National Health Investors, Inc. (NYSE:NHI) Q4 2025 Earnings Call Transcript

National Health Investors, Inc. (NYSE:NHI) Q4 2025 Earnings Call Transcript February 27, 2026

Operator: Greetings, and welcome to the National Health Investors, Inc. Fourth Quarter 2025 Earnings Webcast and Conference Call. At this time, all participants are on a listen-only mode, and a question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, 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.

Dana Hambly: Thank you, and welcome to the National Health Investors, Inc. conference call to discuss the results for 2025. On the call today are D. Eric Mendelsohn, President and CEO; Kevin Carlton Pascoe, Chief Investment Officer; John L. 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. 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 12/31/2025. 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 will now turn the call over to our CEO, D. Eric Mendelsohn.

D. Eric Mendelsohn: 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. 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 fourth quarter 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.

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 fourth quarter alone, setting the company up nicely for strong acquisition growth in 2026. In fact, we have already closed on one deal this year for $105.5 million, our largest SHOP acquisition to date. 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 is 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 the fourth quarter, 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. Meanwhile, demand is accelerating as the first baby boomers turned 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 are 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 have 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. 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 have been overwhelmed by the interest in partnering with NHI which creates a larger talent pool for us and lowers new investment risk. 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. This is very conducive to supporting growth. NHI’s financial strength is 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. 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. 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 two-year CAGR of approximately 6%. Further, this year’s guidance includes approximately $111 million of dispositions of nonstrategic 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%. From a big-picture perspective, NHI is in 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 are as enthusiastic as we have ever been. Before I turn the call over to Kevin, I want to welcome our newest board member. We announced this week that Lily Donahue 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. She brings an extensive and diverse set of skills to the NHI Board. 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 will now turn the call over to Kevin. Kevin?

Kevin Carlton Pascoe: Thank you, Eric. Starting with investment activity and the pipeline, NHI had a great year in 2025 with $392.4 million in investments at an 8.1% average initial yield. As Eric noted, the fourth quarter 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 nine properties in Kentucky, South Carolina, and Tennessee. We expect an initial NOI yield for the first year in the high single-digit range 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.

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 will 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 fit or does not fit within NHI’s strategic outlook.

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. Turning to our operating performance, total SHOP NOI increased by 124.9% compared to 2024 due to the transition of seven properties on August 1 and the acquisition of four properties on October 1. 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. For the year, our same-store NOI increased by 7.6%, and 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 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. 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, stable occupancy, and EBITDARM coverages. Cash lease revenue increased approximately 7.2% year over year driven primarily by acquisitions, successful transition of properties formerly operated by SLM, and annual escalators. Deferral collections of $1.9 million actually decreased by 17% compared to the fourth quarter 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 fourth quarter, and they had an outstanding balance of $7.6 million at December 31. We continue to expect that Bickford’s cash rental revenue will increase in total dollars at the April 1 rent reset, and we will be able to provide more details on the next conference call. The pipeline continued to be active with triple net senior housing deals as we do not 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 is a five-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 potentially triggering. That concludes my remarks, and I will now turn the call over to John to discuss our financial results and guidance. John?

John L. Spaid: Thank you, Kevin, and hello, everyone. This morning, I will 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. I will be using average diluted common shares for all per-share results. For the quarter ended 12/31/2025, 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 noncash gain related to derivative accounting for forward equity sales agreements, as well as a $5 million gain on sales of real estate. For the twelve-month period ended 12/31/2025, 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. 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. Several one-time items helped us achieve these strong normalized FFO results. During the year, we recognized gains from equity method investments of $3.7 million, up from $400,000 in the prior year. 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 noncash write-offs of straight-line rents receivable and excludes noncash rental income related to operations transfers attributable to the third-quarter SHOP transition properties, 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 million and $232.1 million, respectively. As Kevin noted, NOI from our 26-property SHOP segment for the quarter ended December 31 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 fourth quarter but was sequentially up 8.7% from the third quarter.

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. 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. I will 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 were 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 $400,000.

During the quarter, we closed on new investments totaling $217.5 million. 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. At 12/31/2025, we have 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 ATMs assuming the settlement of our forward equity sale agreements. 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 attributable to the cash on our balance sheet, excess revolver, forward equity, and additional ATM capacity. We are also announcing today a change in our leverage policy. 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. Our lower leverage policy reflects the importance we place on our investment grade rating, and also reflects the changes to our debt service coverage ratio 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 03/31/2026, payable 05/01/2026. Last night, we introduced our full-year 2026 guidance, and I previously touched on some of our SHOP expectations. For 2026, we expect NAREIT FFO and NFFO per share at the midpoint 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, at an average NOI yield of 7.8%, comprised of approximately 70% 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 12/31/2026.

Negotiations are ongoing; we expect to have more to report as the year progresses. Capital markets 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 markets 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. So once again, thank you for joining our call today. That concludes our prepared remarks. Operator, please open the lines for questions.

Q&A Session

Operator: Thank you. At this time, we will be conducting our question-and-answer session. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question is coming from Farrell Granath with Bank of America.

Farrell Granath: 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 expect double digits in 2026 in that same-store portfolio. So curious if this initial guidance is reflective of just what you are seeing today? And how should we think about the timing of these corrective measures, which could potentially provide upside to that guidance?

Kevin Carlton Pascoe: Sure. This is Kevin. I would tell you overall, the way we conduct ourselves is we want to deliver something that we feel very confident that we can achieve, and there should be opportunity within the portfolio from there. So it is a bit of an under-promise, over-deliver. We do have some things that are going to 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 nearly 100% occupied. So that will be additive. Those units do not come on until May, and then we expect that it will grow through the balance of the year. We are not expecting everybody to move in all at once. We have got a number of things that we are focused on with the portfolio. We are focused on 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. So we do expect better results in the second half of the year.

Farrell Granath: Great. Thank you. And also just touching on your SHOP pipeline, especially seeing the momentum that you picked up in the second half of ’25 and then now what we have seen under LOI and in the pipeline for ’26. Is it fair to expect that momentum can continue going forward into ’26 at the level that you are potentially able to achieve now?

Kevin Carlton Pascoe: That is our expectation. We give you guidance based on what we have and what we feel like we have reasonable visibility into and what we can execute on. But as you noted, we outpaced the expectation that we set at the beginning of last year and we are working to do the same this year.

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

Austin Todd Wurschmidt: Just, Eric, I wanted to go back to NHC, and I am wondering if it feels like the lease negotiations with the group are moving forward and maybe more importantly, constructively moving forward? And what is the probability that you think you will reach a resolution in the next, you know, three to nine months?

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

Austin Todd Wurschmidt: Understood. Appreciate that. And then from the SHOP challenges that you guys have faced, and you have talked about where you would have expected annualized NOI to restabilize a couple of years ago. Has that changed your approach to either underwriting new deals or how you are structuring management agreements to provide any added flexibility moving forward?

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

Austin Todd Wurschmidt: Got it. And then just last one. Eric, you had highlighted the targeting of secondary suburban markets for deals. What is the long-term growth profile for those markets just given the demand and affordability? And how would you characterize the labor pool for the markets that you are focused on?

D. Eric Mendelsohn: Thanks. 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. But it is no secret that there is a lot of migration from coastal areas to places like Tennessee and other places in the Midwest where housing and cost of living are more affordable. So for the time being, as we look at Bickford and other Midwestern operators, they are able to staff their buildings with full-time employees and not have to utilize any agency labor.

Austin Todd Wurschmidt: And just from a growth profile perspective for those types of assets, how do you think about that over time?

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

Austin Todd Wurschmidt: Okay. Thanks for the comments.

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

Juan Sanabria: Good morning. Just hoping you could help us think about the SHOP growth and the guidance for ’26. Recognizing there are some struggles with the ex-Holiday portfolio, can you compare and contrast what is not in the same-store pool and how that is performing versus the same-store pool, and kind of the expectations on occupancy and rate so we can get a more holistic picture rather than just focus on same-store?

Kevin Carlton Pascoe: Sure. This is Kevin. I will try and address your question—if I miss something, please re-ask. When we are looking at what is not in same store right now, recall that two of them are transitions: one transitioned from triple net to SHOP, and another is a transition to a new operator. We did have some transitional impacts through the second half of 2025, and on the newest we will have some transitional impacts that we experience in 2026. There has only been one of those that retained the current manager, and that group is performing to expectation. We feel very good about where they are at from an operations standpoint. Overall, we are making sure they are putting in the right systems and people. We feel like they have done a very good job of that.

They are building their funnels. We are able to pass through some rate increases, but we are doing that responsibly to make sure that we are not losing occupancy while we go through these transitions. If we look at this, it is more of a forward look—there might be a little bit of noise in the near term. Overall, the transitions have gone pretty well. Pulling one out, the transition we did last year performed better than expectation through the second half of the year. We just finalized our budgeting process and have some solid growth expectations for them this year. You will see those roll into the same-store starting fourth quarter of this year. So you will have a little more incremental visibility on that piece here in the next couple of quarters.

Juan Sanabria: That is helpful. And maybe going back to Austin’s question in a different way: Holiday is maybe a unique situation, but what have you learned that you think prepares you better to deal with the growing pains in SHOP or under transitions, etc., that should give us confidence about investment activity in SHOP as you look to grow pretty significantly with the compelling supply/demand opportunity?

D. 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 Holiday sold to Atria and Welltower. We have put a lot of CapEx in those buildings. We have changed managers. And as we compare them to the same Holiday buildings that are at Ventas and Welltower, from what we are able to surmise, we are doing as good or better than they are with those buildings. Our new SHOP portfolio, the not-same-store group, I feel very positive on. I would also point out that it is assisted living and memory care, not just independent living. And these buildings are performing well from the get-go. 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.

As Kevin said, I think you will start to see our same-store perk up in the third and fourth quarter when the one Holiday building has units that come online and when the Sinceri buildings become same store.

Juan Sanabria: And just last question for me. How should we think about the pricing power and the ability to drive rate in some of these secondary markets? I am not sure about the affluence around some of these assets or the ability to drive pricing with the target customers.

Kevin Carlton Pascoe: Sure. This is Kevin again. Every market is different. We are underwriting the local market fundamentals of each building that we are looking at, so each one is different and it is hard to generalize. One thing I will say is based on the margins where they are at, if you can increase rates 5% a year and hold your expenses to less than four, that is going to be 7% to 8% growth. We think that is very achievable, and we think there is potential for additional growth beyond that on the revenue line in a lot of these. We like our chances here. We are building a very good portfolio. We like our operating partners and their ability to pass through those increases, if not more. That is kind of in line with what we have seen with our triple net portfolio as well. So I think we can do as good or better. As John mentioned in his comments, we can continue to get some margin expansion as we grow the SHOP segment. That is going to add additional growth for us.

Juan Sanabria: Thanks for that. Appreciate it.

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

William John Kilichowski: Good morning. This is Jesus on for John. Thanks for taking the question. Just to switch gears a little bit on the $111 million of dispositions in guidance. It looks a little bit higher than what we were expecting. Can you walk us through what is driving the higher volume, specifically what assets are being sold? And is it primarily capital recycling going to SHOP, or including other non-core assets?

Kevin Carlton Pascoe: This is Kevin. It is 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 are not relationships we are going to grow. They are triple net in nature. And they are intensive from an asset management standpoint. We feel if we can move the capital to the relationships where we are going to have additional growth—not only from a triple net or a SHOP deal that we do from the proceeds, but also where we are going to get additional volume out of that customer—and be less intensive from an asset management standpoint, that gives us a little more efficiency. We have hired a fair amount of folks for asset management.

We are building out our bench and our analytics competencies. We feel good about where we are at, but we need to make sure we are focusing them on the pieces that are going to be meaningful to NHI. And that is really what these dispositions are born out of. Generally, we like to hold on to income, but I think this is the right decision to make sure that we are focusing our team.

William John Kilichowski: That is great. And just a quick follow-up on NHC to the extent you are able to comment. If you do renew the lease, how does that impact what you could reposition or sell versus earlier discussions where you were talking about rotating into SHOP from this portfolio? Would it be an all-or-nothing scenario?

D. Eric Mendelsohn: Could you ask that again? So if we do renew the lease, then what?

William John Kilichowski: How does that impact what you could reposition versus sell, I guess? Because you were talking about some dispositions potentially being involved with this and rotating some capital.

D. Eric Mendelsohn: Fair question. If we were to sell some of the buildings, those proceeds would be redeployed, and the answer is yes, it would be redeployed into SHOP.

William John Kilichowski: Thanks, guys.

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

Rich Anderson: Hey, team. Thanks. Good morning. So the 7% to 8% SHOP same-store NOI guidance—just to clarify, that is still just the 15 legacy Holiday assets. Is that correct?

Kevin Carlton Pascoe: Yes, Rich. Yes, that is correct.

Rich Anderson: Okay. And I think you said 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 address some of the issues that are going on in the legacy portfolio. Is that the right way to think about it?

John L. Spaid: Yes.

Rich Anderson: Okay. I am obviously leading up here. So at 9.3% of the portfolio today, SHOPs as of the end of the year, what is your target in terms of how big SHOP can become as a percentage of the total? And do you still think, from a growth perspective—because you are seeing SHOP growth approaching 20% from some of your larger peers. That has a lot to do with occupancy lift. Is your same-store offering more of a rate growth versus expense growth phenomenon and less about occupancy lift? How are you approaching the same-store profile of SHOP going forward and how big it could be in a couple of years from now?

D. Eric Mendelsohn: In terms of growth of NOI for the company, we have told people that last year we doubled from five to roughly 10. And this year, we could easily double that again to 20, with an eye towards getting it up to 30 or beyond in terms of percentage of SHOP. I still feel like that is achievable and on track. I understand we have some catching up to do, but as you can see by our pipeline numbers, it is easier to find new deals when you are looking for SHOP and RIDEA, not so much with leases. In terms of same-store growth, I think the opportunity is one of margins. We see on the Holiday portfolio a lot of margin opportunity, and on the new not-same-store portfolio, rate opportunity and, frankly, experienced operators taking over from mom-and-pop operators who are not getting the margins that they could.

Rich Anderson: Okay. So it is a—again, a lot of your peers are getting this occupancy lift, which is not a forever situation. Yours is more of a stabilize and margin story, and something in the 10% range on a foreseeable future type of—

Kevin Carlton Pascoe: That is fair.

John L. Spaid: Okay, Rich. This is John. Let us just be honest about the makeup of our SHOP portfolio. It was comprised of the Holiday assets, which Eric touched on before. It is also comprised of these assets that we transitioned away from Discovery to Sinceri. That was the whole point of my discussing the return on invested capital that we are currently experiencing. We strongly believe in the potential of these assets. We have to unlock the margin to improve that, and that is why we are talking about that. And at the same time, growth will help us improve our metrics over time as well.

Rich Anderson: Switching gears. On the outlook for this year, and the $7.6 million of remaining Bickford rent repayment left. Do you expect that all to be paid back in the next year or two? What is the cadence of that payback?

Kevin Carlton Pascoe: What I would have you think about is once the rent reset happens, there is less cash flow overall to pay at least at the same rate. It is not something that we are just going to let go for free. We will 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. It would probably still take them a handful of years to pay that off if we just reset the rent and then revise the formula and have it pay out. We are not looking to take every last dollar from them. They still have to make sure they pay their people and invest in the company. We are going to be mindful of that, but it is not going to just go away. NHI will get value out of it.

John L. Spaid: Kevin, that is April, right? The next one?

Kevin Carlton Pascoe: That is correct.

Rich Anderson: Lastly, DOC is drawing some attention to CCRCs these days. When you think about your entrance fee CCRC portfolio, are you seeing any more activity on the ground in terms of transactions and renewed interest in the space? Any comment there?

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

Rich Anderson: Okay. Got it. Thanks very much.

Kevin Carlton Pascoe: Thank you.

Operator: Thank you. As a reminder, ladies and gentlemen, if you have any questions or comments. Our next question is coming from Omotayo Tejumade Okusanya with Deutsche Bank.

Omotayo Tejumade 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 done this structure where rather than getting the rent, you just lowered the value of any acquisitions you were buying from Bickford. Could it be something like that that you continue to do to make sure you get value for that remaining deferred rent?

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

Omotayo Tejumade Okusanya: Yes. Exactly. So I know in the past, 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 more of what we should expect to see?

Kevin Carlton Pascoe: I do not want to guide you to anything specifically. We have the reset coming up April 1, so we will be finalizing where rent sits going forward this month. But yes, you are on the right track in terms of what value is out there. We have built several buildings with Bickford. There is 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 is some reimagination of the portfolio, whether we prune a little bit—I would not 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. We have a number of options, but there is a formula in place in terms of how rent gets set.

That will be the baseline. We believe that we are going to continue to get the aggregate number of rent that Bickford paid and then some going forward. And just as a reminder, they paid $5.3 million last year. They have been really moving down that repayment number at a steady clip. We are happy with where we are at with them. We have got a little more work to do, but we are in a pretty good spot.

Omotayo Tejumade Okusanya: Gotcha. And then one follow-up. With the reset, 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 firmly in the world of renegotiating with NHC?

D. Eric Mendelsohn: I would say that we are in a quiet period. We are in the thick of it right now, Tayo. I just have to be careful what I say.

Omotayo Tejumade Okusanya: Fair enough. Alright. Thank you.

Kevin Carlton Pascoe: Thanks, Tayo.

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. Mendelsohn for any closing remarks.

D. Eric Mendelsohn: Thanks, everyone, for joining today and for your interest, and we will 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. We thank you for your participation.