NHI Targets More SHOP Growth in 2025, With ‘Good Momentum’ Thus Far

National Health Investors (NYSE: NHI) is preparing to further grow its senior housing operating portfolio in 2025 after “good momentum” last year.

The Murfreesboro, Tennessee-based real estate investment trust (REIT) will consider “select opportunities” to transition triple-net lease senior housing assets to its senior housing operating portfolio (SHOP), which currently numbers 15 communities.

Included in the company’s 2025 guidance is $225 million of incremental investments, with a $190 million prospective pipeline of future investments.

The company has letters of intent representing investments totaling $152.3 million, primarily sale-leaseback investments and a senior housing loan with a purchase option. The REIT acquired a 109-unit assisted living and memory care community in Montrose, Colorado, for $21.2 million in January.

“We still have the capacity and ability to move more quickly than other capital providers,” CEO Eric Mendelsohn said during Wednesday’s fourth quarter 2024 earnings call.

Mendelsohn also noted that the company is taking a recently launched proxy fight from activist investor Land & Buildings over the nomination of two board member nominations “very seriously.”

“The board has made significant changes over the last several years which reflect its commitment to its fiduciary responsibility, and in direct response to shareholder concerns, we appreciate everyone’s interest and hope that you’ll understand that we have no further comment on this matter,” Mendelsohn said during the earnings call.

On Wednesday, NHI stock fell 0.17% to rest at $71.17

‘Good momentum’ in SHOP segment

In 2024, NHI reported 32% net operating income growth within its SHOP segment, with guidance for 2025 ranging between 12% and 15% NOI growth for the current year with the balance sheet ready for future investment opportunities having raised $262 million in net proceeds of which $119 remains available in 2025, Mendelsohn said. 

“We had good momentum throughout 2024 and feel like we ended the year on a high note,” NHI Chief Investment Officer Kevin Pascoe said in response to an analyst question regarding future NOI guidance. “The 12 to 15% is a year-over-year basis, there might be some opportunity there where we’re evaluating some more operational structures and how there might be some cost savings.”

This would be done by “reducing incentives,” Pascoe said, having pushed operators to drive better performance and injecting CapEx dollars into communities with “some more work to do” on driving SHOP results.

“I think it’s safe to say that we’d be disappointed if we did not surpass last year’s total of $237.5 million,” Mendelsohn said of future investment opportunities.

That prospective investment pipeline has a “reasonable chance” of closing within the next 12 months, according to Pascoe. Between November 2024 and Wednesday, the company NHI had closed on $53 million in investments with an average yield of 9%.

In 2024, NHI also finished the year with approximately $425 million in ATM credit capacity with $368.8 million available for its credit revolving facility. 

NHI leaders also commented on a six-property lease with Bonita Springs, Florida-based Discovery Senior Living that was amended in 2023 with a May 1, 2025 reset to a minimum of 5% yield on gross investment, Pascoe noted.

While the lease has generated NOI growth, the buildings have “not performed as expected,” resulting in NHI considering transitioning the properties to another operator, Pascoe added. The properties generated $4.5 million in 2024 base rent and $1.2 million in deferral repayments.

In October, NHI noted operating challenges for senior living operator Senior Living Management (SLM) across a four-property portfolio as the operator faced questions about its ability to sustain operations and pay rent.

Those challenges continued in the fourth quarter of 2024, prompting NHI to transition two Louisiana properties now under triple-net leases to senior living management company the William James Group. The REIT also sold another property for $9.7 million in net proceeds, Pascoe said.

NHI will negotiate with SLM on what “a recovery would look like,” Pascoe said regarding the ongoing SLM sale.

“It’s still to be continued,” Pascoe said.

Resident fees increased 8.1% compared to 2023 driven by occupancy gains to 89.4% census as margin in SHOP improved 90 basis points to 23.2%, the strongest result since 2Q22, Pascoe noted.

Revenue per occupied room (RevPOR) increased 60 basis points with “plenty of runway” for future SHOP growth with the expectation of “several 100 basis points” of margin improvement over the long-term, Pascoe added.

“We expect elevated NOI growth for the foreseeable future,” Pascoe said.

Funds from operations (FFO) per diluted common shares in 2024 increased 3.6% to $4.55 per share. Guidance for normalized FFO per common share in 2025 by the mid-point is expected at $4.63, an increase of 4.3% from 2024. Guidance for funds after distribution (FAD) is $221.7 million, an 8.6% increase from 2024 guidance.

In October, NHI acquired 10 Spring Arbor communities for $121 million, and on Wednesday, leaders noted that cash rent in the fourth quarter 2024 increased $2.6 million “largely attributable” to new rent collected from that acquisition, according to Executive Vice President and Chief Financial Officer John Spaid.

But these increases were partially offset by lower cash rents collected that could be attributed to the SLM default, Spaid added.

Looking ahead, the company will extend over $200 million in term loan maturities into 2026 and retire $125.8 million in maturing debt for 2025, Spaid said.

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