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

Thank you for joining us and welcome to National Healthcare Properties 3rd Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star1 again. I will now hand the conference over to Mike Ozuna, Director of Investor Relations. Mike, please go ahead. Welcome to the third quarter 2026 webcast for National Healthcare Properties, Inc. All participants will be in listen-only mode. Please note, this event is being recorded. Also note that certain statements and assumptions in this webcast presentation, which are not historical facts, will be forward-looking and are made pursuant to safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-thinking statements are subject to certain assumptions and risk factors which could cause the company's actual results to differ materially from the forward-looking statements. The company refers you to its SEC filings, including its most recent form, 10-K, for detailed discussion of the risk factors that could cause these differences and impacts in its business. During today's call, the company will also discuss certain non-GAAP financial measures. These measures should not be considered in isolation or as a substitution for financial results prepared in accordance with GAAP. The company will provide a reconciliation of these measures to the most directly comparable gap measure as part of its third quarter 2026 earnings supplemental on its website at www.nhpread.com. A question and answer session will follow the prepared remarks. Also, please note that a replay of the webcast will be available on the company's website later today. I would now like to turn the call over to the company�s executive management team. Please go ahead, Michael. Thank you, Mike. Good morning, and welcome to National Healthcare Property's third quarter 2026 earnings call. I'm Michael Anderson, Chief Executive Officer of NHB, and I'm joined today by Drew Babin, our Chief Financial Officer, who will speak to our financial results and outlook in greater detail following my remarks. On our first two earnings calls as a public company, we outlined three strategic priorities. First, grow the shop portfolio both organically and through disciplined acquisitions with best in class operators. Second, concentrate our capital in senior housing. And third, build a balance sheet consistent with an investment grade on secured issuer. The third quarter meaningfully advanced each of those objectives. Beginning with the portfolio, when we announced our first outpatient medical sale in May, we expected shop to represent approximately 60% of our cash NOI. Six months later, we have sold, placed under definitive agreement, or signed a letter of intent for every outpatient medial facility we own. In September, we closed the sale of the first 30 properties in our previously announced portfolio for approximately $198 million. The remaining 56 properties in that portfolio are under agreement for approximately 331 million, with the buyer assuming approximately $219 million of secured debt. Also in September, we announced a definitive agreement to sell an additional 40 properties for approximately $531 million, and we signed a non-binding letter of intent to sell the final four properties. We expect both to close in the fourth quarter, subject to customary closing conditions. Together, the 126 properties sold or under definitive agreement represent approximately $1.1 billion of gross proceeds at a trailing 12-month nominal cap rate of 7.5% and an economic cap rate at 6.8%. Upon closing of these transactions, NHP will become a pure place senior housing operating REIT, one of only two in the public markets. All of our net operating income will come from senior housing operating properties in which approximately 97% of revenue is derived from private payers, serving an aging population by the time of severely constrained new supply. Turning to operations, on our second quarter call, we explained that we and our operators had chosen to use short-term concessions at certain lower-occupancy communities. We believed that this approach could weigh on third-quarter same-store NOI growth, and that we believed it was the right long-term decision to accelerate occupancy at those communities. Our third- quarter results showed that our strategies worked. Same-store cash NOI grew 13.6% year-over-year, and same-store cash NOI margin expanded 150 basis points to 24.3%. These results have included the cost of concessions, as well as the impact of a one-time insurance reimbursement in last year's third quarter, which Drew will further detail. We view a short-term concession that secures a longer-term stay as beneficial to overall revenue and margin, and we are now positioned to enter 2027 with greater pricing elasticity and a more efficient flow-through of incremental revenue to NOI across a broader portion of our portfolio. Our four operating partners, Senior Lifestyle, Discovery Senior Living, AgeWell Senior Living, and Priority Life Care now collectively manage our 60 shop communities. Each continues to demonstrate the quality of resident care and operational discipline that underpin these results, and we're grateful for their partnership as we continue to scale alongside them. We also expect to add a fifth operating partner, Sincerity Senior Living through an expected near-term acquisition. Turning to external growth, during the third quarter, we acquired 22 shop communities totaling 1,381 units for approximately $300 million. And subsequent to quarter end, we acquired one additional community with 79 units for aproximadamente $26 million. Our 2026 year-to-date acquisitions now total 25 properties and 1,671 units for approximately$424 million at a forecasted blended year-one yield of approximately 7.9% and a year three yield of approximately 9.4%. Our acquisition pipeline continues to grow. We currently have purchase and sale agreements for approximately $240 million of shop acquisitions, an estimated weighted average year one and year three underwritten cap rates of approximately 7.4% and 8.7% respectively. That total includes the five communities we discussed last quarter for which we were the winning bidder in a bankruptcy proceeding, and at least half of that consideration is expected to be funded with NHP OP units or re-shares. We have an additional $148 million under non-binding letters of intent, together that is approximately $388 million in 1,385 units primarily assisted living and memory care, expected to close in the fourth quarter or in early 2027. Pipeline deals are subject to due diligence, closing conditions, and for the letters of intend to definitive agreement. We believe the overall quality of this pipeline is higher than that of our same-store portfolio, and occupancy across these communities is, on average, higher as well. This volume reflects our disciplined, selective approach. We have evaluated and underwritten nearly $12 billion of potential opportunities and submitted approximately $3 billion of non-binding letters of intent. We continue to focus on need-based, private-pay communities where our operating partners and asset management team can drive measurable improvement. Finally, an update on governance. Last quarter, I noted that we had begun another board process to identify a new independent director. We expect that process to conclude shortly with a meaningful enhancement to our board, and we look forward to sharing further details at the appropriate time. I will now hand the call over to Drew Babin, our Chief Financial Officer. Thank you, Michael. As you've heard, it's been a pivotal quarter for NHP. Our entire team has been working on multiple fronts to deliver on the priorities we laid out earlier this year. That work is reflected in both our operating results and a meaningfully stronger balance sheet. In the third quarter, we reported normalized FFO of approximately $13.6 million, or 19 cents per share, a sequential increase versus last quarter, despite the full-quarter dilutive impact of our IPO shares and the closing of the first Toronto Borough OMF exit. This was a result of an increase in cash NOI and lower fixed charges. Notably, our normalized results exclude $4.3 million of straight-line rent write-offs related to OMF properties sold during the quarter. Among other one-time items, such as acquisition expenses, losses on the extinguishment of debt, and non-cash items related to derivatives. As we complete our OMF exit, redeploy proceeds into our shop pipeline, and continue strengthening our balance sheet, we may see some timing-related earnings volatility in the near term. We expect our portfolio and balance sheet to be substantially stabilized by the time we provide our inaugural FFO per share guidance, which we plan to issue with our fourth quarter results in early 2027. In the shop segment, same-store cash net operating income increased by 13.6% year-over-year and would have increased by 15.1% if not for a one-time insurance recovery, which reduced operating expenses by approximately $150,000 in last year's third quarter. Driven by the focus on occupancy we described last quarter, as well as the upcoming divestiture of a lower-occupancy property now removed from the same-story reporting, Same-store average occupancy increased by 190 basis points sequentially at 220 basis points year-over-year to 86.7% for the quarter. Same-story REVPOR grew by 30 bps sequentially and 4% year-ever-year at $6,454, representing the combined impact of strategic concessions at our lower occupancy properties as well as stronger pricing power with regard to street rates at our higher occupancy property. Same-store cash NOI margins increased by 150 basis points year-over-year, reflecting this pricing improvement and the operating leverage that comes from adding occupancy without a proportional increase in staffing. On a two-year basis, same-store REV4 increased by 10.9%, same-star cash NOIs margin increased by 450 basis points, and same-story cash NOIS increased by approximately 47%. As Michael mentioned, we expect pricing power and margin expansion to broaden as more of our portfolio moves to higher occupancy levels. On the OMF side, our same-store portfolio is now significantly smaller and includes only properties whose sales require additional closing steps related to their secured loans. This pool produced a flattish same-story NOI growth year-over-year and a 3.4% sequential increase from the second quarter. The flat-ish year-over-year performance was largely attributable to a one-time revenue catch-up in the third quarter of 2025 related to the internalization of our property management platform. As far as the balance sheet, our net debt and preferred equity to EBITDA ratio was slightly over six times in the quarter. Due to expected additional reductions in secured debt related to our OMF exit, as well as the already consummated repayment of both our Series A and Series B preferred equity, we expect our leverage to decrease meaningfully. As we've discussed previously, we'll continue to execute our growth strategy in a manner that results in stabilized levels of leverage in line with investment-grade peers. For those newer to our story, you'll recall that in August, we recast our own secured credit facilities, more than doubling total commitments from $550 million to $1.2 billion. The recast includes a $750 million revolver, a $300 million term loan, and a new $150 million delayed draw term loan. with a fully extended maturity of August 30, 2031, assuming all extension options are exercised, as well as improved pricing and terms overall. In connection with the recast, we repaid the $332 million Fannie Mae secured loan, a significant step toward building a balance sheet consistent with an investment grade on secured issuer. Due to year-to-date levels of performance and our expectations for the fourth quarter of 2026, we have increased our 2026 full-year shop same-store cash NOI growth guidance to 16.5% to 18.5%. Further, we have discontinued our OMF same-story NOI growth guidance in advance of our expected exit from the segment. With that said, we expect the fourth quarter same-shore cash NOIs of our remaining same-story OMF portfolio to be generally consistent with our third quarter total before the impact of further dispositions. Our new Acquisition guidance of $425 to $645 million includes all deals closed year-to-date at the low end, and additionally, transactions both under definitive agreement and expected to close in the fourth quarter at the high end. Dispositions of $1.1 billion include the disposition of all OMF properties except for four slated to close early 2027, as well as the sale of two non-course shop communities for approximately $50 million. Both total G&A and equity-based compensation guidance remain unchanged from last quarter. We segmented our recurring capital expenditure guidance to reflect our current same-store shop portfolio, and separately, our total 2026 recurring capex spending at OMF properties, including amounts previously spent on assets we no longer own. As I mentioned, we expect to be in a position to provide FFO per share guidance in 2027 once we are through the short-term impact of our portfolio and balance sheet transformation. With that, I'll hand it back to Michael. Thanks, Drew. The third quarter was a transformational quarter for NHB. We turned the plan we outlined to investors in April into a clear path to a pure play shop portfolio. We've agreed to fully exit the OMF segment at attractive pricing, and we've responsibly used a significant portion of the proceeds to retire the vast majority of our secured debt and all of our preferred stuff. We told you last quarter what we intended to do with shop occupancy, and the results are visible. Same store occupancy of 86.7%. We are realizing pricing power at our higher occupancy communities, and we have accelerated narrowing of the occupancy gap relative to the broader NIC averages. Our transactions team is expected to exceed $800 million in total deal activity since our IPO by early next year, and Lindsay Gordon and our senior housing team continue to work with our operators to drive operating results. Importantly, we remain disciplined in our approach, with the right team and infrastructure in place to support our growth. We look forward to updating our shareholders on continued progress in the quarters ahead. With that, I'll turn the call back to the operator for question and answer session. We will now begin the question and answer session, please limit yourself to one question and one follow up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device please stand by while we compile the q a roster your first question comes from the line of jamie feldman with wells fargo your line is open please go ahead hey good morning uh this is jesus on for jamie thanks for taking the question just as um occupancy responded well to the concession strategy you guys highlighted here but rest report growth slowed as you guys talked about in your uh opening remarks as those incentives Rolov, how should we think about REV4 growth kind of heading into 2027, or has the near-term growth mix kind of shifted more towards occupancy gains? Yeah. Hey, Zeus. It's Drew here. I would say that from a guidance perspective or prior guidance, we were prepared to probably give up more on the REV 4 side than we essentially had to at the end of the day to get that occupancy. We've had concessions beginning to burn off, and they'll continue to burn into the fourth quarter. And there will also be an impact of new residents that are coming in kind of beginning to pay 27 rates already with an escalator. So you put all that together, I think the fact that third quarter REVPOR was pretty even with the second quarter, considering what we were doing with occupancy is consistent with what we wanted to do. And in the fourth quarter, I Think you'll continue to see that that REVPR strength and on the occupancy side, You know, the fourth quarter is never the strongest quarter of the year, just seasonally. But, you know, so far so good as far as there not really being bad weather or flu seasons or anything like that that could affect our ops. So we're optimistic that, you Know, the top line story can remain very much intact to even improving through the fourth quarter into next year. That's great. And just on the OMS exit here, I guess, what are the remaining execution items for the pending sales here? And how much, like, acquisition capacity? Just talk about the acquisition capacity that becomes available once those proceeds and debt reductions are reflected. Sure. Hey, Jesus, it's Michael. In terms of acquisition or disposition process, you know, really left with two tranches of the portfolio left to close. We expect those will close this quarter. One is just subject to standard closing conditions, a couple deliverables on the sample front, but nothing that we see as a hurdle to getting the larger $531 million piece of it closed. And then on the other side of the transaction, everything seems in line, just working through the servicer process with that loan assumption. But, again, we've seen no hiccups or hurdles to getting that closed in this quarter. So I still feel optimistic that that will get done on the timeline we've outlined. and I'll let Drew take the proceeds piece of it. Yeah, kind of looking at this deleveraging and essentially re-leveraging exercise with a deck we put out recently talked about how if you take all these OMF sales and just acquisitions we've closed, we really end up, obviously we've taken out the preferred and so the two different leverage ratios become the same thing. But we end up with essentially no net debt, but obviously we'll be putting money to work kind of from there. But obviously, we've prepared to achieve the high end of our acquisitions guidance for this year. And beyond that, there's capacity for at least, call it another 150 sale of pipeline properties that we're looking at for probably early next year closings. But that puts us in an area where our leverage ratio is very consistent with our investment grade peers, which is where we want to be. appreciate the time thanks guys thank you your next question comes from the line of ronald camden with morgan stanley your line is open please go ahead hey great uh just wanted to stick with the occupancy and ref for commentary um just trying to get a sense of where do you think that those are those those numbers sort of stabilize on a go-forward basis and curious When you're buying acquisitions, what are you underwriting for the occupancy gains, annual occupancy games, and REF4 gains when you're underwriting the acquisitions? Thanks. Hey, Ron. It's Michael. Good morning. Yeah, I think sitting in kind of the mid-86% occupancy in the same store portfolio, we still see a long runway on the occupency growth front for us. You know, nice to see some momentum in that. We continue to see some momentum into the fourth quarter. Rev4, as Drew mentioned, you know, we've already rolled out 27 street rates for new leases executed in the fourth corner. So we're starting to see some uptick from that. I think you'll see across the portfolio somewhere blended around a 5% to 6% rate increase for renewals and, you know. Consistent with prior years, I think at the higher end of the occupancy spectrum, we certainly feel like there's some more pricing elasticity. And we've seen that over the last quarter as we offset some of the concessions with new leasing in that subset of the portfolio. And then as we're underwriting new acquisition opportunities, a lot of what we have in the pipeline is sitting in that kind of high 80s occupancy, similar thesis of some occupancy gains to grow. But certainly as we cross 90% occupancy in certain assets, we feel pricing power moves and the momentum moves more towards rate increases at street rates and certainly in in-place rate increases. So that's kind of how we're viewing the portfolio and viewing the acquisition pipeline as well. Great, that's helpful. And my second one was my follow-up. I saw you added an operator with another one on the way. Just curious, as you think about scaling the platform, what the right number of operators is and how you're sort of managing the relationships with those operators in terms of sharing data and best practices and so forth? Thanks. Yeah, absolutely. I think, you know, I think you've seen across our portfolio, we're big believers in relationships with A quality operators. We'd rather have, you know, an A operator in a B market than vice versa. And that, I think, resonates throughout the acquisition pipeline as well as through the existing portfolio. So we've added TLC as a new operator that currently operates three assets. That number should grow closer to nine or 10 by the end of the year. And I think as we view adding operators to the mix, we like to see somewhere north of 10 as kind of the long-term goal with any given operator relationship so that we can implement best practices and have more impactful relationships. So we'll be disciplined as we add those operators, but it's certainly something that we're evaluating on a daily basis with Lindsay and team and uh excited to have PLC in the mix and to add some theory to the pipeline or to the platform shortly thank you your next question comes from the line Rob Stevenson with Huntington your line is open please go ahead good morning guys um can you talk about the 388 of uh assets of the pipeline and whether or not that's inclusive of deferred CapEx and any other improvements that you want to make there, and then also where RevPAR is on an existing basis versus your existing portfolio, which is, I think, around $6,600 a month? Yeah, so in a general sense, just to address your last question first, and we had some materials on this. We put out in a recent deck, but the REV4 on what we're buying is, you know, call it, I think, $150 to $200 higher than our same store portfolio. So there is that. On the acquisition side, could you maybe repeat what that question was? Is a 388 inclusive of any deferred capex and other property improvements that you're going want to make within year one or is there an additional sum there that those communities are going to require so that number is just the purchase price um the way that we guided um but i think it's fair to assume that you know some level of capex over and above that you know maybe maybe 10 million or so in the aggregate um so not you know a materially higher number um i would say that that's going to be geared more towards revenue enhancing projects um you We tend to want to buy properties that are a common area refresh or floor replacement, things like that, away from achieving higher rates, not properties that need kind of the basics addressed right out of the gate. So I think you'll see that the CapEx spending on the acquisitions to be very consistent with what we've done so far and, again, more focused on revenue-enhancing items. okay and then last one for me the 531 omf sale uh is that did you guys say that that was early 27 or is that is that going to close before year end does that close all at once or does that go in multiple tranches like the previous sale has yeah we expect that the uh the 5 31 million dollar portfolio will close in 2026 um and that will all close at once there's no bifurcation the other portfolio was bifurcated because of the loan assumption piece, but there's no debt associated with that portfolio. So that'll be a single closing. Okay. Thanks, guys. I appreciate the time. Thanks, Bob. Your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open. Please go ahead. Yeah, thanks. I guess, Michael, I wanted to circle back on the 3Q concession packages that the company offered. I mean, are you now happy with occupancy and where it is in those lowly occupied communities or lower occupied communities? I mean is there a need to do this again maybe next key selling season or do you think this is like a one-time thing just to kind of get occupancy up in those specific assets? Yeah, I would say it's a broad statement. I think this was a one-time event uh we have you know added the the concessions to the toolbox for what we consider our focus set of communities so nine communities that uh you know we monitor on a bi-weekly basis with the the on the ground team there and so um those are available on a case-by-case basis for them to utilize but broadly speaking we're not going to be using the same widespread concession packages to to drive occupancy like we did in the third quarter and i um you know more focused on driving rate and margin at this point now that we've seen a majority of the portfolio surpass that 85% occupancy level. And I'll add to that too, if you take these properties that are really kind of on this focus list away, our occupancy would be in the low 90s. And so it really is a matter, and we already have the pricing power really coming through, the margins coming throughout those properties. So when it comes to these kind of watch list properties, they're either going to make progress or I think everything is always for sale. And if there's assets that we don't think can get there, I think we're open-minded about potentially divesting those or pruning those. So again, we'll continue to work through it. But all in all, we saw a good sequential improvement at these properties during the quarter. And to Michael's point, concessions are not being used broadly right now um you know could they if there was a weather event or something like that sure um but you know right now it's um we've scaled that back great and then just on the recent acquisitions and the pending deals in your pipeline i mean how are those communities positioned within the market and then i guess specifically i'm just looking at the year one versus year three um x yield expectations it looks like the three Q deals, there's a bigger pickup between the year one and year three yield. Is there something specific with those deals where you see more upside? Or is that going to just vary depending on the individual assets that you're targeting? Yeah, I would say it's really a case by case basis. You know, some of the assets we purchased are, you know, sitting in that kind of low to mid 90s occupancy, as we've talked about in the past, as you know as we think about entering new markets and looking to expand the footprint. We often look for an asset that has a strong reputation and has been well regarded in the market to help build the brand and build the platform off of. But in markets where we've got a foothold already, we tend to focus on opportunities where we have some occupancy and some rate upside. So I think it's really case by case, but still think that there is plenty of runway. The non-same-store pool sits in that kind of high 80s occupancy, slightly elevated above the same-store portfolio, but still some runway to grow. And I'll add, too, that the one asset that we acquired at the end of the second quarter was kind of a uniquely stabilized, highly occupied asset for us, where we were looking to enter the Cincinnati market in the right way. So the yield growth on that one is I think most of what we're going to be doing is going to look more like the third quarter and less like that one we did in the second quarter as far as just growth in the yield the first year from year one to year three yep okay great thank you thanks Rob your next question comes from the line of Wes Galladay with Baird your line is open please go ahead hey good morning everyone for the assets you're looking to buy out of the bankruptcy. Are you still looking to pay part of that with shares? Yes. About $65 to $70 million of that purchase price will be funded with shares. Okay. Would you have the option to pay with cash if you didn't like where the shares were trading? Would that be an option for you? I believe so. We can confirm that for you, but I believe it's structured in a way that we could. But, you know, I think it's a nice way to fund an acquisition. Certainly expect the shares to be in place where we feel comfortable. Okay. And then the leverage is going to come down quite a bit with the asset sales on the OMS side. What is the long-term, I guess, stated goal for leverage going forward? Yeah, what we said is we want to be aligned with our investment-grade peers. And I think, you Know, that should imply a ratio, you Now, below, definitely below five. I think over time, as our internal growth continues to move things forward, and presumably when our cost of equity is in a place where we can fund external growth with our stock, I think we want to keep it coming down long term. But I think for the near term, I would say under five is the right zone. Thank you for the time. Thanks, Ms. West. Your next question comes from the line of Juan Cenebria with BMO Capital Markets. Your line is open. Please go ahead. Hi. Thanks for the time. Just on the investments, I'm just curious on how we should think about initial year one yields of kind of what's pending or what's in the pipeline as you look to redeploy incoming MLB proceeds or own-off-sale proceeds. Yeah. Hey, Juan. What we've got in the pipeline under PSA currently sits around a seven and a half year one with call it 130 basis points of expansion through year three. I think we've seen a lot of levered buyers kind of take a seat on the sidelines with interest rates moving in the last six weeks or so. And so slightly less competition in the market. I don't think cap rates have necessarily moved the opposite direction, but the compression, it feels like, has slowed on that front. And so I think somewhere in that mid-sevens and slightly higher is probably a fair assumption around acquisitions for the foreseeable future. And then I think you've sold maybe three shop assets, correct me if I'm wrong, year to date. Could you just give a little bit more color on on the history of those assets were they part of a portfolio and an asset that maybe were always thought of as disposition potential or um is there a commonality with age or unit size or or um acuity focus like i only or memory care only or if you could just kind of talk a little bit about the assets you've chosen to prune on the shop side and any other potential disposition opportunities Yeah, so there were two shop, there's two shop divestitures that were, you know, one is already closed. That one was in California. And, you know, I think around $42 million. That was our only asset in California, and so some inefficiencies there on our side, having that asset isolated. It was very attractive land and a property that was older and probably needed some CapEx. And there was a buyer that was very California focused, that was excited to put that CapEx in and really thought they could drive higher returns. As we disclosed, we sold that at a 1.7 cap rate. So that was a little more opportunistic, I would say. Again, just owing to the land value. The second one is more of a property that is sort of in that bucket of properties where we're trying to drive occupancy, but we're a little less optimistic on it. And so that one's really just kind of a prune move. We're really not losing much cash flow at all. We're also not getting a ton in proceeds, but it's one that probably just doesn't fit in our portfolio. And I think we'll continue to evaluate assets like that, that if we can't operate it to a certain level, then we don't feel like we need to own it long term. Thank you. Thanks a lot. Thanks. Your next question comes from the line of Julian Bloom with Goldman Sachs. Your line is open. Please go ahead. Yeah, good morning. Thank you for taking my question. Do you think export growth in this sort of 2% range, maybe actually lower than that, X the insurance items in the third quarter is sustainable? And if so, as concessions burn off and Rev4 accelerates in the quarters ahead, and if you're able to hold on to occupancy gains, should we actually expect to see cash and Y margin expansion and NOI growth sort of accelerate in the quarters ahead? Yeah, I'll put it this way. I think on the top line, and I'll circle back to the margin point, we obviously feel good about where our occupancy is, and we still think that there's plenty of runway there. On the rate side, as Michael said, I mean, we're going out with renewals or charging renewals for next year that are as good and maybe even a little better than we got for 26. Residents are moving and now are beginning to pay those. And then, you know, street rates that are higher occupancy communities, we've had a lot of success there, especially where there's been ROI capex. So feeling very good about the top line, if you kind of model out, there's a major difference in what you get as far as NOI growth with different levels of expense growth. And I think logically, given the level of occupancy we're at, we should continue to see export growth moderate. We're not adding significant additional staff with incremental increases in occupancy, and certainly rate drops very directly to the bottom line. So that's all to say we expect to continue to see normalization, and we're working hard with Lindsay's team and with our operators to identify additional areas where we can save on expenses to really take advantage of this point we are in the occupancy cycle where flow-through really begins to pick up. We've begun to see that, and then we expect more of it, frankly. okay great um and then i think a big part of the thesis has been that you would face sort of less competition for the types of assets and markets you're looking in i guess can you give us a sense on your recent pipelines how much competition you feel you faced and how much of your deal flow is being driven by your your relationships with operators and do you think you're sort of seen as a go-to owner for operators sort of brokering a sale in certain markets or for certain types of assets? Yeah. Hey, Julian. Yeah. To that point, I think you're spot on that a lot of the pipeline, certainly a vast majority of the timeline has been sourced through operator relationships um existing and new operators uh you know i think we've seen with levered buyers kind of taking a seat on the sidelines with interest rates where they've moved um there has not been a ton of public competition in some of these assets that we've uh we've been buying and investing in and so i think you know we're running up against local owner operators developers and like and some of these um these assets and we certainly have i think built a reputation of a group that can close efficiently we can do diligence much faster than uh kind of smaller shops and so we've we've been that go-to that you know they know we're well capitalized they know that um we can move with with expediency and so um yeah i think that we have started to build build their reputation and expect that that'll lead to more momentum throughout 27. Okay, great. Thank you. Thanks. Your next question comes from the line of Austin Werschmidt with E-Bank Capital Markets. Your line is open. Please go ahead. Thanks. Good morning. I want to circle back on a few things that have been discussed throughout the call. You kind of mentioned in your prepared remarks the current investment pipeline contains some higher quality assets than the current same store pool? And you did reference less competition, but is that really the only factor that's enabled you to source some of these higher quality deals? And are you refining the types of assets, markets, and operators that you're looking to partner with in light of some of what you've experienced with the watch list properties? Yeah, I think, you know, we certainly are focused on, as I alluded to earlier, A, operators and B, markets is the thesis for us. We know that we can do well with assets that have experienced under management and really bringing that institutional touch to secondary markets, particularly throughout the Midwest, where we've seen a lot of success in the same store portfolio. So we'll continue to invest in those markets, partnering with really high quality operators that can deliver the results and the best practices that our team expects to see throughout the operational lifecycle. And so, yeah, that remains the focus for us. You know, as we evaluate opportunities, we're very focused on assets that I think, as Drew alluded to, have operational upside from also a CapEx, kind of ROI-driven CapEx perspective. We're not investing in assets that have a dated reputation, maybe not the best reputation in a given market because we know that that takes quite some time to turn that from a public perception point of view. And so we like assets that can use some common area refresh. We can experience some rate upside through redoing of units and whatnot, and partnering with operators to drive efficiencies from staffing, labor, food costs, and whatnot. Got it. And then are the watch list properties part of recent portfolio acquisitions, or were these legacy assets that you've owned now for a few years? Yeah, these are legacy assets. This portfolio, you know, the watch list, we call them focus communities, that list shifts every quarter to two quarters. You know, we're constantly evaluating. It could be an occupancy. It couldbe a rate. It couldbenexpense management item that we're adding the assets to for whatever reason. And so there's not necessarily one, you now, unified reason as to why we add an asset to the focus communities. But what it means is those assets and those executive directors and sales directors just get some extra attention from the asset management platform. They're on the phone with them on a biweekly basis, just going through the CRM and leads and understanding what's driving occupancy and sales in that market and in that asset. Could be talking about driving rate, could be looking at expenses and expense management. So that list is one that evolved. And I think we spent a good amount of time on the IPO roadshow talking about we see tremendous results when an asset is added to the watch list or the focus community list because of that extra attention that's paid. And so it's an evolving list. It changes multiple times a year. And right now, the focus is on some of the lower occupied communities. But as I mentioned, that does change as the year progresses. That's helpful. And last one for me, just to kind of hone in, given that, you know, the tougher comps that you've kind of seen with, you know, driving some of the decel in the same store pool. I mean, are we in and around an area that you would sort of range bound put within where you think, you know, is a reasonable stabilized growth level for the assets in the next few years? That's all for me. Thanks. yeah i think it just kind of going back to my comments about um you know it's still having some occupancy upside and you know really having um some stickiness and kind of the mid to um mid to high single digit range as far as rate growth um i think we feel very very good about um that runway and given our older moving age i think мы feel good about our ability to kind of perpetuate that runway pretty far into the cycle and we have plenty of assets in our portfolio that you know are substantially full with margins over 30 percent and you know as more of our portfolio gets to that level there's a there's powerful earnings impact that goes along with that thank you thanks all we've reached the end of the q a session i will now turn the call back to michael anderson for closing remarks thank you and thank you all for joining us this morning uh we're excited about what the rest of the fourth quarter holds for us and moving into 2027 and look forward to sharing some some additional updates with you soon on our board process as that concludes thanks everyone this concludes today's call thank you for attending you may now No disconnect.