National Health Investors Inc (NHI) 2025 Q4 法說會逐字稿

Greetings, and welcome to the NHI fourth-quarter 2025 earnings webcast and conference call. (Operator Instructions) And please note, this conference is being recorded.

I will now turn the conference over to your host, Mr. Dana Hambly, VP of Finance and Investor Relations. Sir, the floor is yours.

Thank you, and welcome to the National Health Investors conference call to review the results for the fourth quarter of 2025. On the call today are Eric Mendelson, 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 and 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 statements may involve risks or uncertainties that are not guarantees of future performance.

All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI 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. 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 Mendelson.

Good morning, and thanks to everyone for joining us today. We completed the year with a solid fourth quarter that generated normalized FFO per share growth of 8.9% compared to last year. The SHOP platform is central to our investment thesis and was a core contributor to the quarter as total NOI increased by 125% year over year and 48% sequentially. Cash rental income from our triple net portfolio increased by approximately 7%, primarily due to acquisitions, while interest income declined by 19% in the fourth quarter due to loan payoffs and pay downs.

Reflecting on the full year results, we delivered growth in normalized FFO per share of 10.6%, and total FAD growth of 13.7%. This exceeded the midpoint of our initial 2025 guidance by approximately 6% and 5%, respectively. SHOP NOI increased by approximately 57% compared to 2024 with 7.6% same-store growth and $6 million from transitions and acquisitions. Our cash rental revenue increased by approximately 10% year over year with contributions both internally and externally. We announced investments of $392 million in 2025, which was well above our initial guidance of $225 million and was our most active year since 2016. This included investments of $218 million in the fourth quarter alone, setting the company up nicely for strong acquisition growth in 2026.

In fact, we've already closed on one deal this year for $105.5 million, our largest SHOP acquisition to date, and we have an active pipeline of over $488 million with an additional $111 million under signed letters of intent. The industry tailwinds for senior housing have never been more favorable, and there's little evidence to suggest that this will change in the next several years. According to [NIC MAP], there were fewer than 25,000 units under construction in the fourth quarter which represents just 2.2% of total inventory and the lowest level since 2012. This shows no signs of reversing as new unit starts are less than 1% of inventory for lowest level since NIC MAP started reporting this information in 2008.

Meanwhile, demand is accelerating as the first baby boomers turned 80 this year. NHI is well positioned to capitalize on this long-term generational growth. We continue to methodically invest in our SHOP capabilities as we significantly expand our presence in private pay senior housing operations, where we see the greatest risk-adjusted returns.

We're adding to talent rapidly. We currently have 35 employees, which is a 46% increase from our average employee count in 2022 when we established our SHOP platform. Including the recent February acquisition, we've increased our SHOP investment by 106% in the last 12 months to approximately $740 million. This has increased our annualized SHOP NOI contribution to 12% of total annualized NOI from 4.5% at the end of 2024. As outlined in our guidance, we expect that 70% of our investment activity this year will be allocated to SHOP, which coupled with strong organic growth, should continue to drive SHOP NOI contribution exponentially higher.

Similar to our approach in the triple net portfolio, we are targeting shop investments at need-driven senior living communities in secondary suburban markets, where we have a better understanding of the local dynamics that most impact operations. We are seeking partners that have demonstrated an ability to deliver outstanding resident satisfaction, which we believe is achieved by attracting and retaining mission-driven employees. Frankly, we've been overwhelmed by the interest in partnering with NHI, which creates a larger talent pool for us and lowers the risk for new investments.

From a financial standpoint, our target markets tend to see fewer buyers than the primary markets, allowing NHI to find stabilized properties at attractive yields in the 7% to 8% range. We expect near-term NOI growth in the first few years in the high single-digit to low double-digit range, which produces strong rates of return in the low to mid-teens. NHI's financial strength is very conducive to supporting growth and bolstered by our fortress balance sheet. Our leverage is less than 4 times net debt to adjusted EBITDA, and we have plenty of dry powder. Our demonstrated ability to access attractive debt and equity capital creates a real competitive advantage for NHI and maintaining and growing the pipeline as market participants can be confident in our ability to finance deals quickly and with limited closing risk.

Regarding our 2026 outlook. We issued guidance last night that included normalized FFO per share growth of 1.2% at the midpoint. This is clearly not where we view the core growth rate of the company. Recall that in 2025, results benefited from several items that we do not view as recurring, which John will address in more detail. When adjusting for these items, we estimate that our normalized growth rate is in the 5% to 6% range, the midpoint of our 2026 NFFO per share guidance implies a 2-year CAGR of approximately 6%.

Further, this year's guidance includes approximately $111 million of dispositions of nonstrategic assets. While we are continually reviewing the portfolio, the early year timing and unusually large size of the dispositions impact this year's growth by an incremental and estimated 1.5%. From a big picture perspective, NHI is in a great position to drive exceptional long-term FFO per share growth and create sustained value for shareholders. We are investing in the people and resources necessary to scale our future growth, particularly in SHOP with estimated NOI growth of over 105% in 2026 before consideration for new investments. Our financial strength gives us flexibility to pursue significant external growth and the senior housing industry fundamentals have never been more attractive.

In short, we're as enthusiastic as we've ever been. Before I turn the call over to Kevin, I want to welcome our newest Board member. We announced this week that [Lilly Donahue] has joined the NHI Board of Directors. As many of you know, Lilly served as the CEO of Holiday Retirement from 2016 to 2022, overseeing a portfolio of more than 300 independent living communities in 46 states. She brings an extensive and diverse set of skills to the NHI Board, and her deep experience in senior living operations, obviously makes her a great fit for us in these early stages of our growing shop platform.

I'll now turn the call over to Kevin. Kevin?

Thank you, Eric. Starting with investment activity in the pipeline. NHI had a great year on 2025 with $392.4 million in announced investments and an 8.1% average initial yield. As Eric noted, the fourth quarter was particularly active with investments of $217.5 million and 2026 is off to a solid start.

In February, we announced our largest shop acquisition to date of $105.5 million for nine properties in Kentucky, South Carolina, and Tennessee. We expect an initial NOI yield for the first year of approximately 8% and 7.6% when including routine CapEx. Allegro Living Management is the new manager for these properties, so we expect some transitional impacts in the first year, but forecast solid double-digit growth in year 2. Allegro is an affiliate of Sprint Arbor management, whom we have worked with since 2024 and has extensive experience in these suburban markets that Eric described earlier. Our total investment with Spring Arbor is now $227 million, and we are looking at opportunities to continue to grow with them. On that note, the pipeline is as active as ever, which gives us confidence that we can meet or exceed last year's total investments.

We currently have $110.6 million under signed letters of intent, primarily in SHOP, and we are evaluating an incremental pipeline of $488 million, all in senior housing. This figure excludes any portfolio deals, but I'll add that we are reviewing several of these large potential investments. We expect that the acquisition environment will remain incredibly strong for several years, which necessitates that we understand how each of our properties either fit or doesn't fit within NHI's strategic outlook. As a part of this ongoing process, we have planned dispositions of seven buildings with six different operators. These properties are not strategically important, so we believe that we can better reallocate our resources to focus on relationships with much more growth potential.

Turning to our operating performance. Total shop NOI increased by 124.9% compared to the fourth quarter of 2024 due to the transition of seven properties on August 1 and the acquisition of four properties on October 1. The same-store NOI on the 15 legacy holiday properties declined by less than 1% year over year, but increased 8.7% sequentially from the third quarter. For the year, our same-store NOI increased by 7.6%, and our 2026 guidance contemplates a 7% to 8% increase, which is more heavily weighted to the second half of the year as occupancy recovers and the 16 units we discussed last quarter come back into service in May. The 11 properties that we transitioned and acquired contributed $4.1 million to the fourth quarter SHOP NOI and are performing in line with expectations.

We expect double-digit NOI growth from this group as it enters the same-store portfolio later this year and early next. Across the triple net portfolio, we are generally experiencing the continuation of solid trends with no rent concessions, continued collection of deferred rents from [Bickford] in excess of expectations, and stable occupancy and EBITDARM coverages.

Gas lease revenue increased approximately 7.2% year over year, driven primarily by acquisitions, successful transition of properties formerly operated by SLM, and annual escalators. Deferral collections of $1.9 million actually decreased by 17% compared to the fourth quarter of last year, which we regard as a success as our outstanding balances have largely been collected at this point, and we do not expect to report on this metric going forward. While total collections declined, the Bickford repayment increased by 38% to $1.5 million in the fourth quarter, and they had an outstanding balance of $7.6 million at December 31.

We continue to expect that Bickford's cash rental revenue will increase in total dollars at the April 1 rent reset, and we'll be able to provide more details on the next conference call. The pipeline continues to be active with triple net senior housing deals as we don't think every property is a fit for SHOP. We are also getting more created with certain targeted lease underwriting to maintain flexibility for potential SHOP conversions. As an example, we purchased a property in Jameson, Pennsylvania for $52.1 million, which is now operated by Priority Life Care. Priority is a new relationship for NHI, but they are a well-established operator with over 60 properties across 12 states.

The lease is unique as it's a 5-year lease at an initial yield of 8% plus a revenue participation feature that could add another 25 to 50 basis points. There are also provisions in the agreement that would convert the property to shop, which we anticipate triggering.

That concludes my remarks, and I'll now turn the call over to John to discuss our financial results and guidance. John?

Thank you, Kevin, and hello, everyone. This morning, I'll provide details on our fourth quarter and full year results, review our financial strength, including our updated leverage policy, and conclude with our financial outlook for 2026. I'll be using average diluted common shares for all per share results.

For the quarter ended December 31, 2025, our net income per share was $0.80, a decrease of 15.8% from the prior year. Recall that in the prior year period, we recognized a $6.3 million noncash gain related to derivative accounting for forward equity sales agreements as well as the $5 million gain on sales of real estate.

For the 12-month period ended December 31, 2025, our net income per share was $3.02 compared to $3.13 in the prior year. Our NAREIT FFO results per share for the fourth quarter and full year compared to the prior year periods, decreased 1.6% and increased 2.2% to $1.22 and $4.65 per share, respectively. The prior year period, NAREIT FFO benefited from the aforementioned $6.3 million gain from derivative accounting. Our normalized FFO results per share for the fourth quarter and full year increased 8.9% and 10.6% to $1.22 and $4.91 per share, respectively, compared to the prior year periods. Several onetime items helped us achieve these great normalized FFO results.

During the year, we recognized gains from equity method investments of $3.7 million, up from $0.4 million in the prior year. We also recognized a $3.4 million benefit to our credit loss reserves compared to a credit loss expense of $4.6 million in the prior year. Finally, we recognized $3.9 million in cash rental income upon lease terminations, which excludes noncash write-offs of straight-line rents receivable and excludes noncash rental income related to operations transfers attributable to the third quarter SHOP transition properties, which benefited both normalized FFO and FAD. FAD for the fourth quarter and full year compared to the prior year periods increased 11.1% and 13.7% to $57.9 million and $232.1 million, respectively. As Kevin noted, NOI from our 26 SHOP -- Property SHOP segment for the quarter ended December 31 increased 124.9% to $7.3 million compared to the prior year period.

Our 15 property same-store SHOP portfolio, NOI declined 0.9% to $3.2 million from the prior year fourth quarter, but was sequentially up 8.7% from the third quarter. Subsequent to the end of the year, we added an additional nine properties to our SHOP segment, which brings our total investment in shop to $740 million. Our 2026 guidance released last night included our NOI expectations for these properties to be $39.6 million at the midpoint. We believe that the 5.4% yield on our current in-place SHOP invested capital continues to represent substantial NOI growth upside for the company. I'll talk more about our 2026 guidance in just a moment.

Interest expense for the fourth quarter was down 6.4% year over year, while weighted average common diluted shares was up 5.4% to 47.9 million shares as a result of the company's greater use of equity in lieu of debt to fund new investments over the last year. Cash G&A increased 39.9% to $6.6 million compared to the year earlier period, while legal expense declined $0.4 million. During the quarter, we closed on new investments totaling $217.5 million. For the year, we made $392 million in new investments, the highest level since 2016. This volume reflects both the success we have of converting existing loans into fee simple ownership as well as the redeployment of over $93.3 million in other loan investment payoffs during the year. Our net deployment of new investment capital represents a 42% increase year over year.

During the quarter, we settled approximately 600,000 common shares from our Q2 2025 forward ATM equity activity for proceeds of approximately $46.2 million at an adjusted forward price of $71.87 per share after fees and forward costs. At December 31, 2025, we have remaining escrowed forward equity proceeds of approximately $44.5 million available to us in exchange for the future delivery of 600,000 common shares at an average price of $69.23 per share. We ended the year with $19.6 million in cash in our balance sheet, $496 million in revolver capacity and also had $315.8 million available on our ATM assuming the settlement of our forward equity sale agreements.

Our balance sheet ended the fourth quarter in great shape. Our net debt to adjusted EBITDA ratio of 3.8 times for the quarter, and our available liquidity was approximately $875 million, attributable to the cash in our balance sheet excess revolver forward equity and additional ATM capacity.

We are also announcing today a change in our leverage policy. We are lowering our leverage policy from a range of 4 times to 5 times to a range of 3.5 times to 4.5 times net debt to adjusted EBITDA. Our lower leverage policy reflects the importance we place on our investment-grade rating and also reflects the changes to our debt service coverage ratios in this higher for longer interest rate environment.

Let me now turn to our dividend and guidance. As we announced last night, our Board of Directors declared a $0.92 per share dividend for shareholders of record March 31, 2026, and payable May 1, 2026. Last night, we introduced our full year 2026 guidance, and I previously touched on some of our SHOP expectations. For 2026, we expect NAREIT FFO and NFFO per share at the midpoint to grow 6.9% and 1.2%, respectively. We expect total FAD at the midpoint to grow 7.8% to $250.2 million. Our full year 2026 guidance includes $230 million in additional future investments and average NOI yield of 7.8% comprised approximately 70% of SHOP investments, which we believe is a conservative assumption for the year.

Excluded from our guidance is any assumption for the early resolution of our NHC lease, which matures December 31, 2026. Negotiations are ongoing, and we expect to have more to report as the year progresses. Capital market activity in our initial 2026 guidance currently only reflects the settlement of our remaining forward equity and the retirement of our upcoming debt maturities using proceeds from our revolver. However, we expect our capital market activity to adjust as required to meet the company's liquidity needs due to changes in the timing and the amount of our investments and dispositions.

Once again, thank you for joining our call today. That concludes our prepared remarks. So with that, operator, please open the lines for questions.

(Operator Instructions)

Farrell Granath, Bank of America.

I first just wanted to start off with a question on the same-store SHOP guidance for 2026. I know that last quarter, there was some commentary around taking corrective measures and that we could potentially expect double digits in 2026 in that same-store portfolio. So curious of the initial guidance, is this reflective of just what you're seeing today, tutor plans of these corrective measures, which could potentially provide greater upside to that guidance?

Sure. This is Kevin. I would tell you overall, just the way we conduct ourselves is we want to deliver something that we feel very confident that we can achieve. And there is -- there should be opportunity within the portfolio from there. So it's a bit of an underpromise, overdeliver -- we do have some things that are going to take place in the back half of the year.

We mentioned that we have one building where 16 units are coming online. That building is 100% occupied. So that will be additive. Those units don't come on until May. And then we expect that it will grow through the balance of the year.

We're not expecting everybody to move in all at once. So we've got a number of things that we're focused on with the portfolio. We're focused on the sales pipeline, building the funnel. Typically, the first part of the year is a little bit softer with holidays and coming out of the winter. So we do expect better results out of the second half of the year.

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

That is our expectation. That said, we give you guidance based on what we have. We feel like we have some reasonable visibility into and what we can execute on. But as you noted, we outpaced the expectation that we said at the beginning of last year and would be -- we're working to do the same this year.

Austin Wurschmidt, KeyBanc Capital Markets.

Just, Eric, I wanted to go back to NHC, and I'm wondering, does it feel like the lease negotiations with the group are moving forward and maybe more importantly, constructively moving forward? And what is the probability that you think you'll reach a resolution in the next three to nine months?

Austin, this is Eric. We're in the thick of it right now. So I would describe our posture as we're in a quiet period regarding NHC.

Understood. Appreciate that. And then from the shop challenges that you guys have faced and you've talked about where you would have expected annualized NOI to restabilize a couple of years ago. I mean has that changed your approach to either underwriting new deals, or how you're structuring management agreements to provide any added flexibility moving forward?

Sure. This is Kevin. I would say it definitely impacts the way we think about deals, but we're also focused on more senior housing campus style products, ones that have assisted memory care. You recall these are former holiday properties that we're not the only ones that have had some issues with but making sure that we have a bit of that continuum, or it's the senior housing, the need-driven component is a component to the deal. I think it's something that we're focused on.

And as we touch on our management agreements are such that we do have flexibility should we need to make a change. That's never our -- it's never a desire of ours. Changes are very disruptive to the property. But if we need to, then we have that ability.

Got it. And then just last one. Eric, you highlighted the targeting of secondary suburban markets for deals. What's sort of the long-term growth profile for those markets, just given the demographics and affordability? And how would you characterize the labor pool for the markets that you're focused on?

Great question, Austin. We definitely pay attention to labor. For example, we tend to avoid Indiana because it has a tough labor market. And the buildings there tend to run a lot of agency labor. But it's no secret that there's a lot of migration from coastal areas to places like Tennessee and other places in the Midwest where housing is more affordable and the cost of living is more affordable.

So for the time being, as we look at Bickford and other Midwestern operators, they're able to staff their buildings with full-time employees and not have to utilize any agency labor.

And just from a growth profile perspective for those types of assets? I mean, how do you think about that over time?

Well, you look at our pipeline, we're pleasantly surprised at the number of deals and opportunities we're seeing now that we're gung ho on SHOP [and RIDEA.] So growth for us is more of an issue of managing it and underwriting it responsibly rather than trying to find it.

Juan Sanabria, BMO Capital Markets.

Just hoping you could help us think about stock growth and the guidance for '26, recognizing there's some struggles with the [x-Holiday] portfolio. But maybe if you can compare and contrast what's not the same-store pool, and how that's performing versus the same-store pool and kind of the expectations on (inaudible) RevPOR just so we can get a kind of a more holistic picture rather than just focusing on same store.

Sure. This is Kevin. I'll try to address your question, if I missed something, please reask the question. But when we're looking at what's not in same store right now, recall that -- two of them. One is the transition from triple net to SHOP.

The other is transition to a new operator. So we do have some transitional impacts that we're -- we had through the first part -- or sorry, the second half of 2025 and then on the newest we'll have some transitional impacts that we experienced in 2026. There's only been one of those that was the current manager. That group is performing to expectation. I feel very good about where they're at from an operation standpoint.

But overall, we'll be looking at is making sure that they're putting in the right systems and people feel like they've done a very good job of that. They're building their funnels. We're able to pass through some rate increases, but we're doing that responsibly to make sure that we're not losing occupancy while we go through these transitions. So when we were to look at this, it's more of a, I would call it, a forward look then -- so there might be a little bit of noise in the near term.

Overall, though, the transitions have gone pretty well. I would say just pulling one out the sincere transition we did last year that performed better than expectations through the second half of the year. We just finalized our budgeting process and have some solid growth expectations for them this year. So I think we're feeling good about where we're at with those operators. You'll see those roll into the same store starting fourth quarter of this year. So you'll have a little more incremental visibility on that piece here in the next couple of quarters.

Okay. That's helpful. Just maybe going back to, I think, maybe trying to ask Austin's question in a different way. I guess, holiday may be a unique situation, but I guess what have you learned that you think prepares you better to deal with (inaudible) in the growing pains in SHOP and/or transitions, et cetera, that should give us confidence about investments or activity in SHOP as you look to grow pretty significantly with that pretty compelling opportunity going forward with supply demand.

Juan, this is Eric. I would just remind everyone that the holiday shop was more of a science experiment that we backed into when holidays sold to Atria and Welltower. We've put a lot of CapEx in those buildings. We've changed managers. And as we compare them to the same holiday buildings that are at Ventas and Welltower from what we're able to surmise we're doing as good or better than they are with those buildings.

Our new SHOP portfolio, they're not same-store I feel very positive on. I would also point out that it's assisted living and memory care, not just independent living. And these buildings are performing well from the get-go. And we look at them for an eye towards double-digit growth, and we verify that with the operator when we do our pro formas and budget for year 2 growth. So as Kevin said, I think you'll start to see our same-store perk up in the third and fourth quarter when the one holiday building has units that come online and when the sincere buildings become same-store.

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

Sure, this is Kevin again. Every market is different. We are underwriting the local market fundamentals of each building that we're looking at. So each one is -- it's very hard to give a generalization here on how we're looking at those because they're all -- again, they're all different. One thing I will say, though, is based on the margins where they're at, if you can increase rates 5% a year, and hold your expenses to less than 4%, that's going to be 7% to 8% growth.

So we think that, that is very achievable, and we think that there is some potential for additional growth beyond that on the revenue line and a lot of these. So I like our chances here. I think that we're building a very good portfolio like our operating partners and their ability to pass through those increases, if not more, that's kind of in line with what we've seen with our triple-net portfolio as well. So I think we can do those good or better. So that's our opportunity, though, as John mentioned in his comments, we can continue to get some margin expansion as we grow the SHOP segment, that's going to add additional growth for us.

John Kilichowski, Wells Fargo.

This is (inaudible) for John. Just to switch gears a little bit on the 1,100 million of dispositions in guidance, with a little bit heading we were expecting here. Can you walk us through what's driving the higher volume, specifically what assets are being sold? And is primarily like just capital recycling up into SHOP or -- including non-core assets?

This is Kevin. It's really an operator relationship situation, coupled with the underlying assets not being core to NHI. So the profile of the communities is largely senior housing, but they're not relationships. We're going to grow. They're triple net in nature, and they're intensive from an asset management standpoint.

So we feel if we can move the capital to those relationships where we're going to have additional growth, not only from a whether it's a triple net or a SHOP deal that we do from the proceeds, something where we're going to get additional volume out of that customer be less intensive from an asset management standpoint meaning we're not spending so much time on one building of an operator really gives us a little more efficiency from an asset management standpoint, we've hired a fair amount of folks for asset management. We're building out that our bench and our analytics competencies I feel good about where we're at, but we need to make sure we're focusing them on the pieces that are going to be meaningful to NHI. And that's really what these dispositions are borne out of. Generally, we like to hold on to income. But I think this is the right decision here to make sure that we're focusing our team.

That's great. And just a quick follow-up on NHC to the extent you're able to comment. If you do renew the lease, how does that impact what you could reposition or sell versus our earlier discussions where you were talking about locating the SHOP from this portfolio? Would it be like an all or nothing scenario?

Could you ask that again? So if we do renew the lease, then what?

Does that impact what you could reposition versus -- or sell, I guess, because we're talking about some dispositions potentially being involved with this and (inaudible) retain some capital.

Fair question. And if I'll repeat your question back. So on the NHC lease if we were to sell some of the buildings, would that be redeployed? And the answer is yes, it would be redeployed into (inaudible).

Rich Anderson, Cantor Fitzgerald.

So the 7.7% to 8% SHOP same-store NOI guidance, just to clarify that, that's still just the 15 legacy holiday assets. Is that correct?

This is John. Yes, that's correct.

Okay. And I think you said your longer-term view on SHOP growth is sort of high single digit, low double digit. Is that also correct? So you sort of get a step-up after you sort of like address some of the issues that are going on in the legacy portfolio? Is that the right way to think about it?

Yes.

Okay. Obviously, leading up here. So at 9.3% of the portfolio today SHOP are at the end of the year. What's your target in terms of how big SHOP can become as a percentage of the total? And do you still think that you're competitive from a growth perspective because you're seeing growth approaching 20% from some of your larger peers.

Now that has a lot to do with occupancy lift. So is your same-store offering more of a rate growth versus expense growth phenomenon and less about occupancy lift? I'm just curious how you're approaching the same-store profile of SHOP going forward? And how big it could be in a couple of years from now?

Well, in terms of growth of NOI for the company, we've told people that last year, we doubled from 5% to roughly 10%. And this year, we could usually double that again to 20% and with an eye towards getting it up to 30 or beyond in terms of percentage of SHOP. So I still feel like that's achievable and on track. And I understand we have some catching up to do. But as you can see by our pipeline numbers, it's easier to find new deals when you're looking for SHOP and [RIDEA] not so much with leases.

In terms of same-store growth, I think the opportunity is one of margins. We see on the holiday portfolio a lot of margin opportunity, and we see on new not same-store rate opportunity and frankly, experienced operators that are taking over from, say, a mom-and-pop operator, who just isn't getting the margins that they could.

Okay. So it's a again, a lot of your peers are getting this occupancy lift, which is not a forever situation. So yours is more of a stabilized but still, as you point out, margin story and something in the 10% range on a foreseeable future type of --

That's fair, that's fair.

Hi, Rich, this is John. Look, let's just be honest about -- a little bit about the makeup of our SHOP portfolio. It was comprised of the holiday assets, which Eric touched on before. It's also comprised of these assets that we transitioned away from [Discovery to Sincere.] And that was the whole point of my discussing the return on invested capital that we're currently experiencing.

We strongly believe in the potential of these assets. We got to unlock the margin to improve that, and that's why we're talking about that. And at the same time, growth will help us improve our metrics over time as well.

Okay. Switching gears. On the outlook for this year, and the -- excuse me, $7.6 million of remaining Bickford rent repayment left on the table. Do you expect that all to be paid back in the next year or two? Like what's the cadence of that payback?

Well, this is Kevin. The -- what I would guess having to think about is once the rent reset happens, there's less cash flow overall to pay at least at the same rate. It is not something that we're just going to let go for free. So we'll be discussing with them what type of alternatives there are to pay that remaining balance or various other things that we can negotiate over but give NHI value. So it would still probably take a handful of years to pay that off if we just reset the rent and then just had to revise the formula and have it pay it out because we're not looking to take every last dollar from them.

They still got to be able to make sure they pay the people and invest in the company. So we're going to be mindful of that, but it's not going to just go away. NHI will get value out of it.

Kevin, that's April, right, the next one?

That's correct.

Okay. Lastly, so DAC is drawing some attention to CCRCs these days. I'm wondering when you think about your CCRC portfolio in terms free entrance fee portfolio, if you're seeing any more activity on the ground in terms of transactions and renewed interest in the space, any comment there? And maybe the answer is no, but --

Well, I think the answer for us is it's been a very good portfolio for us, and we very much appreciate working with our operating partner there. It did wonders through COVID and continue to perform very well. So it's always been something that we've had an eye on. We are also mindful of our concentration there and don't want to make sure we get upside down. So we will continue to look at those opportunities.

There's a few in the marketplace that we've been looking at. But we're also going to make sure we're rigorous with our underwriting criteria. So it's on the table. But not necessarily a direct focus, but something that we'll approach opportunistically. We have some great operating partners that do that space very well.

So it's something that I think we should continue to look at.

(Operator Instructions)

Omotayo Okusanya, Deutsche Bank.

A quick question again on the Bickford distorted rent. When you talk about getting value for the remaining amount of deferred rent, could it be -- I know in the past, you guys have kind of done the structure where rather than getting to the spot rent, you just kind of lowered the value of any kind of acquisitions you were buying from Bickford. Could it be something like that, that you guys continue to do to kind of make sure you get value for that relining different rent?

Sorry, Tayo, I missed part of your question there. You were asking what value we can get from Bickford and (inaudible) cash, that's the question.

Yes, exactly. So I know in the past, sometimes with the deferred rent rather than get the rent, you just lowered the valuation of an acquisition that you were making from Bickford. Is that kind of more of what we should expect to see?

Well, I don't want to guide you to anything specifically. We have the reset coming up April 1. So we'll be finalizing where rent sits going forward this month. The -- but yes, you're on the right track. In terms of what values out there, we've built several buildings with Bickford.

There's still another one remaining that could have some value like that. There were some other developments that we had looked at in the past. There's just some reimagination of the portfolio, whether we prune a little bit. I wouldn't think those are going to be huge numbers of buildings, but there is potentially some addition by traction that could help us to get additional rent. So we're -- we have a number of options, but there is a formula in place in terms of how rent gets reset.

So that would be the baseline for what we think. We believe that we're going to continue to get the aggregate number of rent that (inaudible) paid and then some going forward. And just as a reminder, they paid $5.3 million last year. So they've been really moving down that repayment number at a steady step. And we're happy with where we're at with them.

We've got a little more work to do. But we're in a pretty good spot.

Got you. And then one follow-up. With the NHC reset, and at some point, there was also the option of going with another operator and potentially looking at that option. Is that still on the table at this point, or are we kind of firmly just in the world of renegotiating with NHC?

I say that we're in a quiet period. We're in the thick of it right now, Tayo. So I just have to be careful what I say.

As we have no further questions on the line at this time, I would like to turn the call back over to Mr. Mendelson for any closing remarks.

Thanks, everyone, for joining today and for your interest, and we'll see you at a conference sometime soon.

Thank you. Ladies and gentlemen, this does conclude today's call, and you may disconnect your lines at this time, and we thank you for your participation.