National Health Investors (NYSE:NHI) reduced its full-year distribution guidance after its senior housing operating portfolio fell short of third-quarter expectations, even as the company continued shifting capital from skilled nursing into senior housing.
Chief Executive Officer Eric Mendelsohn said the company’s 15 same-store senior housing operating portfolio, or SHOP, properties delivered 19.5% year-over-year growth in net operating income (NOI), in line with its outlook. But weaker performance at properties outside that group reduced the total portfolio’s contribution.
“We are not satisfied with those results and are addressing the operating performance with our partners,” Mendelsohn said. He added that the company’s longer-term growth outlook for those properties remains unchanged.
Guidance reflects lower SHOP income and higher spending
National Health Investors revised its 2026 guidance to $4.68 to $4.70 per share for both NAREIT funds from operations (FFO) and normalized FFO, and $236.6 million to $237.7 million for funds available for distribution (FAD). Chief Financial Officer Todd Siefert said the FAD range represents a $5 million reduction at the midpoint.
The revised outlook includes about $2.3 million less SHOP NOI from the 42 properties in the portfolio at September 30 and approximately $2.8 million in additional recurring capital expenditures, partly offset by stronger expectations elsewhere in the business. Some routine spending was accelerated to support occupancy gains, Siefert said.
Third-quarter net income rose to $11.47 per share from $0.69 a year earlier, driven by a $541.6 million gain on the sale of the NHC portfolio. The company also recorded a $9.9 million impairment on a property classified as held for sale during the quarter and subsequently sold in the fourth quarter.
Both NAREIT FFO and normalized FFO were $1.12 per share, compared with $1.09 and $1.32, respectively, a year earlier. The latest quarter included $1.1 million in transaction costs for acquisitions the company decided not to pursue. Total SHOP NOI rose 134% to $11.5 million, aided by acquisitions over the preceding 12 months.
Occupancy and transition issues weigh on performance
Chief Operating Officer Chris Maingot said occupancy growth during the summer selling season was slower than expected because of transition-related disruptions and slower growth at certain legacy Holiday communities. Unusually high one-time expenses at select operators also affected results.
During the question-and-answer session, Maingot said operator transitions at newly acquired properties were more disruptive than expected. One portfolio had lower incoming occupancy than anticipated, while another experienced immediate move-outs. He said a group of same-store properties also continued to lag, although the overall same-store pool performed in line with expectations.
Maingot said the company is working with operators to ensure communities have sales staff, rent-ready units and locally appropriate pricing and incentives. Occupancy increased in August, September and October, he said, although the company expects it to taper during the holiday season. Move-in incentives and holiday-related expenses could also temper the near-term financial benefit.
Mendelsohn said some building capital expenditures were above original underwriting because improvements such as roofs and boilers were not budgeted. The company is also investing in features such as furniture and carpeting that prospective residents can see during tours.
Proceeds fund senior housing expansion
The July 1 NHC portfolio sale generated $555 million in net proceeds, and the company expects to recycle more than 95% before year-end, primarily into SHOP and investments expected to transition into SHOP, Mendelsohn said. Including an October acquisition, SHOP accounted for approximately 18% of total NOI, up from 9% entering the year.
Chief Investment Officer Kevin Pascoe said the company had completed $396.2 million in investments year to date at an average yield of 7.5%. That included $320 million in SHOP investments at an average first-year yield of 7.3% after routine capital expenditures.
National Health Investors has $285 million under signed letters of intent, including approximately $190 million expected to close in the fourth quarter. Those closings would bring 2026 investments to about $590 million, Pascoe said. The expected year-end acquisitions would initially be structured as net leases to fit the company’s planned Section 1031 exchanges, with conversions to SHOP anticipated in 2027.
Pascoe also said the company was considering selling a subset of same-store SHOP properties, with potential proceeds exceeding $100 million. He described a sale as the likely scenario but said the company was still evaluating its options.
At September 30, reported net debt to adjusted EBITDA was 3.6 times, or 2.4 times when adjusted for $340 million available for future Section 1031 exchanges. The board declared a quarterly dividend of $0.94 per share, payable January 29, 2027, to shareholders of record on December 31, 2026.
About National Health Investors (NYSE:NHI)
National Health Investors, Inc. (NYSE: NHI) is a real estate investment trust that owns and finances properties used for senior housing and health care. Founded in 1991, the company is headquartered in Murfreesboro, Tennessee. NHI’s portfolio includes senior housing communities, such as independent living, assisted living and memory care properties, as well as skilled nursing facilities. It typically works with health care operators through property leases and mortgage loans. The company serves markets across the United States.
