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Date

Tuesday, May 5, 2026 at 10:00 a.m. ET

Call participants

  • President and Chief Executive Officer — Eric Mendelsohn
  • Chief Investment Officer — Kevin Pascoe
  • Chief Financial Officer — John Spaid
  • Chief Accounting Officer — David Travis

Takeaways

  • Net Income Per Share -- $0.82, marking an increase of 10.8% compared to the prior year period.
  • NAREIT FFO Per Share -- $1.23, up 7.9% year over year.
  • Normalized FFO Per Share -- $1.23, representing a 7% increase year over year.
  • FAD -- $62.5 million for the quarter, up 11.6% year over year.
  • Interest Expense -- Increased 4.9% year over year due to higher average interest rates on company debt.
  • Cash G&A Expense -- $5.6 million, up 31% from $4.3 million in the prior year, reflecting expansion of the SHOP strategy.
  • Average Diluted Shares -- 48.5 million, up 5.8%, attributed to increased equity financing.
  • SHOP Investments Year-to-Date -- $212.4 million, including a $106.9 million acquisition of seven properties in Colorado closed May 1; the portfolio contains 532 units, occupancy in the high-80% range, and RevPOR approximately $5,300.
  • SHOP Platform Capital Deployed (Last 12 months) -- Over 100% growth achieved, with recent acquisitions tracking ahead of expectations.
  • SHOP NOI Increase -- 188.1% year over year due to the acquisition and transition of 20 properties.
  • SHOP Same-Store NOI (Legacy Holiday) -- Down 2.4% year over year, totaling $3.0 million and now representing less than 4% of annualized NOI.
  • SHOP Non-Same-Store Portfolio -- 27 properties (including Colorado acquisition), estimated annualized NOI of $33 million, or 73% of total SHOP NOI.
  • Sequential Growth (Non-Same-Store SHOP) -- 5.2% growth in NOI vs. Q4 2025, totaling $4.3 million from 11 transitioned and acquired properties.
  • SHOP Investment Mix Post-Transactions -- Pro forma, SHOP will represent approximately 24% of total portfolio and over 15% of annualized NOI, after pending NHC and other asset sales.
  • NHC Portfolio Sale -- Pending $560 million disposition, basis less than $15 million, expected to drive near-term earnings pressure but creates liquidity for higher-growth redeployment.
  • Capital Recycling and Leverage -- Pro forma net debt to adjusted EBITDA expected below 3x after NHC asset sale, supporting future acquisition capacity.
  • Triple Net Portfolio Performance -- Cash lease revenue up 7.7% year over year, driven by acquisitions, escalators, and true-up in NHC percentage rent; offset by the transition of seven properties to SHOP.
  • EBITDARM Coverage -- For twelve months ended December 31, 2025 (excluding NHC), senior housing coverage was 1.61x and medical was 2.53x.
  • Bickford Lease Reset -- Base rent reset to $38.4 million (up $3.2 million), 2%-3% annual escalators, and a new revenue-driven conditional rent structure; pro forma EBITDARM coverage of 1.55x.
  • Available Liquidity -- $960 million including cash, revolver, forward equity, and ATM; cash balance at quarter end was $24.9 million, revolver capacity $391 million, and ATM capacity restored to $500 million.
  • Pending and Announced Dispositions -- Four property sales produced net proceeds of $53.4 million; three additional asset sales expected to generate $58 million.
  • Investment Pipeline -- $560 million active, with $20.3 million under signed LOIs and over $200 million in outstanding LOIs.
  • Full Year 2026 Guidance -- Midpoint GAAP net income per share of $14.37 (includes large NHC gain); NAREIT FFO per share $4.77 (up 2.6%), normalized FFO per share $4.77 (down 2.9%), FAD $242.2 million (up 4.1%).
  • Guidance Investment/Yield Assumptions -- Assumes $180 million additional investments at 7.8% average NOI yield (60% SHOP); $392 million of 2026 investments at 8% yield modeled in total.
  • Dividend Declaration -- $0.92 per share, record date June 30, 2026, payable August 7, 2026.
  • Debt Maturities -- $225 million due in 2026 and 2027; no other maturities before the 2028 revolver facility.
  • Tax Planning -- Expectation to use IRC Section 1031 and reverse 1031 exchanges to defer capital gains on NHC sale.
  • Legacy Holiday SHOP Guidance -- Full-year same-store SHOP NOI growth revised to 1%-3%, reducing FFO per share guidance by less than 1%.

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Risks

  • CEO Mendelsohn stated the timing gap between the NHC portfolio sale and capital redeployment will cause "near-term earnings pressure," referencing updated guidance reflecting this impact.
  • Legacy Holiday properties delivered a 2.4% decline in same-store NOI and prompted downward revision in full-year same-store SHOP NOI guidance to 1%-3% due to continued underperformance.
  • CFO Spaid said, "it's not determinable at this point," if a special dividend will be needed, and the company may need to declare one if IRC 1031 strategies cannot fully defer taxable gain from the NHC disposition.

Summary

National Health Investors (NHI +2.00%) reported year-over-year gains across net income, NAREIT FFO, normalized FFO, and FAD, primarily driven by substantial new SHOP and triple net investments, as well as favorable cash rent adjustments. The company is repositioning its portfolio away from skilled nursing and toward private pay senior housing, highlighted by the pending $560 million disposition of the NHC leased portfolio and a significant capital recycling strategy. Updated guidance incorporates the impact of asset sales, a robust pipeline of acquisition opportunities, higher yield expectations on new investments, and ongoing enhancement of the company's liquidity and leverage profile.

  • With $212.4 million in year-to-date SHOP investments and a $560 million transaction pipeline, management signaled "ample opportunity" to redeploy disposition proceeds into higher-growth assets.
  • SHOP is expected to comprise approximately 24% of the total portfolio and more than 15% of NOI pro forma for asset sales, signaling an acceleration in the strategic migration toward private pay senior housing.
  • Newer SHOP acquisitions, including the Colorado portfolio, have an estimated initial NOI yield of 8.3% (7.8% after CapEx), newer SHOP acquisitions are outperforming initial expectations
  • Cash lease revenue in the triple net portfolio rose 7.7%, supported by escalators and revenue true-ups, confirming stable performance with "no rent concessions."
  • Guidance for 2026 FAD growth of 4.1% and available liquidity of $960 million underscore management’s assertion of balance sheet strength, despite temporary FFO and FAD headwinds during the deployment of disposition proceeds.

Industry glossary

  • SHOP (Senior Housing Operating Portfolio): Directly owned and managed senior housing assets (as opposed to those under triple-net leases), with NHI responsible for operating performance and subject to market-related revenue and expense volatility.
  • EBITDARM: Earnings before interest, taxes, depreciation, amortization, rent, and management fees — a financial coverage ratio used to assess the credit quality and operational strength of healthcare real estate portfolios.
  • RevPOR: Revenue per occupied room, measuring average monthly income generated per occupied unit in senior housing.
  • IRC Section 1031 (Like-Kind Exchange): A tax-deferral strategy allowing proceeds from dispositions to be reinvested in qualifying properties to defer recognition of capital gains.
  • Reverse 1031 Exchange: A structure allowing the purchase of replacement property before the sale of the relinquished asset under IRC Section 1031.
  • Triple Net Lease: A lease agreement structure where the lessee is responsible for property taxes, insurance, and maintenance in addition to rent.
  • NOI (Net Operating Income): Gross property income minus operating expenses but before accounting for debt service, taxes, or capital expenditures.
  • ATM (At-the-Market Program): A facility allowing issuance of new equity at market prices, typically to bolster liquidity or fund investments.

Full Conference Call Transcript

Operator: Good day, everyone. Welcome to the NHI First Quarter 2026 Earnings Webcast and Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Dana Hambly. The floor is yours.

Dana Hambly: Thank you, and welcome to the National Health Investors conference call to review results for the first 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 and 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.

D. Mendelsohn: 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 $107 million acquisition for 7 properties in Colorado last night.

On a pro forma basis and including the pending NHC and other asset 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% to 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 are confident that the steps we are 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 3x 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 want to say a few words about John Spaid, who recently announced that he will be starting his well-earned retirement on July 1. John joined NHI as employee #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: 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 1. 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 first 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, and 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, but 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 we'll 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 EBITDARM 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 1. EBITDARM coverage improved across our major asset classes.

For the 12 months ended December 31, 2025, senior housing and medical coverages, excluding NHC, were 1.61 and 2.53, respectively. Regarding Bickford, we reset the leases to fair market value on April 1. 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% to 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 31 was 1.55x. 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: 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 ended 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.

And subsequent to the quarter's end, we announced an additional investment for $106.9 million in 7 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 30, 2026, and payable August 7, 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 midpoint 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. So with that, operator, please open the lines for questions.

Operator: [Operator Instructions] Your first question is coming from Farrell Granath with Bank of America.

Farrell Granath: This is Farrell Granath. I first wanted to ask about the $560 million 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. And 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 the revenue participation within that $560 million? And 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: Sure. This is Kevin. I would say our pipeline has 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. And I think we just have to be open with the structure that we use and mindful of the property or the underlying asset, 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 going to be an emphasis for us.

So 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 what kind of growth profile we can get.

Farrell Granath: And 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 fl,u seasonality? Or is it from other comments that we have heard in prior quarters, due to transition in staff or other items?

Kevin Pascoe: There is some modest seasonality. That said, they did hit our projections for the first quarter. The issue that we 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 of others that we're doing some extensive CapEx projects that ran into some delays, that are going to delay kind of the lease-up there. So we wanted to make sure we were resetting expectations for something that we felt very confident in versus trying to adjust later in the year. I still think our forecast is very manageable, but frankly, disappointing. But like I said, the problem is fairly isolated.

And again, as we've talked about in prior calls, we're just talking about a very small portfolio, which is what's moving the percentage here probably more than it should. It affected our -- it's less than 4% for us.

Operator: Your next question is coming from Juan Sanabria with BMO Capital Markets.

Juan Sanabria: Maybe a question for John, and congratulations on your upcoming retirement. But just wanted to, on the guidance, delve a little deeper into the driver. So how much of the decrease in FAD per share was as a result of the NHC sale? And just to confirm, you're only assuming you reinvest an incremental $180 million and nothing over and above that. Is that correct?

John Spaid: Well, it depends on your definition of reinvestment, Juan -- this is John. So there's a lot of moving parts. First, the proceeds. The proceeds are going to -- initially, there's going to 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 will 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. So there's some drag there. We've already been making investments ahead of our original guidance.

This investment we announced today was ahead of the original guidance. The $180 million in additional guidance increases our 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. So 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 offset some of that. But the net effect has -- of the NHC transaction was to pull down our guidance. I hope that helps.

Juan Sanabria: It does. And then 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?

D. Mendelsohn: Juan, this is Eric. I'll take that question. If a third-party reaches out in writing, then we will issue a press release about that. Until then, we're not ready to disclose anything.

Operator: Your next question is coming from Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: 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 given the difficulty predicting whether you'll transact, I guess, how far along are you in negotiating these deals? How competitive is the process? And should we view your willingness to openly discuss these deals as maybe having a higher probability of closing?

Kevin Pascoe: 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 want to give a bit of a head fake by quoting ridiculously large number. We're reviewing a large amount of opportunities, which generally, when we describe it, did not include $100-plus million portfolio deals that we're looking at. So 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 is for certain until it's closed.

Austin Wurschmidt: And just to be clear, these portfolio deals are outside of the $560 million that you put in the release last night, correct?

Kevin Pascoe: That's right.

Austin Wurschmidt: And then just one more. Recognizing that the same-store shop pool is small, and this was sort of structured with a group of underperforming assets several years ago 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 in maybe the future performance versus what you've seen happen within the same-store pool in the last couple of years?

Kevin Pascoe: Sure. This is Kevin again. What we're looking at now is generally newer assets, generally has some element of health care 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 a combination is helpful, though, and that's generally what we're looking at more now is where you have an ILAL or ILAL memory or 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. So generally, it's going to be newer and have the continuum, I'd say that.

And then really, what we're looking at is more of a -- when we look at the growth profile, 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. So it's just a little bit different profile.

Austin Wurschmidt: And then 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? And that's all for me.

Kevin Pascoe: Sure. I would suggest to you that the market is 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 2. So I think our underwriting has evolved over time, and I feel confident in our ability to execute here.

Operator: Your next question is coming from Rich Anderson with Cantor Fitzgerald.

Richard Anderson: So I think I heard a number, 24% SHOP. Is that pro forma for the NHC sale? And I'm curious what that number would be after deployment of the proceeds, where we're looking at when all the dust settles from the transaction?

Kevin Pascoe: Sure. Rich, this is Kevin. That is a pro forma after NHC. And then 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. But I think it's safe to say that looking into the future, that SHOP percentage is going to continue to increase.

Richard Anderson: Curious as to why it's only 15% of NOI, like you would think that those numbers would be flipped given the growth profile. This is just the Holiday impact that's causing that lower percentage of NOI?

Kevin Pascoe: Yes. I mean I think that those properties in aggregate have been a drag. We're working to make sure we manage that as good stewards of the company, but really focusing on the new SHOP, which we talked about has good -- a much better growth profile to it.

Richard Anderson: Okay. When you think about the duration of this is like a, call it a one step back, 2 steps forward type of strategy around the sale rather than the release of the NHC portfolio. So I can appreciate that, but I think it all comes down to how long before you sort of get back to square one. So given all of 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 the previous range of guidance and truly presenting this as the right strategy to take? Is this 1 year worth of time, 2 years, 5 years?

I think what would be measurable as success in your mind?

D. Mendelsohn: Rich, this is Eric. I agree it's -- it is kind of a 2 steps forward, one step back event. But we're excited about the opportunity of 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 1031ed over $200 million worth of transactions this year. So in my mind, we're almost halfway through that $560 million gain. And if we can redeploy the rest of that, call it, 200 -- $360 million in the next 6 months, then I would consider that a win, especially if it's senior housing and even more especially if it's SHOP.

Richard Anderson: John, congrats to you. Good luck.

Operator: [Operator Instructions] Your next question is coming from Omatayu Okusana with Deutsche Bank.

Omotayo Okusanya: 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 [Technical Difficulty]. First question from my end, the proceeds from NHC, I mean, is there any chance at all whether with the 1031 rules or anything of that nature where you may have to ultimately deploy that as a special dividend? Or can that scenario kind of [indiscernible] or like is that kind of a [Technical Difficulty]?

John Spaid: Yes, this is John. We're looking at that. We are obviously planning in case we do need to declare a special dividend towards the end of the year. As you know, REITs have 2 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 return the capital back to shareholders unless they can find a better use for the capital and can defer it. And so there are short time frames under these 1031 arrangements. Our average cost of capital, let's say, is 4.6%, 4.7% in that range. So initially, the lost NOI doesn't completely result in a one-for-one reduction in FAD.

So we're looking at reducing debt, saving interest expense and then making smart redeployment of that capital. And insofar as we do have to declare a special dividend, the components of that dividend may include a portion of stock. So stay tuned. As I said in my prepared remarks, it's not determinable at this point, and it's going to depend on a lot of factors that we really -- won't really know until we get to the fourth quarter.

Omotayo Okusanya: Got you. That's helpful. And then if I could just ask a quick question about Bickford. With the new lease structure now, I would kind of expect you don't collect any "rent deferrals" anymore with the way the new structure is set up. I 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: Tayo, this is Kevin. As for the occupancy dip, it's -- when we look at seasonality and their trends over the last few years, this is within the normal range. So nothing that we're concerned about here. And sorry, could you restate your first question for me, please?

Omotayo Okusanya: And then the first question was around the rent deferrals, again, that you've kind of been collecting. But the way the new lease has been structured April 1, does that kind of disappear and it's all kind of being built into the new lease rate?

Kevin Pascoe: Yes, I would characterize it as being built into the new rent. We just have a new rent structure where we will get the contingent rent through the rest of the lease versus when the way it currently was structured is there would have been a balloon payment. So now we would extend the period in which we have the contingent rent eligible for probably another 5-plus years. And then we can participate in the revenue growth at the operator level.

Operator: You do have a follow-up question coming from Juan Sanabria with BMO Capital Markets.

Juan Sanabria: 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: 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, and I would not tell you to forecast, that's where the market is today. And what we see is the same as what you see is year 1 yields tend to be in kind of that 7% type range, plus or minus. Some of that's going to be based on vintage of asset market. If you -- 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.

But I think that's kind of what we're seeing right now. Our expectation is to try and do something better than that, but we're -- we have to be able to meet the market.

Juan Sanabria: And then just kind of going back to one of the earlier questions. I guess the question in the forefront of people's minds is, is the Holiday situation in the kind of the back and forth on expectations there unique to those assets? And 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 what are you looking for today that's different? I recognize Holiday was IL only and now it's more of an acuity mix, AL, IL, memory care mix. But if you could just expand on those points, I think that would be helpful.

D. Mendelsohn: 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. And 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 health care 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.

So more to come on what we're doing with the Holiday portfolio, but I'm going to be pointing to the not same-store portfolio going forward because we're getting the kind of performance that we're looking for out of those newer buildings.

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

D. Mendelsohn: Sure. That is a sublease. NHC is not running those buildings. They're run by [ Solaris ]. And we are -- 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.

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.

D. Mendelsohn: Thank you, everyone, for your time and attention today, and we 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.