Greetings. Welcome to the National Health Investors 2Q 2025 Earnings Webcast and Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Dana Hambly. You may begin. Dana Rol

Thank you, and welcome to the National Health Investors conference call to review results for the second quarter of 2025. On the call today are Eric Mendelsohn, 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 call were released after the market closed yesterday in 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 and 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, 2024, and Form 10-Q for the quarter ended June 30, 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 Mendelsohn.

Hello, and thanks to everyone for joining us today. We followed a strong start to the year with an even stronger quarter, which exceeded our expectations. The second quarter's outperformance was multifaceted and driven by solid execution throughout the enterprise. The faster pace of acquisitions in the first half of the year, exceptional SHOP NOI growth and continued deferral collections on improving tenant fundamentals were all major contributors. Due to the outperformance and good visibility, we're raising our 2025 guidance for the second time this year. We increased the midpoint of our normalized FFO guidance per share by $0.09 to $4.80, representing year-over-year growth of 8.1%. With our improving growth and excellent coverage, we also announced last night that we are increasing the dividend for the first time in 4 years. Additionally, we're excited to share a milestone event for NHI. Effective August 1, we completed the transition of 7 properties from leases to SHOP, resulting in an increase to our annualized SHOP NOI of approximately $8.8 million or 57%. Following these transitions, SHOP will represent almost 10% of our consolidated NOI. Given the significant organic and external growth opportunities, we expect that percentage to grow exponentially both on a near-term and long-term basis. Since we established SHOP in April of 2022, we've been methodically preparing to grow this portfolio as we believe senior housing operations provide the highest growth potential with the best risk-adjusted returns in our investment universe. Through investments in personnel as well as other internal and external resources, we're confident that we now have established a strong foundation across our asset management, business development, accounting and legal functions to strategically expand the SHOP portfolio at a rapid pace. Turning to the SHOP results for the quarter. SHOP NOI increased by over 29% compared to the second quarter of 2024. While there were some nonrecurring benefits during the quarter, which Kevin will detail, we're pleased that the early strategy to focus on driving higher occupancy is now leading to improved RevPOR growth and margin expansion. RevPOR growth of 3.7% and NOI margin at 26.9% are both record results since SHOP's formation. We continue to see substantial organic upside in this portfolio. With the conversions, we expect pro forma annualized 2026 NOI growth to be double digits. The pipeline activity continues to make us optimistic that acquisitions will be a meaningful component of our growth profile for the next several years. We've announced investments of $175 million so far this year and currently have approximately $130 million under signed LOIs, which we expect to close in the next few months. This includes a SHOP deal valued at approximately $74 million as well as a purchase option that we've exercised on a large entrance fee community. The incremental pipeline at nearly $350 million is entirely focused on senior housing, including a significant number of SHOP deals. We expect to have several signed LOIs in the next 2 quarters. As I just mentioned, we expect acquisitions and SHOP acquisitions, in particular, to be a major contributor to our growth profile. While we view every deal based on its own merits, we also employ a portfolio approach in which we measure any new acquisitions impact on the yield and growth of the overall SHOP portfolio. Obviously, we like the deals, and we see many that offer tremendous NOI growth, and we evaluate situations in which the deal may open up a new relationship or geography where we see significant future opportunity. Through this approach, we are also developing a stable of institutional class operating partners that should allow us to source more opportunities with more seamless integration into our platform. Overall, our goal still targets aggregate initial yields to be accretive immediately with expected multiyear exceptional NOI growth. The balance sheet continues to be in great shape and very supportive of funding the significant investment pipeline. Our net debt to adjusted EBITDA at 3.9x is below the low end of our target range, and we have available liquidity of approximately $760 million. We believe this low leverage and strong access to capital create real competitive advantages and give us optionality when assessing our capital needs for the future. To sum all of this up, we're very excited about the multiple growth opportunities and our confidence in capitalizing on these opportunities has never been higher. As this is our first public conference call since the Annual Shareholders Meeting in May, I want to share a few comments. First, we want to sincerely thank our shareholders for the constructive dialogue over the years and especially leading up to this year's meeting. We believe your valuable feedback has informed and validated our strategic direction. Also, your direct correspondence has resulted in considerable Board changes, including this year's retirement of our 2 longest tenured Board members, the recent appointments of Candice Todd and Rob Chapin and the declassification of the Board. Lastly, the outcome of the vote clearly informs our Board that there is more work to be done, particularly with Board refreshment. The Board is committed to improved governance and understands the role it plays in delivering long-term value for our shareholders. On that topic, the special Board committee tasked with overseeing the NHC lease renegotiation is actively engaged with management. While we're not providing details of the engagement or the ongoing discussions with NHC, we are confident that the special committee's interests are fully aligned with our shareholders to execute a deal that delivers the best possible value. I'll now turn the call to Kevin to provide more details on our operations. Kevin?

Thank you, Eric. Our focus during the quarter was on transitioning 6 previously leased properties, including 5 assisted living and 1 independent living community to Sinceri Senior Living under a SHOP operating structure. This was accomplished on August 1, and we're thrilled to be working with Sinceri, an accomplished operator with 76 communities in its portfolio spanning 24 states. NHI retains 100% ownership of this portfolio and has engaged Sinceri under a management agreement, which includes incentives based on growth in both NOI and real estate valuation. We also transitioned an independent living community in Tulsa, Oklahoma from a lease to the existing SHOP venture that we have with Discovery Senior Living, which increases that portfolio to 10 properties. Discovery was the operator under the lease, so there should be no disruption in operations. These 7 properties generate approximately $8.8 million in annualized SHOP NOI, and we expect them to have double-digit NOI growth profile in 2026. John will provide more details on the impact of the transitions to this year's guidance. The pipeline is very active, and we are evaluating approximately $343 million in senior housing deals through potential investments in SHOP, fee simple real estate and mortgage loans that have preferably a path to future ownership. More than 50% of the pipeline are SHOP deals with initial yields that are accretive to the company. We are focused on assets where there is a clear path to significant NOI growth. As Eric noted, we're also interested in acquisitions that provide other strategic benefits such as establishing a relationship with a new operating partner where we see future opportunities to scale in a specific geography. With Sinceri, we feel we are getting the best of both worlds in double-digit NOI growth and significant flexibility to grow that relationship. Turning to our SHOP performance. Our same-store SHOP portfolio of 15 communities increased NOI by 29.4% year-over-year to $3.8 million. The quarter did benefit from nonrecurring items totaling approximately $200,000. Adjusting for these items, we are still quite pleased that the pro forma rate was over 21%. As we've talked about, our strategy in 2023 and 2024 was to drive occupancy higher, which we did successfully. With occupancy over 89% for the last 3 quarters, our focus has shifted to pricing. We are encouraged to see early results in the RevPOR growth of 3.7% compared to the second quarter of 2024 and 2.1% compared to this year's first quarter. Due to the excellent growth year-to-date, we have moved our full year NOI growth rate slightly higher to a range of 13% to 16%. This implies some slowing in the second half of the year, which is driven by some recent softness in occupancy, but we're optimistic that this trend reverses itself in fairly short order. Our longer-term view is unchanged, and we actually have higher conviction in the margin potential following the strong second quarter results. Across the triple net portfolio, we are generally experiencing the continuation of solid trends with no rent concessions, continued collection of deferred rents in excess of our expectations and stable occupancy and EBITDARM coverages. Bickford continues to generate strong NOI, and we are encouraged to see the recent occupancy rebound. Bickford's second quarter occupancy increased by 20 basis points from the first quarter to 85.2%. Trailing 12-month EBITDARM coverage through March 30, excluding deferral repayments, was 1.66x. Including the repayments of approximately $4.8 million over that timeframe, Bickford's pro forma coverage was a very comfortable 1.46x. Bickford repaid approximately $1.2 million in deferred rent during the second quarter and has an outstanding balance of $10.4 million at June 30. Recall that Bickford's next rent reset is April of 2026. Due to their solid performance, we expect that we will be able to capture more than a quarterly run rate of deferral repayments into the future base rent and largely eliminate the variability that these repayments can cause to our outlook. Before I turn the call over to John, I'd like to announce we have hired Grant Johnston to fill the new role of Senior Vice President of Asset Management. Grant has over 2 decades of asset management and health care finance experience across senior housing and skilled nursing industries and has extensive relationships with operating companies, private equity and capital providers. Grant is part of that strong foundation Eric mentioned earlier, and we expect great contributions from him. I'll now turn the call over to John to discuss our financial results and guidance. John?

Thank you, Kevin, and hello, everyone. Let me begin with our second quarter results. I'll be using average diluted common shares for all per share results. For the quarter ended June 30, 2025, our net income per share was $0.79, down 2.5% from the prior year. Our NAREIT FFO results per share for the second quarter compared to the prior year period increased 0.8% to $1.19 per share. Our normalized FFO results per share for the second quarter increased 3.4% to $1.22 per share compared to the prior year second quarter. During the second quarter, we recognized a $1.5 million gain from our equity method investment and $1.4 million in lower credit loss expenses, which positively impacted net income, NAREIT FFO and normalized FFO. When reviewing our performance this quarter, please recall that last year's second quarter results included a lump sum $2.5 million deferred rent recovery from one of our cash basis tenants. FAD for the quarter ended June 30 compared to the prior year period increased 8.1% to $56 million. NOI from our SHOP segment for the quarter ended June 30 increased 29.4% to $3.8 million compared to the prior year period. The year-over-year SHOP common shareholder FAD contribution was up 32.6% to $3.4 million after adjusting for routine capital expenditures and noncontrolling interest. For the 6 months ended June 30, SHOP revenues increased 5.7% to $28.2 million compared to $26.6 million in the prior year period. SHOP expenses grew 2.4% from $20.8 million to $21.2 million, and the margin expanded 241 basis points as a result of improvements in occupancy and RevPOR. In the second quarter, our cash rents increased $4.6 million year-over-year. Cash rents attributable to our investment volume contributed $5.9 million. And our existing lease escalators, negotiated step-ups and percentage revenue rents contributed an additional $1.7 million and represents a 2.7% increase in those rents year-over-year. Offsetting these increases were our cash rent changes associated with the previous year's various transition properties, which represented only a $200,000 reduction in rents on those properties. Finally, as I previously mentioned, further offsetting these changes was last year's $2.5 million lump sum deferred rent payment associated with one of our cash basis tenants. Interest expense for the quarter was flat year-over-year, while weighted average common diluted shares were up 7.5% to 46.8 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. Sequentially, compared to the first quarter, cash G&A, excluding proxy fight expenses, increased $800,000, primarily due to compensation expenses. Legal expenses were modestly down sequentially Q2 over Q1, but still at an elevated level due to the company's increased investment in SHOP activities. In the second quarter, we completed the acquisition of a senior housing portfolio for $63.5 million. We also closed on a $28 million senior housing construction loan with an existing operator. Our total funded investments for the 6 months ended June 30 was $161.5 million. This total includes our new acquisitions, net of one property acquired in the first quarter through a deed in lieu of foreclosure as well as our funded mortgage and loan commitments plus our investments in our existing real estate. To meet our investment needs, we utilized proceeds from mortgage and loan payoffs totaling $35.4 million as well as $123.5 million in proceeds from new equity. Year-to-date, our paid dividends plus $76 million in debt retirements were well supported by our operating cash flow and other liquidity sources. During the quarter, we settled just under 800,000 common shares from our Q4 2024 and Q1 2025 forward ATM activity at an adjusted forward price of $74.71 per share after fees and forward costs for proceeds of approximately $58 million. Additionally, we again activated our ATM and sold on a forward basis approximately 1.3 million common shares at an average price before fees of $72.50 per share. At June 30, 2025, we had total escrowed forward equity proceeds of approximately $102.3 million available to us in exchange for the future delivery of 1.4 million common shares at an average price of $71.03 per share. We also ended the quarter with $18.6 million in cash on our balance sheet and $322 million in revolver capacity. During the second quarter, we retired $75.7 million in secured debt, which brings our secured debt balance to 0. We also extended our $200 million term loan for 6 months to December 16, 2025. We have a $50 million senior loan maturing in November and intend to extend the term loan maturity in the third quarter for an additional 6 months to June 2026. Our balance sheet ended the second quarter in great shape. Our net debt to adjusted EBITDA ratio was 3.9x for the quarter, just below our stated 4x to 5x leverage policy. Our interest coverage ratio was stable sequentially and improved year-over-year to 4.7x despite retiring $151 million in lower rate fixed interest rate debt since the second quarter last year. At June 30, our liquidity was approximately $760 million, which includes escrowed forward equity, cash, excess revolver capacity and up to an additional $316 million in available ATM capacity. We continue to monitor long-term bond rates and expect to utilize public debt to further improve our liquidity. 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 September 30, 2025, and payable October 31, 2025. This represents a 2.2% increase and is our first dividend increase since the first quarter of 2021. We also adjusted our full year 2025 guidance, which includes increases to our normalized FFO and normalized FAD results. Our guidance includes the impacts from the recently announced SHOP conversion and our other expected results. Compared to 2024, NAREIT FFO guidance at the midpoint is $4.48 or a decline of 1.5% and normalized FFO at the midpoint is $4.80 or an increase of 8.1%. Compared to our May full year guidance, we decreased NAREIT FFO by $0.19 per share and increased normalized FFO by $0.09 per share. Our guidance for FAD at the midpoint is $228.9 million, up from the May guidance of $225.1 million and represents a 12.1% increase over 2024. Included in our guidance issued last night are just announced RIDEA SHOP conversion expectations, which commenced August 1. During the third quarter and subject to final post-closing reconciliations, we expect to write off approximately $12 million in straight-line receivables associated with the termination of the Discovery leases, and we conservatively estimated between $1 million and $1.4 million in losses upon operations transfer, which will both be adjusted out of our normalized FFO and FAD results. Our guidance includes our expected 5-month NOI contribution from the conversion SHOP operations in the range of $3.6 million to $3.7 million as well as approximately $500,000 in routine CapEx for the remainder of the year. During the third quarter, the company also expects to recognize Discovery lease revenues totaling approximately $3.3 million, subject to final post-closing reconciliations. Our guidance includes same-store SHOP NOI growth in the range of 13% to 16% over 2024, which is up slightly from 12% to 15% in prior guidance. Guidance also includes the continued collection of deferred rents and the fulfillment of our existing commitments. In keeping with our past recent practice, our updated 2025 guidance includes $105 million in additional new unidentified investments at an average yield of 8.1%. Our guidance includes a small amount of forward equity utilization between now and the end of the year, but our actual use will be dependent upon the volume and timing of additional new investments. Finally, guidance continues to include assumptions for additional costs and concessions related to normal asset management transitions, dispositions and loan repayments. 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] Your first question for today is from Austin Wurschmidt with KeyBanc.

Eric, it sounds like you have a lot of positive momentum on the investment front, but there was a bit of a delay in closing, I believe, on some of the investments and that decrease in the unidentified investments assumed in guidance. Can you just give some additional detail what's driving the delay and just what the confidence level that everything is moving forward from here?

Austin, this is Kevin. I would just characterize it as a timing issue. As we talked about during the quarter, we're very focused on the conversion. We still have a very robust pipeline. We've got a couple of deals under LOI that we expect to close in the not-too-distant future. So I don't view it as a disruption. It's just more timing than anything else.

Appreciate that. And then you guys have talked about in the past last quarter or so walked away from a larger portfolio transaction. I don't think you kind of flagged whether or not you continue to evaluate those deals outside of what you've quoted in the pipeline. Anything you can share in terms of the opportunity set and what the desire or likelihood is that there's something out there that could fit nicely within the portfolio to continue to grow as a percentage of the overall entity?

Sure. This is Kevin again. I think when we look at the pipeline, what we're quoting are things that are -- we're actively working. There's a likelihood that we issue an LOI, but there are also ones that are generally under $100 million in size. So it's stuff that's a little more tangible. We absolutely have some bigger deals in the pipeline that we're evaluating, and we have the personnel and the bandwidth to be able to take it down. We also just don't want to send the wrong signal and make the pipeline look like it's bigger than it should be when those deals have -- generally have some more nuances to them. So there's a few that are still floating around. We still continue to evaluate some larger portfolios. It's really just a sense of making sure we have the right operating partner. It's the right profile and it checks a lot of boxes.

And from a funding perspective, can you just remind us, should we think about a leverage-neutral approach to funding investments or whether we could see you drive down leverage further over time? And that's it for me.

Yes, Austin, this is John. So our policy is usually maintain leverage neutral. But as you noticed, we were in the market talking to debt investors in March. That was prior to Liberation Day. Liberation Day was very disruptive. We've noted that during the period of time earlier this year, our cost of equity was pretty close to our cost of incremental long-term debt. So we've pivoted to utilizing a lot more equity. That's not our desire. Our desire is to stay more leverage neutral. But that's going to be market conditions and driven by market. And we're fortunate enough to have options here to provide for liquidity from different sources.

Your next question is from Omotayo Okusanya with Deutsche Bank.

Good execution this quarter. Just around Discovery, again, they're still a top tenant of yours. I think the subset is 3.2% of NOI. Just curious how you're thinking about that overall relationship today because again, you transitioned a bunch of assets away from them, but then there's this one independent living asset that you actually check with them in the SHOP portfolio. Just wondering what some of the challenges are that caused some of the transition and just how you're thinking about the overall relationship today?

Tayo, this is Kevin. As it relates to Discovery, they're still going to be an ongoing partner of ours. So there -- we have 10 buildings with them in SHOP. We continue to see some NOI growth within that portfolio and expect more out of them. So they're going to be a piece of our business going forward. As we talked about on the last call, it's a matter of making sure that we're promoting the things that are going well within the relationship, which is why we moved over the independent living building from triple net to SHOP. We want to promote that piece of it. So you'll continue to see them be a piece of our business. They're a large operator in the space. So we like having them as a customer, and we'll see what the future brings for us there.

But on the assisted living side, is there something thematic with those assets you transition? Do they not have scale in those markets? Or just kind of curious why that decision was made?

I think this is a function of there smaller buildings and secondary markets. Discovery had done an okay job coming out of the pandemic and getting them turned around. But as we've really just described, I generally think they do really well with bigger buildings and more primary markets. They've done a decent job here, but we wanted to make sure that we had the right focus, not to say they weren't giving focus to the buildings. It was just a function of it was time for a change and wanted to make sure that we had a partner that was going to be able to succeed with smaller buildings in the secondary markets and think that there's still a fair amount of growth that's left in these, which is why we made this transition.

Makes sense. And then one other quick one for me. I think you made a comment that SHOP there was like some near-term softness in occupancy you saw maybe post 2Q and you were kind of hoping it was just a temporary thing. Could you just talk a little bit about what you're seeing out there and what may be causing that, whether it's just you're starting to ramp up on pricing or maybe that's what caused the pullback?

I think it was really 2 things. There was some change in kind of the local leadership in some of the buildings, which can sometimes cause a little bit of disruption. I don't want to offer an excuse for that. But I think there was an element of just moving some people around, making sure we have the right people in the right seats that's accomplished. And then the other part of it is really just some abnormal move-outs higher than normal. The flows in and move-ins have been fairly consistent. It was just kind of an abnormality on the move-out side. So we think that will kind of come back to the mean, and we'll continue to see growth there.

Your next question for today is from Farrell Granath with Bank of America.

This is Farrell Granath. I first just wanted to touch on the recent hire of Grant. And how does that play into how you're thinking about either your investment or strategy when expanding into either the SHOP business or just expanding into senior housing generally?

This is Kevin again. The focus for us was to make sure that we have our asset management team in a very good spot to be able to take on where the business is going, which is going to be more of a SHOP focus. And that's going to require us to have an expansion of oversight. So we hired in a senior person in Grant. We're going to be putting people in the right seats. I use that phrase once already, but using it here again to make sure that we have the right oversight. We have great people on our team, and I think there's a lot of room for them to grow. We just need to make sure that we have our systems and processes down when it comes to SHOP, so we can expand that piece of the business. So once we get that set, we can further accelerate the pipeline and make sure that whatever we bring in the front end is going to be managed appropriately, and we're going to see the growth that we expect out of it.

Great. And also on the SLM, I know you had received some of the loan payment that you had previously disclosed last quarter. Would you expect to receive any other payments going forward? Or has there been any other development?

No further developments. We have an agreement with them where there are some scheduled payments. Frankly, they're a foundering operator right now. So we'll see what happens with them. They're not going to be -- I view this as largely wrapped up. We have a few payments that I think they'll make where we have a mortgage property, but it will be small, and it's just -- it's not really going to move the needle significantly. And we still do have credit on the guarantee with guarantees that we have behind it. So we have recourse should they not perform. But at the end of the day, again, we're talking about a very small percentage here.

Great. And one last one for me. For the Discovery deferral payments with the termination of the lease, I thought there was a comment about that you would expect to collect the remaining deferral balance. I was just wondering if you could touch on how much that was in total, what you could expect to come in?

This is John. So everything was approximately $3.3 million. So it's not quite the entire deferral balance.

Your next question is from John Kilichowski with Wells Fargo.

Maybe the first one for me just going to be on NHC. Could you give us maybe a progress report on how those discussions are going? And then maybe also on the performance of that portfolio to date from a coverage perspective?

Easy questions. This is Eric. So the discussions are ongoing. I can't really give you the details, but the special committee of the Board that was formed of nonconflicted directors has met. We discussed our strategy, and that is in progress. NHC has received some communication about that strategy. So things are moving, and that's about all I can give you there on that update. And then in terms of coverage, as I'm sure you probably know, we report their corporate coverage but it has improved to over 4x. If you look at Page 7 in our supplemental, you'll see the number 4.16x for NHC on their first quarter 2025 coverage. So as an enterprise, they're doing really well and their ability to pay whatever the negotiated new rent is should not be an issue.

Got it. Very helpful. And then an extension of that is, in the past, you've mentioned the potential to do some dispositions out of that portfolio come the turn of the new lease. Are you able to maybe size some of that for us? I don't know if you can talk about, is that a 5% or 20% of the portfolio you're looking at? Or are there certain states maybe that you could speak to? Just something that can help us think about what that portfolio is going to look like going forward?

The way I think about it is from a pure asset management perspective, which means that you can call some of the underperforming buildings or more difficult states and come up with a better portfolio that possibly could pay more rent. So as I've said in the past, a lease renewal could look like a combination of buildings that are sold and remaining buildings that are paying higher rent.

We have reached the end of the question-and-answer session, and I will now turn the call over to Eric Mendelsohn for closing remarks.

Thank you, operator. Thanks, everyone, for your attention, and we look forward to seeing you at NAREIT or at some other investor conference.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.