know that last quarter there was some commentary around taking corrective measures and that we could potentially accept double digits in 2026, in that same-store portfolio. Curious of this initial guidance, is this reflective of just what you're seeing today? Future plans of these corrective measures, which could potentially provide greater upside to that guidance?

Farrell Granath: Thank you. Good morning. I first just wanted to start off with a question on the same-store SHOP guidance for 2026. I know that last quarter there was some commentary around taking corrective measures and that we could potentially accept double digits in 2026, in that same-store portfolio. Curious of this initial guidance, is this reflective of just what you're seeing today? Future plans of these corrective measures, which could potentially provide greater upside to that guidance?

Speaker #2: In that same-store portfolio, I'm curious about this initial guidance—is it reflective of just what you're seeing today? Are there future plans for these corrective measures, which could potentially provide greater upside to that guidance?

Speaker #3: Sure. This is Kevin. I have to tell you, overall, just the way we conduct ourselves is we want to deliver something that we feel very confident that we can achieve.

Kevin Pascoe: Sure. This is Kevin. I would tell you overall, just the way we conduct ourselves is we wanna deliver something that we feel very confident that we can achieve. There should be opportunity within the portfolio from there. It's a bit of an under promise, over deliver. We do have some things that are gonna take place in the back half of the year. We mentioned that we have one building where 16 units are coming online. That building is 100% occupied, that will be additive. Those units don't come on until May. You know, we expect that it will grow through the balance of the year. We're not expecting everybody to move in all at once. You know, we've got a number of things that we're focused on with the portfolio.

Speaker #3: And there should be opportunity within the portfolio from there. So it's a bit of an under-promise over-delivery. We do have some things that are going to take place in the back half of the year.

Speaker #3: We mentioned that we have one building where 16 units are coming online. That building is 100% occupied, so that will be additive. Those units don’t come on until May, and then we expect that it will grow through the balance of the year.

Speaker #3: We're not expecting everybody to move in all at once. So we've got a number of things that we're focused on with the portfolio. We're focused on the sales pipeline, building the funnel. Typically, the first part of the year is a little bit softer with holidays and coming out of the winter.

Kevin Pascoe: We're focused on the sales pipeline, building the funnel. You know, typically the first part of the year, you know, is a little bit softer with holidays and coming out of the winter. We do expect better results out of the second half of the year.

Speaker #3: So, we do expect better results out of the second half of the year.

Speaker #2: Great, thank you. And also, just touching on your shop pipeline, especially seeing the momentum that you've picked up in the second half of '25 and then now what we've seen under LOI and in the pipeline for '26, is it fair to expect that that momentum can continue going forward into '26?

Joanna Gajuk: Great. Thank you. Also, just touching on your SHOP pipeline, especially seeing the momentum that you've picked up in the second half of 2025, and then now what we've seen under LOI and in the pipeline for 2026. Is it fair to expect that momentum can continue going forward into 2026 of the level that you're potentially able to achieve now?

Farrell Granath: Great. Thank you. Also, just touching on your SHOP pipeline, especially seeing the momentum that you've picked up in the second half of 2025, and then now what we've seen under LOI and in the pipeline for 2026. Is it fair to expect that momentum can continue going forward into 2026 of the level that you're potentially able to achieve now?

Speaker #2: Of the level that you're potentially able to achieve now?

Speaker #3: That is our expectation. That said, we give you guidance based on what we have, we feel like we have some reasonable visibility into, and what we can execute on.

Kevin Pascoe: That is our expectation. That said, you know, we give you guidance based on what we feel like we have some reasonable visibility into and what we can execute on. As you noted, we outpaced what the expectation that we set at the beginning of last year and would be, you know, we're working to do the same this year.

Speaker #3: But as you noted, we outpaced the expectation that we set at the beginning of last year, and we'll be working to do the same this year.

Speaker #2: Thank you.

Joanna Gajuk: Thank you.

Farrell Granath: Thank you.

Speaker #1: Thank you. Our next question is coming from Austin Wehrschmidt with KeyBanc Capital Markets. Your line is live.

Operator: Thank you. Our next question is coming from Austin Wurschmidt with KeyBanc Capital Markets. Your line is live.

Speaker #4: Thanks, and good morning, everybody. Just Eric, I wanted to go back to NHC, and I'm wondering, does it feel like the lease negotiations with the group are moving forward, and maybe more importantly, constructively moving forward?

Austin Wurschmidt: Thanks, good morning, everybody. Just, Eric, I wanted to go back to NHC, and I'm wondering, does it feel like the lease negotiations with the group are moving forward and maybe more importantly, constructively moving forward? What is the probability that you think you'll reach a resolution in the next, you know, three to nine months?

Speaker #4: And what is the probability that you think you'll reach a resolution in the next three to nine months?

Speaker #3: Hey, Austin. This is Eric. We're in the thick of it right now, so I would describe our posture as we're in a quiet period regarding NHC.

Eric Mendelsohn: Hey, Austin, this is Eric. We're in the thick of it right now. I would describe our posture as we're in a quiet period regarding NHC.

Speaker #4: Understood. Appreciate that. And then, from the shop challenges that you guys have faced—and you've talked about where you would have expected annualized NOI to re-stabilize a couple of years ago—has that changed your approach to either underwriting new deals or how you're structuring management agreements to provide any added flexibility moving forward?

Austin Wurschmidt: Understood. Appreciate that. From the SHOP challenges that you guys have faced and, you know, you've talked about where, you know, you would have expected annualized NOI to restabilize a couple of years ago, I mean, has that changed your approach to either underwriting new deals or how you're structuring management agreements, to provide, you know, any added flexibility moving forward?

Speaker #3: Sure. This is Kevin. I would say it definitely impacts the way we think about deals, but we're also focused on more senior housing campus-style products—ones that have assisted and memory care, recall.

Kevin Pascoe: Sure. This is Kevin. I would say it definitely impacts the way we think about deals, but we're also focused on more senior housing, campus-style products, ones that have assisted in memory care. You recall, these are former holiday properties that, you know, we're not the only ones that have had some issues with. But making sure that we have a bit of that continuum or it's the senior housing, the need-driven component is a component to the deal, I think is something that we're focused on. As you touch on, our management agreements are such that we do have flexibility should we need to make a change. You know, that's never our, it's never a desire of ours. Changes are very disruptive to the property, but, you know, if we need to, then we have that ability.

Speaker #3: These are former Holiday properties that we're not the only ones that have had some issues with. But making sure that we have a bit of that continuum, or it's the senior housing, the need-driven component is a component to the deal, I think, is something that we're focused on.

Speaker #3: And as you touch on, our management agreements are such that we do have flexibility should we need to make a change. That's never our it's never a desire of ours.

Speaker #3: Changes are very disruptive to the property, but if we need to, then we have that ability.

Speaker #4: Got it. And then just last one, Eric, you highlighted the targeting of secondary suburban markets for deals. What's sort of the long-term growth profile for those markets, just given the demographics and affordability?

Austin Wurschmidt: Got it. Then just last one. You know, Eric, you highlighted the targeting of secondary suburban markets for deals. What's sort of the long-term growth profile for those markets, just given, you know, the demographics and affordability? How would you characterize the labor pool for the markets that you're focused on? Thanks.

Speaker #4: And how would you characterize the labor pool for the markets that you're focused on? Thanks.

Eric Mendelsohn: Great question, Austin Wurschmidt. We definitely pay attention to labor. For example, you know, we tend to avoid Indiana because it has a tough labor market, and the buildings there tend to run a lot of agency labor. It's no secret that there's a lot of migration from coastal areas to places like Tennessee and other places in the Midwest, where housing is more affordable and cost of living is more affordable. For the time being, as we look at Bickford and other Midwestern operators, they're able to staff their buildings with full-time employees and not have to utilize any agency labor.

Speaker #3: Great question, Austin. We definitely pay attention to labor. For example, we tend to avoid Indiana because it has a tough labor market. And the buildings there tend to run a lot of agency labor.

Speaker #3: But it's no secret that there's a lot of migration from coastal areas to places like Tennessee and other places in the Midwest, where housing is more affordable and the cost of living is more affordable.

Speaker #3: So, for the time being, as we look at Bickford and other Midwestern operators, they're able to staff their buildings with full-time employees and not have to utilize any agency labor.

Austin Wurschmidt: Just from a growth profile perspective, for those types of assets, I mean, how do you think about that over time?

Speaker #4: And just from a growth profile perspective for those types of assets, I mean, how do you think about that over time?

Austin Wurschmidt: Just from a growth profile perspective, for those types of assets, I mean, how do you think about that over time?

Speaker #3: Well, you look at our pipeline, we're pleasantly surprised at the number of deals and opportunities we're seeing now that we're gung-ho on shop and Ridea.

Eric Mendelsohn: Well, you look at our pipeline, we're pleasantly surprised at the number of deals and opportunities we're seeing now that we're gung ho on SHOP and RIDEA. Growth for us is more of an issue of managing it and underwriting it responsibly, rather than trying to find it.

Speaker #3: So, growth for us is more of an issue of managing it and underwriting it responsibly, rather than trying to find it.

Speaker #4: Okay. Thanks for the comments.

Austin Wurschmidt: Okay. Thanks for the comments.

Speaker #1: Thank you. Our next question is coming from Juan Sanabria with BMO Capital Markets. Your line is live.

Operator: Thank you. Our next question is coming from Juan Sanabria with BMO Capital Markets. Your line is live.

Speaker #5: Good morning. Just hoping you could help us think about job growth and the guidance for '26, recognizing there's some struggles with the ex-holiday portfolio.

Juan Sanabria: Good morning. Just hoping you could help us think about SHOP growth, and the guidance for 26, recognizing there's some struggles with the ex Holiday portfolio. Maybe if you can compare and contrast what's not in the same-store pool and how that's performing, versus the same-store pool, and kind of the expectations on occupancy and rep poor, just so we can get a kind of a more holistic picture rather than just focusing on same store.

Speaker #5: But maybe if you can compare and contrast what's not in the same store pool and how that's performing versus the same store pool and kind of the expectations on occupancy and rep poor, just so we can get a kind of a more holistic picture rather than just focusing on same store.

Speaker #3: Sure. This is Kevin. I'll try and address your question. If I missed something, please re-ask the question. But when we're looking at what's not in same store right now, recall that two of them—one is a transition from a triple net to SHOP.

Kevin Pascoe: Sure. This is Kevin. I'll try and address your question. If I miss something, you know, please re-ask the question. When we're looking at what's not in same store right now, recall that two of them, one, is a transition from a triple net to SHOP. The other is a transition to a new operator. We do have some transitional impacts that we've had through the first part or, sorry, the second half of 2025, and then on the newest, we'll have some transitional impacts that we experience in 2026. There's only been one of those that was the current manager, though that group is performing to expectation, you know, feel very good about where they're at from an operation standpoint.

Speaker #3: The other is a transition to a new operator. So we do have some transitional impacts that we've had through the first part or sorry, the second half of 2025 and then on the newest.

Speaker #3: We'll have some transitional impacts that we experience in 2026. There's only been one of those, and that was the current manager. That group is performing to expectation. I feel very good about where they're at from an operations standpoint.

Speaker #3: But overall, what we'll be looking at is making sure that they're putting in the right systems, and people feel like they've done a very good job of that.

Kevin Pascoe: Overall, what we'll be looking at is making sure that they're putting in the right systems and people. Feel like they've done a very good job of that. They're building their funnels. We're able to pass through some rate increases, but we're doing that responsibly to make sure that we're not losing occupancy while we go through these transitions. When we are to look at this, it's more of a, I would call it a forward look than, you know. There might be a little bit of noise in the near term. Overall, though, the transitions have gone pretty well.

Speaker #3: They're building their funnels. We're able to pass through some rate increases, but we're doing that responsibly to make sure that we're not losing occupancy while we go through these transitions.

Speaker #3: So, when we were to look at this, it's more of a—I would call it a forward look—so there might be a little bit of noise in the near term.

Speaker #3: Overall, though, the transitions have gone pretty well. I would say, just pulling one out, the Sincere transition we did last year performed better than expectations through the second half of the year.

Kevin Pascoe: I would say, you know, just pulling one out, the Sinceri transition we did last year, that performed better than expectation through the second half of the year, where we just finalized our budgeting process and have some solid growth expectations for them this year. I think, you know, we're feeling good about where we're at with those operators. You'll see those roll into same store, starting Q4 of this year, so you'll have a little more incremental visibility on that piece here in the next couple of quarters.

Speaker #3: We just finalized our budgeting process and have some solid growth expectations for them this year. So I think we're feeling good about where we're at with those operators.

Speaker #3: You'll see those roll into the same store starting fourth quarter of this year. So you'll have a little more incremental

Speaker #1: Visibility on that piece here in the next couple of quarters.

Speaker #2: Okay . It's helpful just for maybe going back to , I think , maybe trying to ask Austin's question in a different way , I guess holidays may be a unique situation , but I guess .

Juan Sanabria: Okay. That, it's helpful. Just with maybe going back to, I think, maybe trying to ask Austin's question in a different way. I guess, you know, Holidays may be a unique situation, I guess, what have you learned that you think prepares you better to deal with kind of the growing pains in SHOP or/and transitions, et cetera, that should give us confidence about investments or activity in SHOP as you look to grow pretty significantly with a pretty compelling opportunity going forward with supply and demand?

Speaker #2: What have you learned that you think prepares you better to deal with the kind of growing pains in the shop, or transitions, etc.?

Speaker #2: That should give us confidence about investments or activity in SHOP as you look to grow pretty significantly, with that pretty compelling opportunity going forward with supply and demand.

Speaker #3: Hey Juan, this is Eric. I would just remind everyone that the holiday shop was more of a science experiment that we backed into when Holidays sold to Atria and Welltower.

Eric Mendelsohn: Hey, Juan, this is Eric. I would just remind everyone that the Holiday SHOP was more of a science experiment that we backed into when Holidays sold to Atria and Welltower. We've put a lot of CapEx in those buildings. We've changed managers, and as we compare them to the same Holiday buildings that are at Ventas and Welltower, from what we're able to surmise, we're doing as good or better than they are with those buildings. Our new SHOP portfolio, the not same store, I feel very positive on. I would also point out that it's assisted living and memory care, not just independent living.

Speaker #3: We've put a lot of CapEx in those buildings . We've changed managers . And as we compare them to the same holiday buildings that are at Ventas and Welltower , from what we're able to surmise , we're doing as good or better than they are with those buildings .

Speaker #3: Our new shop portfolio , the not same store , I feel very positive on . I would also point out that it's assisted living and memory care , not just independent living .

Speaker #3: And these buildings are performing well from the get-go. And we look at them with an eye towards double-digit growth, and we verify that with the operator when we do our pro formas and budget for year two growth.

Eric Mendelsohn: And these buildings are performing well from the get-go, and we look at them for an eye towards double-digit growth, and we verify that with the operator when we do our pro formas and budget for year 2 growth. I, you know, as Kevin said, I think you'll start to see our same store perk up in Q3 and Q4, when the 1 Holiday building has units that come online and when the Sinceri buildings become same store.

Speaker #3: So I , you know , as Kevin said , I think you'll start to see our same store perk up in the in the the third and fourth quarter when the one holiday building has units that come online and when the sensory buildings become same store

Speaker #2: And just one last question from me. You know, how should we think about the pricing power and the ability to drive rate in some of these secondary markets?

Juan Sanabria: Just last question for me. You know, how should we think about the pricing power and the ability to drive rate in some of these secondary markets? I'm not sure kind of the affluence around some of these assets or the ability to drive pricing with the target customers.

Speaker #2: I'm not sure—kind of the affluence around some of these assets, or the ability to drive pricing with the target customers.

Kevin Pascoe: Sure, this is Kevin again. Every market is different. We are underwriting the local market fundamentals of each building that we're looking at. Each one it's very hard to give a generalization here on, you know, how we're looking at those, because they're all, again, different. You know, one thing I will say, though, is based on the margins where they're at, if you can increase rates 5% a year and hold your expenses to less than 4%, that's gonna be 7% to 8% growth. We think that that is very achievable, and we think that there is some potential for additional growth beyond that on the revenue line in a lot of these. You know, I like our chances here. I think that we're building a very good portfolio.

Speaker #1: Sure. This is Kevin again. Every market is different. We are underwriting the local market fundamentals of each building that we're looking at.

Speaker #1: So each one is it's very hard to give a generalization here on , you know , how we're looking at those because they're all again , they're all different .

Speaker #1: You know , one thing I will say though , is based on the margins where they're at , if you can increase rates 5% a year and hold your expenses to less than four , that's going to be 7 to 8% growth .

Speaker #1: So, we think that is very achievable. And we think that there's some potential for additional growth beyond that on the revenue line.

Speaker #1: And a lot of these . So , you know , I'd like our chances here . I think that we're we're building a very good portfolio .

Speaker #1: We like our operating partners and their ability to pass through those increases, if not more. You know, that's kind of in line with what we've seen with our triple net portfolio as well.

Kevin Pascoe: Like our operating partners and their ability to pass through those increases, if not more. You know, that's kind of in line with what we've seen with our triple net portfolio as well. I think we can do as good or better. That's our opportunity, though, as John mentioned in his comments. If we can continue to get some margin expansion as we grow the SHOP segment, you know, that's gonna add additional growth for us.

Speaker #1: So I think we can do as good or better , you know , so that that's our opportunity , though , as John mentioned in his comments , if we can continue to get some margin expansion as we grow the shop segment , you know , that's going to add additional growth for us

Speaker #2: Thanks for that. Appreciate it.

Operator: Thanks for that. Appreciate it.

Speaker #4: Thank you. Our next question is coming from John Kolakowski with Wells Fargo. Your line is live.

Operator: Thank you. Our next question is coming from John Kilichowski with Wells Fargo. Your line is live.

Speaker #5: Good morning. This is Jesus on for John. Thanks for taking the question. Just to switch gears a little bit, the $100 million of dispositions in guidance was a little bit higher than we were expecting here.

Michael DeJesus: Good morning. This is Jesus in for John. Thanks for taking the question. Just to switch gears a little bit on the $1,100 million of dispositions and guidance, was a little bit higher than we were expecting here. Can you walk us through what's driving the higher volume, specifically what assets are being sold? Is primarily, like, just capital recycling back into SHOP or pruning non-core assets?

Speaker #5: Can you walk us through what's driving the higher volume? Specifically, what assets are being sold, and is it primarily just capital recycling into SHOP or pruning non-core assets?

Speaker #1: This is Kevin . It's really an operator relationship situation coupled with the underlying asset not being core to NE . So the profile of of the communities is , is largely senior housing , but they're not relationships .

Kevin Pascoe: This is Kevin. It's really an operator relationship situation, coupled with the underlying asset not being core to NHI. The profile of the communities is largely senior housing, but they're not relationships we're gonna grow. They're triple net in nature, and they're intensive from a asset management standpoint. We feel if we can move the capital to relationships, where we're gonna have additional growth, not only from a, you know, whether it's a, whether it's a triple net or a SHOP deal that we do from the proceeds. You know, something where we're gonna get additional volume out of that customer, be less intensive from a asset management standpoint, meaning we're not spending so much time on one building of an operator, really gives us a little more efficiency from an asset management standpoint.

Speaker #1: We're going to grow their triple net in nature . And they're intensive from a asset management standpoint . So we feel if we can move the capital to the to relationships where we're going to have additional growth not only from a , you know , whether it's a whether it's a triple net or a shop deal that we do from the proceeds , something where we're going to get additional volume out of that customer , be less intensive from a asset management standpoint , meaning we're not spending so much time on one building of an operator .

Speaker #1: You know, it really gives us a little more efficiency from an asset management standpoint. And we've hired a fair amount of folks for asset management.

Kevin Pascoe: We've hired a fair amount of folks for asset management. We're building out our bench and our analytics competencies. I feel good about where we're at, but we need to make sure we're focusing them on the pieces that are gonna be meaningful to NHI, and that's really what these dispositions are born out of. You know, generally, we like to hold on to, you know, income, but I think this is the right decision here to make sure that we're focusing our team.

Speaker #1: We're building out our bench and our analytics competencies. I feel good about where we're at, but we need to make sure we're focusing them on the pieces that are going to be meaningful to NHI.

Speaker #1: And that's really what these dispositions are , are born out of . You know , generally we like to hold on to , you know , income .

Speaker #1: But I think this is the right decision here to make sure that we're focusing our team.

Speaker #5: That's great . And just a quick follow up on NXT . To the extent you're able to comment , if you do renew the lease , how does that impact what you could reposition or sell versus our earlier discussions where you were talking about rotating into shop from this portfolio , would it be like an all or nothing scenario

Michael DeJesus: That's great. Just a quick follow-up on NHC, to the extent you're able to comment. If you do renew the lease, how does that impact what you could reposition or sell versus our earlier discussions, where you were talking about rotating into SHOP from this portfolio? Would it be like an all or nothing scenario?

Speaker #3: Could you ask that again? So, if we do renew the lease, then what?

Eric Mendelsohn: Could you ask that again? If we do renew the lease, then what?

Speaker #5: What does that impact? What you could reposition versus or sell, I guess, because you were talking about some dispositions potentially being involved with this.

Michael DeJesus: How does that impact, what you could reposition versus, or sell, I guess, because you were talking about some dispositions potentially being involved with this, rotating some capital?

Speaker #5: And rotating some capital

Eric Mendelsohn: Fair question. I'll repeat your question back. On the NHC lease, if we were to sell some of the buildings, would that be redeployed? The answer is yes, it would be redeployed into SHOP.

Speaker #3: Fair question . And if I'll repeat your question back . So on the NHC lease , if we were to sell some of the buildings , would that be redeployed ?

Speaker #3: And the answer is yes, it would be redeployed into SHOP.

Speaker #5: Thanks guys

Michael DeJesus: Thanks, guys.

Speaker #4: Thank you. Our next question is coming from Rich Anderson with Fitzgerald. Your line is live.

Operator: Thank you. Our next question is coming from Rich Anderson with Cantor Fitzgerald. Your line is live.

Speaker #6: Hey , team . Thanks . Good morning . So the the 7.7 to 8% shop same store NOI guidance . Just just to clarify that that's still just a 15 legacy holiday assets .

Rich Anderson: Hey, team. Thanks. Good morning. The 7 to 8% SHOP same store and NOI guidance, just to clarify, that's still just the 15 legacy Holiday assets. Is that correct?

Speaker #6: Is that correct .

Speaker #7: Yes, John. Yes, that's correct.

Eric Mendelsohn: This is John. Yes, that's correct.

Speaker #6: Okay . And I think you said you know , your longer term view on shop growth is sort of high single digit , low double digit .

Rich Anderson: Okay. I think you said, you know, your longer-term view on SHOP growth is sort of high single-digit, low double-digit. Is that also correct? You sort of get a step up after you sort of, right, you know, address some of the issues that are going on in the legacy portfolio. Is that the right way to think about it?

Speaker #6: Is that is that also correct ? So you sort of get a step up after you sort of right , you know , address some of the issues that that are going on in the legacy portfolio .

Speaker #6: Is that the right way to think about it?

Speaker #3: Yes .

Eric Mendelsohn: Yes.

Speaker #6: Okay . Obviously , leading up here . So at 9.3% of the portfolio today , shop or as of the end of the year , what what's your target in terms of how big shop can become as a percentage of the total ?

Rich Anderson: Okay, obviously leading up here. At 9.3% of the portfolio today, SHOP, or as of the end of the year, what's your target in terms of how big SHOP can become as a percentage of the total? Do you still think that you're competitive from a growth perspective? Because, you know, you're seeing, you know, growth approaching 20% from some of your larger peers. Now, that has a lot to do with occupancy lift. Is your same store offering more of a rate growth versus, you know, expense growth phenomenon and less about occupancy lift. I'm just curious how you're approaching the same store profile of SHOP going forward and how big it could be in a couple of years from now?

Speaker #6: And do you still think that your your competitive from a growth perspective because you know , you're seeing you ? No UPS growth approaching 20% from some of your larger peers ?

Speaker #6: Now that has a lot to do with occupancy lift . So is your same store offering more of a rate growth versus , you know , expense growth phenomenon and less about occupancy lift ?

Speaker #6: I'm just curious how you're approaching the same-store profile of SHOP going forward, and how big it could be in a couple of years from now.

Speaker #3: Well, in terms of growth of NOI for the company, we've told people that last year we doubled from five to roughly ten.

Eric Mendelsohn: Well, in terms of growth of NOI for the company, we've told people that last year we doubled from 5 to roughly 10, and this year we could easily double that again to 20, and with an eye towards getting it up to 30 or beyond, in terms of percentage of SHOP. I still feel like that's achievable and on track. You know, I understand we have some catching up to do, but as you can see by our pipeline numbers, it's easier to find new deals when you're looking for SHOP and RIDEA, not so much with leases. In terms of same store growth, I think the opportunity is one of margins.

Speaker #3: And this year we could easily double that again to 20. And with an eye towards getting it up to 30 or beyond in terms of percentage of shop.

Speaker #3: So I still feel like that's achievable . And on track . And , you know , I understand we have some catching up to do , but as you can see by our pipeline numbers , it's it's easier to find new deals when you're looking for shop and ridea not so much with leases in terms in terms of same store growth .

Speaker #3: I think the opportunity is one of margins . You know , we see on the holiday portfolio a lot of margin opportunity and we see on the new not same store rate opportunity and frankly , experienced operators that are taking over from , say , a mom and pop operator who just isn't getting the margins that they could .

Eric Mendelsohn: You know, we see on the Holiday portfolio a lot of margin opportunity, and we see on the new, not same store, rate opportunity and, frankly, experienced operators that are taking over from, say, a mom-and-pop operator who just isn't getting the margins that they could.

Speaker #6: Okay , so it's it's a again , a lot of your peers are getting this this occupancy lift , which is not a forever situation .

Rich Anderson: Okay, it's a, again, a lot of your peers are getting this occupancy lift, which is not a forever situation. Yours is more of a, you know, stabilize, but, you know, still, you know, as you point out, margin story, and something in the 10% range on a, you know, foreseeable future type of...

Speaker #6: So , you know , yours is more of a , you know , stabilize . But , you know , still , you know , as you as you point out , margin story and something in the 10% range on a , you know , foreseeable future type of

Speaker #3: That's fair, that's fair.

Eric Mendelsohn: That's fair. That's fair.

Speaker #7: Okay , Rich , this is John . Look , let's just be honest about a little bit about the makeup of our shop portfolio .

John Spaid: Okay, Rich Anderson, this is John Spaid. Look, let's just be honest about a little bit about the makeup of our SHOP portfolio. It was comprised of the Holiday assets, which Eric Mendelsohn touched on before. It's also comprised of these assets that we transitioned away from Discovery Senior Living to Sinceri. That was the whole point of my discussing the return on invested capital that we're currently experiencing. We strongly believe in the potential of these assets. We got to unlock, you know, the margin to improve that, and that's why we're talking about that. At the same time, growth will help us improve our metrics over time as well.

Speaker #7: It was comprised of the holiday assets, which Eric touched on before. It's also comprised of these assets that we transitioned away from Discovery to Sinceri.

Speaker #7: And that was the whole point of my discussing the return on invested capital that we're currently experiencing. We strongly believe in the potential of these assets.

Speaker #7: We got to unlock . You know , the the margin to , to improve that . And that's why we're , we're we're talking about that .

Speaker #7: And at the same time, growth will help us improve our metrics over time as well.

Speaker #6: Okay . Switching gears on the outlook for this year and the six , excuse me , 7.6 million of remaining Bickford rent repayment left on the table .

Rich Anderson: Okay. Switching gears, on the outlook for this year and the $7.6 million of remaining Bickford rent repayment left on the table, do you expect that all to be paid back in the next year or 2? Like, what's the cadence of that payback?

Speaker #6: Do you expect that all to be paid back in the next year or two? Like, what's—what's—what's the cadence of that payback?

Speaker #1: Well , this is Kevin . The what I would guess have you think about is once the rent reset happens , there's less cash flow overall to pay , at least at the same rate .

Kevin Pascoe: Well, this is Kevin Pascoe. What I would guess, have you think about is, once the rent reset happens, there's less cash flow overall to pay, at least at the same rate. It is not something that we're just gonna let go for free, so we'll be discussing with them what type of alternatives there are to pay that remaining balance or, you know, various other things that we can negotiate over that give NHI value. You know, it would still probably take them a handful of years to pay that off if we just reset the rent and then, just have them re-revise the formula and have it pay it out. Because we're not looking to take every last dollar from them.

Speaker #1: It is not something that we're just going to let go for free. So we'll be discussing with them what type of alternatives there are to pay that remaining balance, or various other things that we can negotiate over that give NHI value.

Speaker #1: So , you know , it would still probably take them a handful of years to pay that off if we just reset the rent and then you just had them revise the formula and have it pay it out , because we're not looking to take every last dollar from them , they've still got to be able to make sure they pay their people and invest in the company .

Rich Anderson: Yeah.

Kevin Pascoe: They still got to be able to make sure they pay their people and invest in the company. We're gonna be mindful of that, but, you know, it's not gonna just go away. NHI will get value out of it.

Speaker #1: So we're going to be mindful of that. But it's not going to just go away. NHI will get value out of it.

Speaker #6: Kevin . That's that's April , right . The next one .

Rich Anderson: Kevin, that's April, right? The next one.

Speaker #1: That's correct .

Kevin Pascoe: That's correct.

Speaker #6: Okay . Lastly . So doc is drawing some attention to Crcs these days . I'm wondering , you know , when you think about your CCRC portfolio entrance free , free entrance fee portfolio , if you're seeing any more activity on the ground in terms of transactions and you know , renewed interest in the space , any comment there ?

Rich Anderson: Lastly, DOC is drawing some attention to CCRCs these days. I'm wondering, you know, when you think about your CCRC portfolio entrance free entrance fee portfolio, if you're seeing any more activity on the ground in terms of transactions and, you know, renewed interest in the space? Any comment there? Or maybe the answer is no, but-

Speaker #6: And maybe the answer is no. But.

Kevin Pascoe: Well, I think the answer for us is it's been a very good portfolio for us, and we, you know, very much appreciate working with our operating partners there. It did wonders through COVID and continued to perform very well. It's always been something that we've had an eye on. We are also mindful of our concentrations there and don't want to make sure we get upside down. We will continue to look at those opportunities. There's a few in the marketplace that we've been looking at. We're also gonna make sure we're rigorous with our underwriting criteria. It's on the table, but not necessarily a direct focus, but something that we'll approach opportunistically. We have some great operating partners that do that space very well, it's something I think we should continue to look at.

Speaker #1: Well , I think the answer for us is it's been a very good portfolio for us . And we , you know , very much appreciate working with our operating partners there .

Speaker #1: It did wonders through COVID and continues to perform very well. So, it's always been something that we've had an eye on. We are also mindful of our concentrations there and want to make sure we don't get upside down.

Speaker #1: So we will continue to look at those opportunities. There are a few in the marketplace that we've been looking at, but we're also going to make sure we're rigorous with our underwriting criteria.

Speaker #1: So it's on the table . But not necessarily a direct focus , but something that will approach opportunistically . We have some great operating partners that do that space very well .

Speaker #1: So, it's something I think we should continue to look at.

Speaker #6: Okay, all I got. Thanks very much.

Rich Anderson: Okay. All I got. Thanks very much.

Speaker #1: Thank you

Kevin Pascoe: Thank you.

Speaker #4: Thank you . As a reminder , ladies and gentlemen , if you have any questions or comments , please press star one on your telephone keypad .

Eric Mendelsohn: Thank you. As a reminder, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone keypad. Our next question is coming from Omotayo Okusanya with Deutsche Bank. Your line is live.

Operator: Thank you. As a reminder, ladies and gentlemen, if you have any questions or comments, please press star one on your telephone keypad. Our next question is coming from Omotayo Okusanya with Deutsche Bank. Your line is live.

Speaker #4: Our next question is coming from Amato Oxana with Deutsche Bank. Your line is live.

Speaker #8: Hi . Yes , good morning everyone . A quick question again on the Bickford Deferred rent when you talked about getting value for the remaining amount of deferred rent , could it be .

Omotayo Okusanya: Yes. Good morning, everyone. Quick question again on the Bickford deferred rent. When you talk about getting value for the remaining amount of deferred rent, could it be... I know in the past, you guys have kind of done this structure where, you know, rather than getting deferred rent, you just kind of lowered the value of any kind of acquisitions you were buying from Bickford. Could, could it be something like that?

Speaker #8: I don't know if you guys have kind of done this structure where, you know, rather than getting deferred rent, you just kind of lowered the value of any kind of acquisitions.

Speaker #8: You were buying from Bickford. Could it be something like that, that you guys continue to do to kind of make sure you get value for that remaining deferred rent?

Omotayo Okusanya: ... that you guys continue to do to kind of make sure you get value for that remaining deferred rent?

Speaker #9: Yes. What I say is right.

Kevin Pascoe: Sorry, Tayo, I missed part of your question there. You were asking what value we can get from Bickford in lieu of cash, is that the question?

Speaker #1: Sorry, I missed part of your question there. You were asking what value we can get from Bickford in lieu of cash.

Speaker #1: That's question .

Speaker #8: Yes , exactly . So I know in the past , you know , sometimes with deferred rent , rather than get the rent , you just lowered the valuation of of an acquisition that you were making from Bickford .

Omotayo Okusanya: Yes, exactly. I know in the past, you know, sometimes with the deferred rent, rather than get the rent, you just lowered the valuation of an acquisition that you were making from Bickford. Is that kind of more what we should expect to see?

Speaker #8: Is that kind of more of what we should expect to see?

Speaker #1: Well, I don't want to guide you to anything specifically. We have the reset coming up the 1st of April, so we'll be finalizing where rent sits going forward this month.

Kevin Pascoe: Well, I don't want to guide you to anything specifically. We have the reset coming up the first of April, so we'll be finalizing, you know, where rent sits going forward, this month.

Speaker #8: Okay .

Omotayo Okusanya: Okay.

Speaker #1: The but but yes , you're on the right track in terms of what value is out there . We we've built several buildings with Bickford and there's still another one remaining that could have some value like that .

Kevin Pascoe: Yes, you're on the right track. In terms of what value is out there, we've built, you know, several buildings with Bickford. There's still another one remaining that could have some value like that. There were some other developments that we had looked at in the past. There's just some reimagination of the portfolio, whether we prune a little bit. I wouldn't think those are going to be huge numbers of buildings.

Speaker #1: There are some other developments that we had looked at in the past. There's just some reimagination of the portfolio, whether we prune a little bit.

Speaker #1: I wouldn't think those are going to be huge numbers of buildings, but there is potentially some addition by subtraction that could help us get additional rent.

Omotayo Okusanya: Thanks a lot.

Kevin Pascoe: There is potentially some addition by subtraction that can help us get additional rent. You know, we have a number of options, but there is a formula in place in terms of how rent gets reset. That will be the baseline for what we think. We believe that we're gonna continue to get the aggregate number of rent that Bickford paid, and then some going forward. Just as a reminder, they paid $5.3 million last year, so they've been really moving down that repayment number at a steady clip, and we're happy with where we're at with them. We've got a little more work to do, but we're in a pretty good spot.

Speaker #1: So , you know , we're we have a number of options , but there is a formula in place in terms of how rent gets reset .

Speaker #1: That will be the baseline for what we think. We believe that we're going to continue to get the aggregate number of rent that Bickford paid, and then some going forward.

Speaker #1: And just as a reminder, they paid $5.3 million last year. So they've been really moving down that repayment number at a steady clip.

Speaker #1: And we're happy with where we're at with them. We've got a little more work to do, but we're in a pretty good spot.

Speaker #8: Gotcha. And then one follow-up with the NHC reset is, at some point there was also the option of going with another operator.

Omotayo Okusanya: Gotcha. One follow-up: with the NHC reset, I know at some point there was also the option of going with another operator and potentially looking at that option. Is that still on the table at this point, or are we kind of firmly just in the world of renegotiating with NHC?

Speaker #8: And potentially looking at that option, is that still on the table at this point, or are we kind of firmly just in the world of renegotiating with NHC?

Kevin Pascoe: I'd say that we're in a quiet period. We're in the thick of it right now, Tayo. I just have to be careful what I say.

Speaker #3: I say that we're in a quiet period. We're in the thick of it right now, so I just have to be careful what I say.

Kevin Pascoe: I'd say that we're in a quiet period. We're in the thick of it right now, Tayo. I just have to be careful what I say.

Speaker #8: Fair enough. All right. Thank you.

Omotayo Okusanya: Fair enough. All right. Thank you.

Speaker #3: Thanks , tayo

Kevin Pascoe: Thanks, Tayo.

Speaker #4: Thank you. As we have no further questions on the lines at this time, I would like to turn the call back over to Mr. Mendelsohn.

Operator: Thank you. As we have no further questions on the lines at this time, I would like to turn the call back over to Mr. Mendelson for any closing remarks.

Speaker #4: For any closing remarks .

Speaker #3: Thanks, everyone, for joining today and for your interest, and we'll see you at a conference sometime soon.

Kevin Pascoe: Thanks, everyone, for joining today and for your interest, and we'll see you at a conference sometime soon.

Operator: Thank you. Ladies and gentlemen, this does conclude today's call, and you may disconnect your lines at this time, and we thank you for your participation.

Q4 2025 National Health Investors Inc Earnings Call

Request a DemoDemo

NHI

Earnings