National Health Investors (NHI) Q1 2026 Earnings Call - Strategic Pivot to SHOP Accelerated by NHC Sale

Operator: Good day everyone. Welcome to the NHI First Quarter 2026 Earnings Webcast and Conference Call. At this time, all participants have been placed on a listen only mode, and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Dana Hambly. The floor is yours.

Dana Hambly, Moderator/IR, National Health Investors (NHI): Thank you and welcome to the National Health Investors conference call to review results for the 1st quarter of 2026. 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’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. 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, and Form 10-Q for the quarter ended March 31, 2026. 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.

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Good morning, and thank you for joining us today. NHI delivered a solid start to 2026, with first quarter results exceeding our internal expectations across Nareit FFO, Normalized FFO, and FAD. These results reflect continued momentum across the portfolio and the benefits of the investments we’ve made over the past year, particularly within our SHOP portfolio, which continues to scale rapidly and contribute meaningful growth. At the same time, we’re updating our full year guidance, which I want to address upfront. The primary driver of this change is the recently announced agreement to sell the NHC portfolio for $560 million. This transaction advances our capital recycling strategy, increases our concentration in private pay senior housing, and enhances our balance sheet, providing significant liquidity to reinvest into higher growth opportunities.

While we believe this is the right strategic decision for the long term, the timing of the transaction and redeployment of capital creates near term earnings pressure, as reflected in our updated guidance. From an operating standpoint, we continue to make progress expanding our SHOP platform. Invested capital through the first quarter increased more than 100% over the past year. Recent acquisitions and transition properties are performing well and in aggregate are tracking ahead of our initial expectations. We also announced a $107 million acquisition for seven properties in Colorado last night. On a pro forma basis and including the pending NHC and other assets sales, our SHOP investment increases to approximately 24% of our total portfolio and over 15% of annualized NOI. We have now closed on investments of over $212 million in 2026.

We expect to defer a significant portion of capital gains associated with the pending NHC asset sale, which has a basis of less than $15 million. Based on our active pipeline and other tax planning strategies, we expect to further mitigate these gains. While we have good overall SHOP momentum, the legacy Holiday same store performance continues to be below our expectations. As a result, we’ve adjusted our full year same store SHOP NOI growth to a range of 1%-3%. This impacts our FFO per share guidance by less than 1%. The 11 non-same store properties that we transitioned and acquired since the first quarter of last year contributed $4.3 million to NOI, representing 5.2% sequential growth from the fourth quarter of 2025. We believe these assets are more indicative of the underlying organic SHOP growth potential.

The broader strategic outlook for NHI remains very compelling. We’re confident that the steps we’re taking today are the right ones to strengthen the company and enhance our long-term growth profile. We are actively reshaping the portfolio to increase our exposure to private pay senior housing, where we see the most attractive risk-adjusted returns. The pending NHC leased portfolio disposition accelerates that shift to approximately 80% of annualized NOI. Overall, the senior housing industry fundamentals present significant organic and external tailwinds. Demand is accelerating and new supply is stagnating. We are working on several initiatives to improve internal growth, and we continue to add depth to our asset management platform through experienced new hires and investments in technology to increase scale advantages. The pipeline is robust, and we remain disciplined in our underwriting and capital allocation.

The capital recycling positions the pro forma balance sheet with leverage at less than 3 times net debt to adjusted EBITDA, giving us substantial flexibility to pursue accretive acquisitions. Taken together, we believe these factors position NHI to deliver solid long-term FFO per share growth and create sustained value for stockholders. Before I turn the call over to Kevin, I wanna say a few words about John Spaid, who recently announced that he will be starting his well-earned retirement on July first. John joined NHI as employee number 13 in 2016, answering my call to bring greater financial acumen in managing NHI’s balance sheet and capital market relationships. His leadership has NHI well-positioned with an excellent balance sheet and ample access to capital that should fuel our long-term growth strategy.

On behalf of the entire NHI community and all of our stakeholders, I congratulate John on a great career and wish he and his wife many years of great golf, travel, fine dining, and good living. Thank you, John. I’ll now turn the call over to Kevin to discuss our business development and asset management activities. Kevin?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Thank you, Eric. Beginning with business development, NHI is off to a strong start with announced year-to-date SHOP investments of $212.4 million. This includes a 7-property portfolio of assisted and independent living assets in Colorado, which we closed on May 1st. The portfolio has 532 units, occupancy in the high 80% range, and RevPOR of approximately $5,300. We expect an initial NOI yield for the 1st year of approximately 8.3% and 7.8% after routine CapEx. Properties are transitioning management to Generations, which is an existing lessee of ours in Colorado, who we have been looking for opportunities to grow with since our initial investment in 2025. We currently have $20.3 million under signed letters of intent and are evaluating an active pipeline valued at $560 million.

We are also in discussions on multiple larger portfolio opportunities and have over $200 million in outstanding LOIs. This pipeline continues to give us confidence that we can meet or exceed last year’s investment total. Our external growth strategy remains focused on private pay senior housing assets across both SHOP and triple net structures while maintaining flexibility for future SHOP transitions. Though pricing has tightened over the past year, deal volume has accelerated, and we believe we are well-positioned given our excellent reputation in the industry, strong access to capital, and ability to execute. As a part of our ongoing portfolio management efforts, we completed the disposition of 4 properties with 4 operators for net proceeds of approximately $53.4 million. In addition to the pending NHC transaction, we have 3 other properties under contract for disposition, representing approximately $58 million of expected net proceeds.

Turning to our operating performance, total SHOP NOI increased by 188.1% compared to the first quarter of 2025, driven by the transition and acquisition of 20 properties. Same-store NOI on the 15 legacy Holiday properties declined 2.4% year-over-year to $3 million and represents less than 4% of the company’s annualized NOI. The first quarter NOI was in line with our expectations. Occupancy declined throughout the quarter, prompting the change to the full year growth outlook. While the financial impact is limited, we are not satisfied with the performance and are evaluating a range of strategic alternatives for these assets and will provide further detail as decisions are finalized. The non-same store portfolio, including the Colorado acquisition, now includes 27 properties. The estimated annualized NOI of approximately $33 million represents 73% of total SHOP NOI.

As Eric noted, the non-same store properties generated solid growth from the fourth quarter, and our updated guidance reflects an increased contribution relative to our initial forecast. For these newer assets and future acquisitions, we continue to expect near-term NOI growth in the high single-digit to low double-digit range, supporting projected rates of return in the low to mid-teens. Across the triple net portfolio, we continue to see stable performance with no rent concessions and generally steady occupancy and EBITDA coverage. Cash lease revenue increased approximately 7.7% year-over-year, driven primarily by acquisitions, NHC percentage rent, and the annual percentage rent true-up, as well as annual escalators. This was partially offset by the transition of 7 properties to SHOP on August 1st. EBITDA coverage improved across our major asset classes.

For the 12 months ended December 31st, 2025, senior housing and medical coverage excluding NHC were 1.61 and 2.53 respectively. Regarding Bickford, we reset the leases to fair market value on April 1st. The new structure includes base rent of $38.4 million, which is approximately $3.2 million above the prior base rent, and annual escalators of 2%-3%. In addition, we will receive conditional rent based on a revenue-driven formula similar to the structure previously used for deferral collections. The pro forma EBITDARM coverage on the new base rent at December 31st was 1.55 times. Given this elevated coverage, we expect total cash collections from Bickford, including base and conditional rent, to increase modestly under the new lease.

The conditional rent component extends through the life of the lease and allows NHI to participate in the potential upside as performance continues to improve. That concludes my remarks, and I’ll now turn the call over to John to discuss our financial results and guidance. John?

John Spaid, Chief Financial Officer, National Health Investors (NHI): Thank you, Kevin, and hello, everyone. This morning, I’ll provide details on our first quarter results and update you on our financial outlook for 2026. I’ll be using average diluted common shares for all per-share results. For the quarter ending March 31, 2026, our net income per share was $0.82, an increase of 10.8% from the prior year’s first quarter. Contributing to our strong Q1 performance was the accretive growth attributable to the $413 million in new investments the company placed in service since the beginning of the second quarter last year. Also contributing to the quarter was an above-expectation prior year NHC percentage revenue rent true-up and a larger-than-expected improvement in first quarter NHC percentage revenue rent, which resulted in a $1.3 million higher cash rent for the quarter compared to our February guidance expectations.

Also recall that in the prior year first quarter, we recognized $1.2 million in transaction expenses and $0.3 million for proxy contest expenses. Our Nareit FFO and Normalized FFO results per share for the first quarter compared to the prior year period increased 7.9% and 7% respectively to $1.23 per share. FAD for the first quarter compared to the prior year period increased 11.6% to $62.5 million. Interest expense for the first quarter was up 4.9% year-over-year due to higher average interest rates on the company’s debt. Cash G&A for the first quarter was up 31% to $5.6 million compared to $4.3 million in the first quarter last year as the company continues to ramp its SHOP growth strategy.

Weighted average common diluted shares were up 5.8% to 48.5 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. During the quarter, we closed on new investments totaling $105.5 million, subsequent to the quarter’s end, we announced an additional investment for $106.9 million in seven senior housing SHOP properties with an existing operator. At March 31, 2026, we had remaining escrowed forward equity proceeds of approximately $44.2 million available to us in exchange for the future delivery of 643,000 common shares at an average price of $68.81 per share.

We ended the quarter with $24.9 million in cash on our balance sheet and $391 million in revolver capacity. During the first quarter, we renewed our shelf registration statement on file with the SEC and concurrently entered into new equity ATM distribution agreements, bringing our ATM capacity back up to $500 million. Our balance sheet ended the first quarter in great shape. Our net debt to adjusted EBITDA was 4x for the quarter and at the midpoint of our 3.5x to 4.5x leverage policy. Our available liquidity, excluding the proceeds from future dispositions, was approximately $960 million attributable to the cash on the balance sheet, excess revolver, forward equity, and additional ATM capacity.

We have 2 debt maturities in 2026 and 2027 totaling $225 million and no other maturities until our revolver facility matures in 2028. 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 stockholders of record June 30th, 2026, and payable August 7th, 2026. The company expects to offset the expected gains due to our announced dispositions utilizing IRC Section 1031 like-kind exchanges, including reverse 1031 exchanges, to the greatest extent possible. At this time, the company’s final year-end 2026 taxable income and capital gains are not yet determinable and may not be fully determinable until the fourth quarter. Last night, we updated our 2026 full-year guidance.

We expect GAAP net income at the midpoint to be $14.37 per share, reflecting the significant gain associated with the pending NHC lease portfolio disposition. We expect NAREIT FFO and NFFO per share at the midpoints to be $4.77 per share, or up 2.6% and down 2.9% compared to 2025 respectively. We expect total FAD at the midpoint to grow 4.1% to $242.2 million.

Our full-year 2026 guidance includes $180 million in additional future investments and an average NOI yield of 7.8%, comprised approximately 60% in SHOP investments, which we believe is a conservative assumption for the remainder of the year. The guidance includes $392 million in new announced and unidentified 2026 investments at an average NOI yield of 8%. The guidance includes the impacts associated with our recently completed and expected dispositions for 6 properties, as well as the 35 property NHC portfolio. Our 2026 guidance 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 the changes in the timing and the amount of our investments and dispositions. I’d like to conclude by thanking everyone I’ve worked with during my 10 years at NHI. I especially want to thank Eric and our board of directors for the opportunity to serve as CFO and for their trust. I’m very proud to be leaving the company with a balance sheet in solid shape and well-positioned to support the company’s future. Once again, thank you for joining the call today. That concludes our prepared remarks. With that, operator, please open the lines for questions.

Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on a speakerphone to provide optimum sound quality. Please hold for just a few moments while we poll for questions. Your first question is coming from Farrell Granath with Bank of America. Please pose your question. Your line is live.

Farrell Granath, Analyst, Bank of America: Good morning. This is Farrell Granath. I first wanted to ask about the $560 incremental pipeline that you’re expecting going forward. I know when this initially was announced, we had received color that it was to be paying down debt. Then based on some of your comments, it seems that you’re receiving or are able to be underwriting or looking over more deals. Can you give us a little bit more color on the percentage or breakdown of SHOP versus leased or leased with a revenue participation within that $560? If that has actually started to increase after the announcement of or likelihood of being able to close deals after the announcement of the NHC lease.

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Sure. Good morning. This is Kevin. I would say our pipeline’s been pretty consistent. It is fairly robust right now, predominantly senior housing, which isn’t a big change. That’s what we’ve been looking at this whole time. I think we just have to be open with the structure that we use, and mindful of, you know, the property or the underlying assets, their ability to have growth, and then making sure that we make an assessment, is that appropriate for a lease or a SHOP transaction? I think we want to do more SHOP, and that’s gonna be an emphasis for us.

There might be a way for us to do, if it is a lease, maybe there’s a way to do a transition into the future, but we’re remaining flexible on structure at the moment and just making sure that we understand the underlying fundamentals of the property and, you know, what kind of growth profile we can get.

Farrell Granath, Analyst, Bank of America: Okay. Thank you. I also wanted to ask about the Legacy Holiday assets. I know you had commented, that they haven’t been performing within expectation. What is driving that underperformance? Is it simply from flu seasonality, or is it from other comments that we had heard prior quarters due to transition in staff or other items?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): There is some modest seasonality. That said, they did hit our projection for the first quarter. The issue that we’ve run into really is relegated to just a handful of properties and some census loss at those, which made us kind of reset expectations for growth. We have a couple others that we’re doing some extensive CapEx projects that ran into some delays that are gonna delay kind of the lease up there. We wanted to make sure we were resetting expectations for something that we felt very confident in versus, you know, trying to adjust later in the year. I still think our forecast is very manageable, but frankly disappointing. You know, like I said, the problem is fairly isolated.

Again, as we’ve talked about in prior calls, we’re just talking about a very small portfolio, which is, you know, is what’s moving the percentage here probably more than it should. You know, it affected our, you know, it’s less than 4% for us.

Farrell Granath, Analyst, Bank of America: All right. Thank you very much.

Operator: Your next question is coming from Juan Sanabria with BMO Capital Markets. Please pose your question. Your line is live.

Juan Sanabria, Analyst, BMO Capital Markets: Hi, good morning. Maybe a question for John, and congratulations on your upcoming retirement. Just wanted to on the guidance, delve a little deeper into the driver. How much of the decrease in FAD per share was as a result of the NHC sale? Just to confirm, you’re only assuming you reinvest an incremental $180 million and nothing over and above that. Is that correct?

John Spaid, Chief Financial Officer, National Health Investors (NHI): Well, depends on your definition of reinvestment, Juan. This is John. There’s a lot of moving parts. First, the proceeds. The proceeds are gonna you know, initially there’s gonna be well over $200 million that will reduce debt. Those $200 million are tied to reverse 1031 exchanges that we’ve already set up. There’ll be a portion of those proceeds that we’ll have to set aside, we can’t touch for a period of time with intermediaries and 1031s. Those proceeds will be reinvested at the rate that the intermediaries can provide us. There’s some drag there. We’ve already been making investments ahead of our original guidance.

You know, this investment we announced today was ahead of the original guidance. The $180 million in additional guidance increases our, you know, guidance that we gave to you for the total amount that we thought we’d be able to invest this year. We still think that’s a very conservative number. You know, it’s a little bit of, yes, NHC transaction in a variety of different ways did pull down our guidance. However, we’ve had some outperformance on investments that have, you know, offset some of that. The net effect has of the NHC transaction was to pull down our guidance. I hope that helps.

Juan Sanabria, Analyst, BMO Capital Markets: It does. Thank you. Can I just on the NHC transaction, have you had any third parties reach out looking at potentially topping the bid by NHC to repurchase the assets?

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Hey, Juan, this is Eric. I’ll take that question. If a third party reaches out in writing, we will issue a press release about that. Until then, we’re not ready to disclose anything.

Juan Sanabria, Analyst, BMO Capital Markets: Thank you very much.

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Thanks, Juan.

Operator: Your next question is coming from Austin Wurschmidt with KeyBanc Capital Markets. Please pose your question. Your line is live.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Thanks. Good morning, everybody. Eric or Kevin, in the prepared remarks, I think you indicated you have over $200 million in outstanding LOIs for multiple larger portfolios. I guess given the reluctance to give too much detail on larger portfolio opportunities, just, you know, given the difficulty predicting whether you’ll transact, I guess, how far along are you in negotiating these deals? You know, how competitive is the process? Should we view your willingness to openly discuss these deals as maybe having a higher probability of closing?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Sure. This is Kevin. I would tell you that we’re willing to talk about them because we feel like there is ample opportunity out there, whether we end up landing these deals or some other ones that are in the pipeline. I also don’t feel like our pipeline number we gave is indicative. I also don’t wanna give a bit of a head fake by quoting, you know, ridiculously large number. We’re reviewing a large amount of opportunities, which generally when we describe it, does not include 100-plus million-dollar portfolio deals that we’re looking at. We wanted to try and give a little bit of flavor for what the pipeline does look like. That said, I feel like we have a solid chance at landing these, which is why we’re willing to talk about them, but nothing’s for certain until it’s closed.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Just to be clear, these portfolio deals are outside of the $560 million that you put in the release last night, correct?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): That’s right.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: All right. Thanks. Just one more. You know, recognizing that the same-store SHOP pool is small, and this was sort of structured with a group of underperforming assets, you know, several years ago, you know, coming out of the COVID period, but how does this group of assets compare to the assets you’ve recently acquired and are underwriting today, just to give confidence, you know, in maybe the future performance versus what you’ve seen happen within the same-store pool the last couple of years?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Sure. This is Kevin again. What we’re looking at now is generally newer assets, generally has some element of healthcare associated with it versus the independent. That said, I don’t want to make it such that independent is a negative. I think having some sort of continuum or combination is helpful though, and that’s generally what we’re looking at more now, is where you have an IL, AL or ILAL memory or, you know, some combination thereof. We feel like there’s better pricing power on that side and be able to add the element of care and create a bit of a continuum. Generally, it’s going to be newer and have the continuum, I’d say that. Really what we’re looking at is When we look at the growth profile, you know, we’re not looking at deep value adds.

I would characterize the Holiday transition as more of a turnaround. That’s not really where we’ve been playing in the sandbox right now. It’s just a little bit different profile.

Austin Wurschmidt, Analyst, KeyBanc Capital Markets: Just last follow-up there is just, have you changed your underwriting at all to drive some additional success in landing these recent deals within SHOP? That’s all for me. Thank you.

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Sure. I would suggest to you that the market’s very competitive, so we’re trying to meet the market and make sure that we’re making good decisions based on data and that we understand the markets that we’re going into and what our operators’ competencies are as they manage these assets and finding the right fit between the two. I think our underwriting has evolved over time and, you know, feel confident in our ability to execute here.

Operator: Your next question is coming from Richard Anderson with Cantor Fitzgerald. Please pose your question. Your line is live.

Richard Anderson, Analyst, Cantor Fitzgerald: Thanks. Good morning. I think I heard a number, 24% SHOP. Is that pro forma for the NHC sale? I’m curious what that number would be after, you know, deployment of the proceeds, where we’re looking at when all the dust settles from the transaction.

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Sure. Hey, Richard, this is Kevin. That is a pro forma after NHC. You know, what the mix looks like is still to be determined. It just depends on what level of SHOP versus triple net we redeploy the capital into. You know, I think it’s safe to say that, you know, looking into the future, that SHOP percentage is going to continue to increase.

Richard Anderson, Analyst, Cantor Fitzgerald: Curious as to why it’s only 15% of NOI. Like, you would think that those numbers would be flipped given the growth profiles. Is this just the Holiday impact that’s causing that?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): It is

Richard Anderson, Analyst, Cantor Fitzgerald: percentage of NOI?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Yeah. I mean, I think that’s those properties in aggregate have been a drag. We’re working to make sure we manage that as good stewards of the company, really focusing on the new SHOP, which, you know, we talked about has a much better growth profile to it.

Richard Anderson, Analyst, Cantor Fitzgerald: Okay. When you think about, you know, the duration of, you know, this is like a, call it a 1 step back, 2 step forward type of strategy around the sale rather than the release of the NHC portfolio. I can appreciate that, but I think it all comes down to how long before you sort of get back to square 1. I’m, you know, given all these comments around pipeline and so on, I mean, what would be a success in your mind to sort of getting back and then surpassing, you know, the previous range of guidance, and, you know, truly presenting this as the right strategy to take? You know, is this 1 year worth of time, 2 years, 5 years? I mean, what would be measurable as success in your mind?

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Hey, Richard, this is Eric. I agree, it is kind of a 2 steps forward, 1 step back event. We’re excited about the opportunity of, you know, focusing on senior housing, having less legacy issues with NHC. What I would consider a success is if we can meet or exceed our original guidance. Keep in mind that we’ve already 1031-ed over $200 million worth of transactions this year. In my mind, we’re almost halfway through that $560 million gain. If we can redeploy the rest of that, call it $360 million in the next 6 months, I would consider that a win, especially if it’s senior housing and even more especially if it’s SHOP.

Richard Anderson, Analyst, Cantor Fitzgerald: Okay. That’s all I have. John, congrats to you. Good luck. Hit them straight. Thanks.

John Spaid, Chief Financial Officer, National Health Investors (NHI): Thanks, Rich.

Operator: Once again, if you do have any remaining questions, comments or follow-up questions, please press star one at this time. Your next question is coming from Omotayo Okusanya with Deutsche Bank.

Omotayo Okusanya, Analyst, Deutsche Bank: Yes. Good morning, everyone. John, a big congratulations. It has been a pleasure working with you, and thanks for always shooting straight and telling it like it is. I always kind of appreciated that about you as CEO of the company. First question from my end, the proceeds from NHC, is there any chance at all, whether with the 1031 exchanges rules or anything of that nature, where you may have to ultimately deploy that as a special dividend? Or can a scenario like that ever kind of occur?

John Spaid, Chief Financial Officer, National Health Investors (NHI): Hey, Tayo. Yes, this is John. We’re looking at that. We are, you know, obviously planning in case we do need to declare a special dividend towards the end of the year. As you know, REITs have two options here. We can actually pay the tax on the capital gain if we so chose. Typically, REITs don’t do that. They would prefer to, you know, return the capital back to shareholders unless they can find a better use for the capital and can defer it. You know, there are short time frames under these 1031 exchanges arrangements. You know, our average cost of capital, let’s say, is, you know, 4.6, 4.7, in that range.

Initially, you know, the lost NOI doesn’t completely result in a one-for-one reduction in FAD. You know, we’re looking at, you know, reducing debt, saving interest expense, and then making smart redeployment of that capital. Insofar as we do have to declare a special dividend, the components of that dividend may include a portion of stock. Stay tuned. As I said in my prepared remarks, it’s not determinable at this point, and it’s gonna depend on a lot of factors that we really won’t really know until we get to the fourth quarter.

Omotayo Okusanya, Analyst, Deutsche Bank: Gotcha. That’s helpful. Then if I could just ask a quick question about Bickford. With the new lease structure now, are we to kind of expect you don’t collect any quote-unquote, rent deferrals anymore with the way the new structure is set up? Also wanted to understand a little bit about the slight occupancy dip in the reported metrics. What was kind of going on there?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Hey, Tayo, this is Kevin. As for the occupancy dip, it’s when we look at seasonality, and, you know, their trends over the last few years, this is within the normal range, so nothing that we’re concerned about here. Sorry, could you restate your first question for me, please?

Omotayo Okusanya, Analyst, Deutsche Bank: The first question was around the rent deferrals again, that you’ve kind of been collecting with the way the new lease has been structured, April 1st. Does that kind of disappear? It’s all kind of been built into the new lease rate?

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Yeah, I would characterize it as being built into the new rent. We just have a new rent structure where we would get the contingent rent through the rest of the lease versus when The way it currently was structured is there would’ve been a balloon payment. Now we would extend the period in which we have the contingent rent eligible, you know, for probably another 5+ years, and then we can participate in the revenue growth at the operator’s level.

Omotayo Okusanya, Analyst, Deutsche Bank: Gotcha. Thank you.

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Thank you.

Operator: You do have a follow-up question coming from Juan Sanabria with BMO Capital Markets. Please pose your question. Your line is live.

Juan Sanabria, Analyst, BMO Capital Markets: Hi. Just a quick question on the SHOP pipeline. What kind of yields can we expect on incremental investments? You talked about increased competition, so just curious on the pricing you’re seeing in today’s market.

Kevin Pascoe, Chief Investment Officer, National Health Investors (NHI): Hey, Juan. This is Kevin. I would say that we’ve done very well on the last few deals that we’ve closed in terms of our initial yields. The market has definitely tightened. I would not tell you to forecast. That’s, you know, where the market is today. What we see is the same as what you see, is year one yields tend to be in kind of that 7% type range, ±. Some of that’s gonna be based on, you know, vintage of asset, market. You know, if it’s a bigger portfolio, it might be a bit lower where you think you might get some better rents or some better growth. You know, I think that’s kind of what we’re seeing right now. Our expectation is to try and do something better than that.

You know, we have to be able to meet the market.

Juan Sanabria, Analyst, BMO Capital Markets: Then just kinda going back to one of the earlier questions. I guess the question in the forefront of people’s minds is the Holiday situation and the kind of the back and forth on expectations there unique to those assets? What lessons have you learned that you don’t think that would be replicated in what you’re purchasing or have purchased more recently? Just yeah. If you said, what are you looking for today that’s different? I recognize Holiday is IL only, and now it’s more of an Acuity mix, AL, IL memory care mix. If you could just expand on that, those points, I think that would be helpful.

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Hey, Juan, this is Eric. You’ve heard me say this before, the Holiday buildings were a science experiment when Holiday was sold to Atria. We decided to kick off our SHOP portfolio with that as our first basis. I would tell you that the new product that we’re looking at is not 40 years old, not in need of constant CapEx, and not in very tertiary markets. We’re looking at mostly senior housing that has assisted living or memory care or some healthcare component. We’re looking at newer buildings. We’re looking at operators that have good local infrastructure and good practices in marketing and SEO and SEM marketing that keep the buildings full and keep the margins high.

More to come on what we’re doing with the Holiday portfolio, I’m going to be pointing to the not same store portfolio going forward, ’cause we’re getting the kind of performance that we’re looking for out of those newer buildings.

Juan Sanabria, Analyst, BMO Capital Markets: Thanks. Just one final one for me. It looks like some of the Florida assets tied to NHC are closing later or are being kinda carved off in some fashion. Could you just talk a little bit about that change, I believe, and why that’s taking place?

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Sure. That is a sublease. NHC is not running those buildings. They’re run by Solaris. For legal reasons, we’re just assigning that lease back to NHC so we keep the sublease intact. It’s a technicality of Florida licensing that requires us to do that, but the timing and the closing won’t be affected.

Juan Sanabria, Analyst, BMO Capital Markets: Thank you.

Operator: There are no further questions in queue at this time. I would now like to turn the floor back over to Eric Mendelsohn for any closing remarks.

Eric Mendelsohn, President and Chief Executive Officer, National Health Investors (NHI): Thank you everyone for your time and attention today, and we’ll look forward to catching up with you in person at one of the conferences soon.

Operator: Thank you, everyone. This does conclude today’s conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.