Q3 2026 National Healthcare Properties Earnings Call - NATIONAL HEALTHCARE PROPERTIES INC

Explicit Guidance:

• 2026 Full-Year Shop Same-Store Cash NOI Growth: Increased to 16.5%–18.5% (up from prior guidance).
• 2026 Dispositions: Total of $1.1 billion (includes all OMF properties except four slated to close early 2027 and two non-core shop communities totaling ~$50 million).
• 2026 Acquisitions: Guidance of $425–$645 million (low end includes YTD closings; high end includes definitive agreements expected to close in Q4 2026).
• G&A and Equity-Based Compensation: Full-year 2026 guidance remains unchanged from previous quarter.
• 2026 Recurring CapEx: Segment-specific guidance provided, separating same-store shop portfolio from OMF properties (including amounts spent on sold assets).
• FFO Per Share: No specific numerical guidance provided for 2026; management expects to provide inaugural FFO per share guidance in Q4 2026 results (early 2027) once portfolio and balance sheet transformation stabilizes.
• OMF Same-Store NOI Growth: Guidance discontinued; Q4 2026 expected to be generally consistent with Q3 2026 levels.

Business-Segment Outlook:

• Portfolio Transformation: Expected to close the sale of the final four OMF properties in early 2027, completing the transition to a pure-play senior housing REIT (only two in public markets).
• Shop Segment (Same-Store):
  • Occupancy: Currently 86.7%; management sees a "long runway" for growth, with a long-term goal of stabilizing in the mid-86% to high-80s range.
  • Revenue (RevPOR): Q4 2026 and 2027 outlook includes new leases executing at 2027 street rates (5%–6% renewal rate increases anticipated) and higher pricing power in assets exceeding 90% occupancy.
  • Margins: Expect broadening pricing elasticity and improved flow-through of incremental revenue to NOI as occupancy expands without proportional staffing increases.
  • Operational Focus: Concessions are being scaled back; focus shifting to rate/margin expansion, though concessions remain a tool for specific "focus" communities (approx. 9 properties) monitored bi-weekly.
• Acquisition Pipeline: ~$388 million in assets (1,385 units) expected to close in Q4 2026 or early 2027. Pipeline quality viewed as higher than same-store portfolio, with average occupancy in the high 80s and yields underwritten at ~7.4% (Year 1) and 8.7% (Year 3).
• Operator Expansion: Currently 4 partners (Senior Lifestyle, Discovery, AgeWell, Priority Life Care); adding Sincerity Senior Living (via acquisition of "PLC") near-term; target is to have north of 10 operators long-term to facilitate best practice sharing.
• Watch List/Pruning: "Focus communities" (lower occupancy) are monitored bi-weekly; assets failing to improve are subject to potential divestiture.

Market and Competitive Outlook:

• Competition: Reduced competition from leveraged buyers due to higher interest rates; management views itself as a "go-to" owner for operators due to efficient diligence and closing capability.
• Deal Sourcing: ~Vast majority of pipeline sourced via operator relationships; significant "winning bids" in bankruptcy proceedings (consideration to be funded with ~$65–$70 million in NHP OP units/shares).
• Pricing Power: Anticipated to strengthen in Q4 2026 and 2027 as concessions expire and new leases reflect higher street rates.
• Asset Quality: Acquisition focus on "A-operator, B-market" strategy, specifically seeking assets with operational upside (common area refresh, unit upgrades) rather than those requiring basic fixes.

Macro / Industry Outlook:

• Demand Drivers: Serving an aging population with severely constrained new supply.
• Interest Rates/Cap Rates: Management notes less competition from levered buyers; expects acquisition yields to remain in the mid-sevens range (approx. 7.5%) with ~130 bps expansion by Year 3.
• Leverage Target: Long-term goal to maintain net debt/EBITDA below 5.0x, aligning with investment-grade peers. Q4 2026 expected to reduce leverage meaningfully following OMF exit.
• FX/Other: No specific macro commentary on FX or tariffs; focus remains on domestic senior housing fundamentals.

Strategic Initiatives:

• OMF Exit: Completion of ~$1.1 billion in OMF dispositions and debt repayments (including $332M Fannie Mae loan) to achieve investment-grade balance sheet profile.
• Acquisitions: Execution of $425–$645 million in acquisitions in 2026; pipeline includes bankruptcy assets and non-binding LOIs.
• CapEx: Focus on revenue-enhancing projects (common area refresh, floor replacement) rather than capital-intensive repairs; ~$10 million aggregate expected for pipeline deals.
• Governance: Board director selection process expected to conclude "shortly" to enhance board composition.
• Credit Facility: Recast facilities ($1.2B total commitment, $750M revolver) with maturity extending to August 2031; provides capital for growth and refinancing.

Risks and Headwinds to Outlook:

• Timing/Execution: Potential volatility in earnings timing due to portfolio transformation and disposition closings (e.g., four OMF properties closing early 2027).
• Seasonality: Q4 seasonality (weather, flu season) could impact occupancy, though management is optimistic for Q4 2026.
• Concession Efficacy: Risk that concessions do not lead to desired long-term occupancy if market conditions worsen; specific "focus" assets may require pruning.
• Due Diligence/Closing Conditions: Pipeline deals subject to standard due diligence, closing conditions, and conversion of LOIs to definitive agreements.
• Regulatory/Policy: Referenced general SEC risk factors regarding actual results differing from forward-looking statements.

Management Tone on the Future:

• Confidence: High confidence in the strategic pivot, citing "pivotal quarter" results and "meaningful advancement" of priorities.
• Optimism: Expresses optimism regarding 2027 top-line story, "upside" from pricing power, and "plenty of runway" for occupancy growth.
• Discipline: Emphasizes disciplined, selective approach; willing to divest underperforming assets ("prune") rather than hold inefficient ones.
• Shift in Narrative: Transitioning from growth-at-all-costs to "investment-grade" quality, profitability focus, and operational efficiency.

Miscellaneous:

• Yield Expectations: 2026 YTD acquisitions yielded ~7.9% Year 1 and ~9.4% Year 3.
• Capital Structure: Net debt to EBITDA slightly over 6x currently; expected to drop significantly below 5x post-O MF exit.
• Divestiture Details: One opportunistic sale in California at 1.7% cap rate (land value driven); other pruning moves expected to be low cash-flow impact.