National Healthcare Properties, Inc. Q1 FY2026 earnings call

• Corporate Milestone

  • In April 2026, NHP completed its initial public offering (IPO) on NASDAQ under ticker NHP, raising $531 million in gross proceeds
  • $186 million of revolving credit facility borrowings were repaid with IPO proceeds, materially strengthening the company's balance sheet

• Portfolio Strategy

  • The company announced a strategic reorientation to concentrate capital in the SHOP segment, where it has stronger operational expertise, differentiated infrastructure, and believes long-term growth opportunities are greatest
  • The planned OMF disposition is not a reflection of OMF performance deterioration, but a deliberate strategic choice to pursue superior long-term risk-adjusted returns via SHOP concentration

• Transaction Activity

  • During Q1 2026, NHP signed a definitive agreement to acquire 13 senior living communities for $64 million via a joint venture with Discovery Senior Living, holding a 98.5% ownership stake; the agreement includes a right of first refusal and purchase option for an additional 13 Discovery-managed communities
  • Post-quarter end, the company signed definitive agreements to acquire an 88-unit Oregon assisted living community for $26.5 million and a 130-unit Florida assisted living/memory care community for $35 million, both expected to close in Q2/Q3 2026
  • An additional $40.3 million in SHOP transactions are currently under letter of intent, targeting stabilized yields of 8-9%
  • In May 2026, NHP entered a definitive agreement to divest 86 OMF properties for $528.2 million total consideration, including $278 million of assumed purchaser debt

• Balance Sheet Health

  • Net debt to annualized further adjusted EBITDA was 8.6x in Q1 2026, down from 9.0x in Q4 2025; after accounting for signed transactions and the IPO, leverage is only 0.6x
  • The company is evaluating strategies to reduce its $182 million in outstanding preferred stock at reasonable premiums to market pricing, which would improve fixed charge coverage with minimal earnings dilution

1. Senior Housing Operating Properties (SHOP) Segment: Same-store cash net operating income (NOI) increased 24% year-over-year. Same-store average occupancy reached 83.8% (up 280 basis points YoY), with assisted living and memory care both hitting 85.1% occupancy (up 490 bps and 630 bps YoY respectively). Same-store revenue per unit increased 4.4% YoY to $6,340. Same-store cash NOI margin expanded 270 bps YoY to 22.1%. Approximately 96% of SHOP segment revenue comes from private payers. The segment accounts for a growing share of the company's portfolio following the planned OMF disposition. 2. Outpatient Medical Facilities (OMF) Segment: Same-store cash NOI increased 5.5% year-over-year to $20.3 million. Same-store occupancy rose 50 bps YoY to 94%. The 5.4-year weighted average lease term remains across the full portfolio, with a high-credit quality tenant base including major U.S. healthcare systems.

• For full-year 2026, SHOP same-store cash NOI is expected to increase 13-16% to $50.7-$52 million
• For full-year 2026, OMF same-store cash NOI is expected to increase 2.5-3.5% to $81.2-$82 million (guidance covers the full current portfolio, not just the residual OMF holding post-divestiture)
• 2026 SHOP acquisitions are projected to total $375-$425 million, with OMF dispositions projected at $528 million
• Full-year 2026 total normalized FFO is expected to be $26-$27 million, including $5-$6 million of non-cash equity-based compensation
• Recurring capital expenditures for the current owned portfolio are projected at $22-$25 million; the OMF portfolio planned for sale carries $10 million in trailing 12-month recurring CapEx obligations
• The company will not provide per-share FFO guidance for 2026 due to expected volatility from transaction timing; per-share guidance will begin in 2027 once the portfolio repositioning is largely complete
• Management maintains a goal of pursuing an unsecured investment-grade balance sheet, and will keep leverage aligned with this target

• Forward-looking statements are subject to risks that could cause actual results to differ materially from projections, with detailed risk factors disclosed in the company's SEC filings (including the most recent Form 10-K)
• All pending acquisitions and the OMF disposition are subject to customary closing conditions, including regulatory approvals, purchaser due diligence, and lender consent for loan assumptions; there is no guarantee the transactions will close on the expected timeline or at all
• The only 2026 debt maturity is $333 million in Fannie Mae secured loans; while management expects to partially refinance the maturity, there is risk that market conditions could impact refinancing terms
• SHOP occupancy gains are moderating as the portfolio matures, with less low-hanging occupancy improvement available compared to prior periods

Q: SHOP delivered very strong Q1 same-store NOI growth, but the full-year guidance implies deceleration. What is driving this deceleration, and are there any one-time factors to note for comparative purposes? What is the portfolio's stabilized occupancy target, and when will the company become more aggressive on rate increases? When is the 13-asset Discovery SHOP acquisition expected to close? / A: Deceleration stems from the portfolio maturing: there are no longer under-managed assets in the portfolio, so large easy occupancy gains are no longer available, as occupancy approaches stabilized levels. As occupancy rises, the company will see more benefit from rate growth and margin expansion, and management remains comfortable with the published guidance range. Stabilized occupancy is targeted between 93% and 95%, adjusted for higher-acuity SHOP's higher short-notice move-out rate. The portfolio ended Q1 with spot occupancy just over 85%, the threshold where margin expansion unlocks and the company can start pushing rates more aggressively. The 13-asset Discovery acquisition is expected to close in Q2 2026, pending only 1-2 final regulatory approvals.

Q: When is the OMF portfolio divestiture expected to close, and will the company need to use 1031 tax deferral for the transaction? How does the sold OMF portfolio compare to the residual OMF portfolio post-sale, and what are current debt market access conditions for the upcoming Fannie Mae maturity? / A: The OMF divestiture is currently expected to close in Q3 2026, while the purchaser completes ongoing due diligence. Management does not expect large taxable gains from the transaction, so 1031 deferral will not be necessary, though the option remains available if needed. The residual OMF portfolio post-sale has less multi-tenant exposure, a lower CapEx as a percentage of NOI, lower leverage with lower-coupon debt, higher occupancy, greater health system tenant exposure, and a longer weighted average lease term, improving overall portfolio quality. The Fannie Mae maturity is expected to include a Fannie Mae component priced in the lower half of 5% yields, which is attractive relative to the existing debt being refinanced; the company is also evaluating line of credit adjustments and term loan options with its banking partners post-IPO.

Q: What is the expected timing for any preferred stock buyback activity, and will it use proceeds from the OMF sale? / A: The company holds cash from the IPO already, but is also using cash for closing upcoming acquisitions. Management will have additional liquidity from OMF sale proceeds in Q3 2026, so actions can happen either earlier or later in 2026. Reducing outstanding preferred stock delivers meaningful improvement to fixed charge coverage, so management expects to take action in 2026, with timing dependent on available liquidity.