National Health Investors (NHI) Q2 FY26 earnings call: guidance and Q&A

Seeking color on the size and timeline for strategic alternatives being evaluated for the same-store portfolio, given it's a "subset."

Eric Mendelsohn stated they are careful due to competitive and employee sensitivities but confirmed the goal is to prune underperforming assets and develop others. The aim is for transactions to be accretive, considering return on invested capital, debt reduction, and reinvestment. He wants to get it done this year.

“And our goal as good stewards of capital is to make the transaction accretive or as close to accretive as possible. And the way we think about that is we look at the return of invested capital on the asset. And if it is lower than we want, then we compare it to, well, gee, if we sold something, could we pay off some debt.”

asked by William John Kilichowski · answered by D. Mendelsohn

How the business will look different in the next 6-12 months following recent C-suite appointments (COO, CFO).

Eric Mendelsohn explained that with SHOP exposure growing from 5-6% to nearly 25%, the new COO (Chris Maingot) will focus on operations and asset management, bringing private equity mentality. This frees Kevin Pascoe (CIO) to accelerate acquisitions, aiming for $500-$700 million annually, up from $200-$400 million.

“Hiring a COO does 2 things. It gives Kevin an opportunity to put the pedal to the metal on acquisitions. And I think that we have a good brand and a good opportunity to partner with operators that Kevin can exploit and use to grow our platform and ramp up our acquisitions. We talk about a run rate of 200 to 400 a year. I'd like to see that go to the 500 to 700 a year.”

asked by William John Kilichowski · answered by D. Mendelsohn

Update on larger portfolio deals being evaluated and confidence in deploying the remaining $334 million of NHC proceeds via 1031 exchange to avoid a special dividend.

Kevin Pascoe confirmed active pipeline including larger portfolios, emphasizing disciplined underwriting over asset aggregation. Eric Mendelsohn stated they will do everything to avoid a special dividend, noting it's a "headache" for investors, and they have tools like "throwback dividends" (borrowing on future dividends for present coverage).

“I feel -- again, if we're good stewards of capital, we'll do everything we can to avoid the special dividend. It's a headache for certain investors, and there's some tax implications to our investors. I know they'd rather not deal with. So we're going to do everything we can to avoid that special dividend and someone asked about a throwback dividend, which is not a reference to nostalgia, but it is the ability to borrow on future dividends to get coverage in the present. So we have a lot of tools in our toolbox.”

asked by Austin Wurschmidt · answered by D. Mendelsohn

Inquiry about the pricing spread between larger portfolio deals and smaller "singles or doubles."

Kevin Pascoe noted the spread has significantly closed in the last 6 months, from at least 100 bps to 25-50 bps. The overall market has also shifted down by at least 100 bps, with year-1 yields now closer to 6-6.5% for higher quality assets, and B-type properties in the 7s.

“That spread has closed pretty significantly over the last 6 months. It used to be at least 100 basis points. I'd say it's probably 25 to 50 and the whole market has shifted down over that period of time as well to at least 100 basis points. What I think a lot of news clipping used to say year 1 7. We're seeing some pressure on that number now, and it's probably closer to 6%, 6.5% on higher quality stuff, if not a little bit lower. And then you'll see even on your -- what I would consider maybe B type property, they're in the 7s now.”

asked by Austin Wurschmidt · answered by Kevin Pascoe

Questioning why the 40-50% SHOP exposure target is a "3-year plan" given current activity, suggesting it might be a "beatable target."

Eric Mendelsohn acknowledged his tendency to "underpromise and overdeliver" and agreed they could potentially achieve the target faster. He noted market trickiness prevents certainty but implied an internal ambition for quicker execution.

“I agree, Rich. As part of my internal wiring is to underpromise and overdeliver. So if you were to press me on that, I would say, yes, of course, I think we can do better as well and do it faster, just as we have gotten to this point faster. But the market is tricky, and I can't give you certainty on that.”

asked by Richard Anderson · answered by D. Mendelsohn

How NHI incentivizes operators to convert triple-net leases to SHOP, especially if rent coverage is good, beyond just lease expirations.

Kevin Pascoe explained that conversions can happen sooner than lease expiration if operators seek to access locked-up value, need capital for expansion/CapEx, or want to get off a guarantee. NHI can provide capital in exchange for cash flow, making it a negotiation around valuation and relationship fit.

“There's absolutely a way to get there sooner. I think the lease expiration is one avenue. But the other way would be if there's an ask, if you will, from the operating partner. It could be that they want to access that value and there might be a payment associated with buying out the lease coverage. It might be that they want to do an expansion or have some other capital needs, and this gives us an opportunity where we're the capital provider rather than layer on more lease payment, do we go ahead and do a conversion.”

asked by Richard Anderson · answered by Kevin Pascoe