National Health Investors, Inc. Q2 FY2026 earnings call

Strategic Portfolio Shift

• Completed the high-impact sale of the NHC portfolio on July 1, 2026, for $560 million in cash proceeds. This transaction aligns NHI with its strategic focus on private-pay senior housing and significantly strengthens the balance sheet, reducing leverage to well below the long-term target range while providing substantial liquidity for future investments.
• Year-to-date 2026, NHI has completed $237.2 million in new private-pay senior housing investments at an average 7.7% yield, with over $212 million allocated to the shop segment. The company also disposed of 7 non-core properties (in addition to the NHC portfolio) for net proceeds of $117.4 million in 2026 as part of disciplined capital recycling.

Organizational Updates

• Implemented leadership changes to support the growing shop platform: Chris Mango joined as new Chief Operating Officer to oversee the expanding shop portfolio, freeing Chief Investment Officer Kevin Pascoe to focus full-time on acquisition sourcing and operator relationship building. Todd Siefert completed a seamless transition to Chief Financial Officer on July 1, maintaining continuity of the company's long-standing financial discipline.
• General and administrative expenses increased 44% year-over-year to $8.8 million in Q2, driven by shop-related personnel expansion and one-time transition costs, with cash G&A projected to grow low-teens year-over-year for 2026.

Balance Sheet and Capital Deployment

• As of June 30, 2026, the net debt to adjusted EBITDA leverage ratio was 4.1x, well within the 3.5x to 4.5x target range. The company retired its $125 million term loan due June 2026, has only a $100 million private placement note maturing in January 2027 (expected to be retired by end-2026), and no further maturities until 2028.
• Total available liquidity reached ~$792.4 million as of June 30. Approximately $334 million of NHC sale proceeds are being held for tax-deferred reinvestment under Section 1031, with management targeting full reinvestment to avoid a taxable special dividend.
• The board declared a 2 cent per share quarterly dividend increase to 94 cents per share, payable November 6, 2026.

1. Shop (operating senior housing): Total Q2 2026 NOI came in at $11 million, in line with forecasts, representing an 188.5% year-over-year increase driven by acquisition and transition of 27 properties. Shop investments now total ~$850 million, accounting for 24% of the company's total portfolio. Same-store NOI for 15 legacy properties (less than 5% of total annualized NOI) declined 6.3% year-over-year to $3.6 million, but increased 18.9% sequentially from Q1 2026. For the 26 properties held since the start of 2026, NOI increased 7.6% sequentially from Q1 to Q2 2026. Newer shop investments are projected to deliver high single-digit to low double-digit annual NOI growth.

2. TripleNet (triple-net lease): The portfolio continues to deliver stable operating performance, with 100% contractual rent collection, healthy occupancy, and improving EBITDARM rent coverage. For the 12 months ended March 31, 2026, senior housing coverage reached 1.62x (up from 1.52x year-over-year) and SNF coverage reached 2.66x (up from 2.26x year-over-year). Cash lease revenue increased 2.8% year-over-year, driven by $2.4 million from new acquisitions, $2.3 million from annual escalators and percentage rent, partially offset by $2.9 million from property dispositions and transitions of 7 assets to the shop segment. On April 1, 2026, Bickford base rent was reset to $38.4 million from $35 million, with ~$900,000 expected in quarterly additional revenue-share rent going forward.

• Full-year 2026 expectations for shop portfolio performance remain unchanged, with new shop investments still projected to deliver high single-digit to low double-digit annual NOI growth.
• Same-store shop full-year NOI growth guidance is maintained at 1% to 3%, with sequential quarter-over-quarter improvement expected to continue in the second half of 2026, bringing second half growth to ~8% to 9% to offset first half results.
• Cash G&A growth guidance for 2026 is unchanged at low-teens year-over-year.
• Management reaffirmed the 3-year strategic target to grow the shop segment to 40% to 50% of total portfolio value (up from 24% currently), noting the company is likely to reach this target faster than planned due to current acquisition activity. Leverage is maintained within the long-term target range of 3.5x to 4.5x net debt to adjusted EBITDA.

• The legacy same-store shop portfolio has underperformed year-over-year, driven partially by one property with a large number of units under renovation that is currently creating ~1 percentage point of occupancy pressure, and higher-than-expected move-outs at some properties that have weighed on sequential growth.
• The acquisition market for senior housing is increasingly competitive, which has compressed pricing yields: higher-quality large portfolio deals now price closer to 6% to 6.5% after maintenance CapEx, with lower-quality assets pricing in the 7% range, down from wider spreads 6 months prior. This requires stricter underwriting to maintain target risk-adjusted returns.
• Full Section 1031 tax deferral for NHC sale proceeds depends on successfully identifying and closing qualifying replacement investments within the required regulatory timeframe; failure to fully reinvest would result in a taxable special dividend, which creates unfavorable tax implications for many shareholders.
• Conversion of existing triple-net assets to the shop segment requires operators to meet strict SOX compliance and back office capability requirements, which limits the number of available conversion opportunities even when economically attractive.

Q: How large is the subset of same-store shop properties the company is evaluating for strategic alternatives, and when can investors expect an update?

A: Management declined to share the size of the subset to avoid uncertainty for employees and competitive risks. The company is evaluating options including selling properties to deleverage or reallocate capital to higher-return acquisitions, with a target to finalize and announce plans sometime this year.

Q: How will the new C-suite organizational structure change NHI's operations over the next 6 to 12 months?

A: Shop exposure has grown from ~5-6% a year ago to nearly 25% today, with a 3-year target of 40-50%. The new COO will oversee shop portfolio operations and implementation of new operating systems, freeing CIO Kevin Pascoe to focus entirely on acquisitions. The change is expected to increase NHI's annual acquisition run rate from the 200-400 million range to 500-700 million.

Q: What is the pricing difference between large portfolio deals and smaller single/double acquisitions, and is management confident it can fully reinvest the $334 million in NHC 1031 proceeds to avoid a special dividend?

A: The yield spread between large and smaller deals has shrunk from over 100 basis points six months ago to 25-50 basis points today, with the overall market shifting to lower yields. Management will do everything possible to fully reinvest the proceeds to avoid a special dividend, given the unfavorable tax implications it would create for shareholders.

Q: Is the 40-50% 3-year target for shop share an easily beatable conservative estimate, and is 50% the long-term optimal exposure or just a stepping stone?

A: Management confirmed the target is intentionally conservative (an under-promise-over-deliver strategy) and the company will likely reach the target faster than the 3-year timeline, given current activity. At 50% shop exposure, the company will need to ensure sufficient SOX compliance infrastructure to support further growth, and a decision on whether to increase exposure beyond that level will be made at that time.