National Health Investors(NHI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of income, cash flows, and equity, along with detailed notes explaining the company's organization, accounting policies, investment activities, debt, equity, and segment performance Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Total assets | $2,695,959 | $2,614,371 | | Total liabilities | $1,198,665 | $1,229,194 | | Total equity | $1,487,973 | $1,375,387 | | Real estate properties, net | $2,316,452 | $2,211,253 | | Debt, net | $1,118,835 | $1,146,041 | Condensed Consolidated Statements of Income Condensed Consolidated Statements of Income (in thousands, except per share amounts) Three Months Ended June 30, | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :----- | :----- | :--------- | :--------- | | Total Revenues | $90,662 | $84,970 | $5,692 | 6.7% | | Total Expenses | $55,607 | $51,771 | $3,836 | 7.4% | | Net Income | $36,689 | $34,952 | $1,737 | 5.0% | | Net Income Attributable to Common Stockholders | $36,938 | $35,227 | $1,711 | 4.9% | | Diluted EPS | $0.79 | $0.81 | $(0.02) | (2.5%) | Six Months Ended June 30, | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :----- | :----- | :--------- | :--------- | | Total Revenues | $179,958 | $166,482 | $13,476 | 8.1% | | Total Expenses | $111,615 | $102,891 | $8,724 | 8.5% | | Net Income | $70,506 | $65,610 | $4,896 | 7.5% | | Net Income Attributable to Common Stockholders | $71,051 | $66,142 | $4,909 | 7.4% | | Diluted EPS | $1.53 | $1.52 | $0.01 | 0.7% | Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change ($) | Change (%) | | :---------------------------------- | :----------------------------- | :----------------------------- | :--------- | :--------- | | Net cash provided by operating activities | $106,295 | $101,566 | $4,729 | 4.7% | | Net cash used in investing activities | $(123,785) | $(29,544) | $(94,241) | NM | | Net cash provided by (used in) financing activities | $10,311 | $(79,736) | $90,047 | NM | | Decrease in cash, cash equivalents and restricted cash | $(7,179) | $(7,714) | $535 | (6.9%) | - Investing activities in 2025 included $130,984 thousand in acquisitions of real estate properties, a significant increase from $9,866 thousand in 2024[14] - Financing activities in 2025 included $123,484 thousand from issuance of common shares, net, compared to none in 2024[14] Condensed Consolidated Statements of Equity - Total equity increased from $1,375,387 thousand at December 31, 2024, to $1,487,973 thousand at June 30, 2025[18] - Issuance of common shares, net, contributed $65,483 thousand in Q1 2025 and $58,001 thousand in Q2 2025[18] - Dividends declared were $0.90 per common share for both quarters in 2025 and 2024[18][20] Note 1. Organization and Nature of the Business - NHI is a self-managed REIT specializing in sale-leaseback, joint venture, and financing for senior housing and medical facility investments[21] - The Real Estate Investments segment has $2.7 billion in 181 properties (115 senior housing, 65 SNFs, 1 HOSP) across 32 states, primarily under triple-net leases, and $270.4 million in mortgages and other notes receivable[22] - The SHOP segment comprises two ventures owning operations of 15 ILFs (1,732 units) in eight states, managed by third-party property managers[23] Note 2. Basis of Presentation and Significant Accounting Policies - Financial statements are unaudited and prepared in accordance with U.S. GAAP for interim periods[24] - The company consolidates wholly-owned subsidiaries, joint ventures, and Variable Interest Entities (VIEs) where it is deemed the primary beneficiary, such as the Merrill and Discovery SHOP ventures and certain real estate partnerships[25][26][27] - NHI intends to qualify as a REIT, generally exempt from U.S. federal income tax, with Taxable REIT Subsidiaries (TRSs) subject to income taxes[42][43] - Recent accounting pronouncements include ASU 2023-09 (Income Tax Disclosures, effective after Dec 15, 2024), ASU 2024-03 (Income Statement Expenses Disaggregation, effective after Dec 15, 2026), and ASU 2025-05 (Credit Losses for Accounts Receivable, effective after Dec 15, 2025)[49][50][51] Note 3. Investment Activity Real Estate Acquisitions (Six Months Ended June 30, 2025, in thousands) | Operator | Period | Properties | Asset Class | Total Acquisition Price | | :---------------------- | :------- | :--------- | :---------- | :---------------------- | | Generations, LLC | Q1 2025 | 1 | SLC | $21,200 | | Mainstay Healthcare | Q1 2025 | 1 | ALF | $8,600 | | Juniper Communities, LLC | Q1 2025 | 1 | ALF | $46,284 | | Agemark Senior Living | Q2 2025 | 6 | ALF | $63,500 | | Total | | | | $139,584 | - Effective August 1, 2025, a portfolio of six senior housing properties with Discovery was transitioned from Real Estate Investments to the SHOP segment, involving a $9.0 million write-off of straight-line rent receivable[55][176] - Also effective August 1, 2025, an ILF in Tulsa, Oklahoma, was transitioned from Real Estate Investments to the existing Discovery SHOP venture, with a $3.2 million write-off of straight-line rent receivable[57][178] Future Minimum Lease Payments (as of June 30, 2025, in thousands) | Period | Amount | | :---------------- | :------- | | Remainder of 2025 | $131,619 | | 2026 | $269,241 | | 2027 | $220,143 | | 2028 | $215,015 | | 2029 | $206,183 | | 2030 | $197,456 | | Thereafter | $779,528 | | Total | $2,019,185 | Note 4. Mortgage and Other Notes Receivable - Mortgage notes receivable totaled $169.4 million and other notes receivable totaled $101.0 million as of June 30, 2025, net of credit loss reserves of $17.5 million[75] - As of June 30, 2025, two loans totaling $13.3 million were designated as non-performing notes (SLM mezzanine loan and Bickford unsecured loan)[76] - In February 2025, an assisted living facility in Oviedo, Florida, was acquired via deed in lieu of foreclosure for a $10.0 million non-performing mortgage from SLM, recorded at an estimated fair value of $8.6 million[78][191] Credit Loss Reserves (Six Months Ended June 30, 2025, in thousands) | Metric | Amount | | :----------------------------- | :------- | | Balance at December 31, 2024 | $20,249 | | Provision for expected credit losses | $(1,384) | | Write-offs | $(1,400) | | Balance at June 30, 2025 | $17,465 | Note 5. Senior Housing Operating Portfolio - The SHOP segment consists of two consolidated ventures owning operations of 15 ILFs, structured to comply with REIT requirements using TRSs[89] - The Merrill Managed Portfolio (six ILFs) has Merrill owning a 20% common equity interest, classified as redeemable noncontrolling interest (mezzanine equity) due to put rights[90][91] - The Discovery Managed Portfolio (nine ILFs) has the Discovery member owning a 2% common equity interest, classified as equity[92] - Effective August 1, 2025, six properties (five ALFs and one ILF) transitioned from Real Estate Investments to the newly formed Sinceri Managed Portfolio under management agreements[95] Note 6. Equity Method Investment - NHI holds a 25% equity interest in Timber Ridge OpCo, LLC, a CCRC operating company, accounted for under the equity method[96] - Recognized gains from equity method investment of $1.5 million for the three months ended June 30, 2025, and $1.9 million for the six months ended June 30, 2025, significantly up from $0.2 million and $0.4 million in the prior year periods, respectively[97] - Cumulative unrecognized losses for this investment totaled $15.4 million through June 30, 2025[97] Note 7. Other Assets Other Assets, Net (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :---------------------------------- | :------------ | :---------------- | | Total other assets, net | $18,831 | $22,753 | | Restricted cash | $683 | $2,213 | - The company recognized $1.2 million of transaction costs related to an acquisition in its SHOP segment that did not materialize in Q1 2025[99] Note 8. Debt - Total debt, net, decreased to $1,118,835 thousand as of June 30, 2025, from $1,146,041 thousand at December 31, 2024[100] Aggregate Principal Maturities of Outstanding Debt (as of June 30, 2025, in thousands) | Period | Amount | | :---------------- | :------- | | Remainder of 2025 | $250,000 | | 2026 | — | | 2027 | $100,000 | | 2028 | $378,000 | | 2029 | — | | 2030 | — | | Thereafter | $400,000 | | Total | $1,128,000 | - The $700.0 million unsecured revolving credit facility's maturity date was extended to October 2028[101] - All outstanding Fannie Mae term loans, totaling $75.7 million, were repaid in the second quarter of 2025[108][219] Note 9. Commitments, Contingencies and Uncertainties - Total working capital, mortgage, construction, revolving credit, and mezzanine loan commitments amounted to $179.3 million, with $106.6 million funded as of June 30, 2025[111] - Aggregate development commitments totaled $23.4 million, with $7.5 million funded[112] - Aggregate contingent lease inducement commitments were $12.9 million[112] - The credit loss liability for unfunded loan commitments was $0.1 million as of June 30, 2025[114][240] Note 10. Redeemable Noncontrolling Interest - Merrill's noncontrolling interest in the SHOP venture is classified as redeemable noncontrolling interest (mezzanine equity) due to put rights, though a redemption event is not currently probable[116] - The balance of redeemable noncontrolling interest was $9,321 thousand as of June 30, 2025[117] Note 11. Equity and Dividends - The remaining 1.0 million shares from the August 2024 forward equity sale agreement were settled in Q1 2025 for $65.5 million[118][230] - Under the ATM equity program, 0.2 million shares were sold on a forward basis in March 2025 for $15.5 million, and 1.3 million shares were sold on a forward basis in June 2025 for $91.8 million[120][122][233][235] - As of June 30, 2025, 1.4 million shares remain available under ATM forward sales agreements, representing $102.3 million in net proceeds[123][236] - A quarterly dividend of $0.90 per common share was declared for Q1 and Q2 2025 and 2024, with a $0.92 per common share dividend declared on August 5, 2025[125][229] Note 12. Share-Based Compensation - 29,500 restricted stock awards were issued in February 2025, vesting over five years[127] - Options to purchase 567,000 shares of common stock were granted in Q2 2025[128] Share-Based Compensation Expense (in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Restricted stock awards | $351 | $186 | $575 | $344 | | Stock options | $720 | $501 | $3,054 | $2,498 | | Total share-based compensation expense | $1,071 | $687 | $3,629 | $2,842 | - Unrecognized share-based compensation expense totaled $5.1 million as of June 30, 2025[131] Note 13. Earnings Per Share Earnings Per Share (except share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $0.79 | $0.81 | $1.54 | $1.52 | | Diluted EPS | $0.79 | $0.81 | $1.53 | $1.52 | | Weighted average common shares outstanding - diluted | 46,822,465 | 43,563,654 | 46,350,498 | 43,494,103 | Note 14. Fair Value of Financial Instruments Fair Values of Financial Instruments (as of June 30, 2025, in thousands) | Instrument | Carrying Amount | Fair Value | Level | | :---------------------------------- | :-------------- | :--------- | :---- | | Variable rate debt | $573,258 | $578,000 | 2 | | Fixed rate debt | $545,577 | $490,511 | 2 | | Mortgage and other notes receivable, net | $252,939 | $248,610 | 3 | Note 15. Segment Reporting Total Revenues by Segment (Six Months Ended June 30, 2025, in thousands) | Segment | Amount | | :-------------------------- | :------- | | Real Estate Investments | $151,725 | | SHOP | $28,156 | | Non-Segment / Corporate | $77 | | Total | $179,958 | Net Operating Income (NOI) by Segment (Six Months Ended June 30, 2025, in thousands) | Segment | Amount | | :-------------------------- | :------- | | Real Estate Investments | $145,924 | | SHOP | $6,907 | | Non-Segment / Corporate | $77 | | Total | $152,908 | - Capital expenditures for the Real Estate Investments segment increased to $141.8 million in 2025 from $35.0 million in 2024, while SHOP segment capital expenditures decreased to $2.5 million from $3.7 million[138] Note 16. Variable Interest Entities - Consolidated SHOP ventures had aggregate assets of $258.5 million (real estate properties, net) and liabilities of $4.4 million as of June 30, 2025[148] - Consolidated real estate partnerships had aggregate assets of $240.3 million (real estate properties, net) as of June 30, 2025[149] Unconsolidated Variable Interest Entities (Maximum Exposure to Loss as of June 30, 2025, in thousands) | Name | Carrying Amounts to Loss | Maximum Exposure | | :------------------------------ | :----------------------- | :--------------- | | Senior Living | $86,446 | $87,446 | | Senior Living Management | $12,000 | $12,000 | | Bickford | $16,127 | $28,150 | | Encore Senior Living | $35,558 | $35,625 | | Timber Ridge OpCo | $(2,756) | $2,244 | | Senior Living Hospitality Group | $13,026 | $14,050 | | Montecito Medical Real Estate | $9,391 | $39,002 | | Vizion Health | $19,888 | $20,309 | | Navion Senior Solutions | $7,636 | $9,786 | | Kindcare Senior Living | $801 | $801 | | Mainstay Healthcare | $9,062 | $9,062 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. This section provides management's perspective on the company's financial performance, liquidity, and capital resources, including an executive overview, detailed analysis of investment activities, tenant performance, and key financial metrics like FFO, FAD, and Adjusted EBITDA Cautionary Statement Regarding Forward Looking Statements - The report contains forward-looking statements that involve known and unknown risks and uncertainties, which could cause actual results to differ materially from projections[153][154] - Key risks include dependence on operator success, potential for bankruptcy, tenant concentration, regulatory changes, increased liability claims, illiquidity of real estate investments, and the ability to raise capital[154][155] Executive Overview - NHI is a self-managed REIT specializing in senior housing and medical facility investments, operating through two segments: Real Estate Investments and Senior Housing Operating Portfolio (SHOP)[158] - The Real Estate Investments segment includes 197 facilities (125 senior housing, 70 SNFs, 2 HOSPs) with an aggregate gross carrying value of $2.7 billion, and $270.4 million in mortgage and other notes receivable[159] - The SHOP segment comprises two consolidated ventures owning operations of 15 ILFs with 1,732 units, managed by third-party property managers[164] - Senior housing properties are categorized as need-driven (ALFs, SLCs) or discretionary (ILFs, EFCs), while medical facilities (SNFs, HOSPs) primarily receive payments from Medicare, Medicaid, and health insurance[160][161][162][163] Recent Investments Activity Real Estate Acquisitions (Six Months Ended June 30, 2025, in thousands) | Operator | Period | Properties | Asset Class | Total Acquisition Price | | :---------------------- | :------- | :--------- | :---------- | :---------------------- | | Generations, LLC | Q1 2025 | 1 | SLC | $21,200 | | Mainstay Healthcare | Q1 2025 | 1 | ALF | $8,600 | | Juniper Communities, LLC | Q1 2025 | 1 | ALF | $46,284 | | Agemark Senior Living | Q2 2025 | 6 | ALF | $63,500 | | Total | | | | $139,584 | - In March 2025, a mezzanine loan agreement with Vizion Health affiliates was amended, providing an additional $5.4 million in funding, with an outstanding principal balance of $17.7 million as of June 30, 2025[173] - In May 2025, the company entered into a construction loan agreement to fund up to $28.0 million for the development of an 84-unit assisted living and memory care facility[174] - Effective August 1, 2025, a portfolio of six senior housing properties and an ILF in Tulsa, Oklahoma, were transitioned from the Real Estate Investments segment to the SHOP segment, resulting in write-offs of straight-line rent receivables totaling $12.2 million[176][178] Tenant Leases - Tenant leases are typically structured as triple-net leases with initial terms of 10 to 15 years, including annual rent escalators[179] - One senior living community is subject to a purchase and sale agreement for approximately $39.0 million, expiring in October 2025[180] - Tenants hold purchase options on four properties with an aggregate net carrying value of $76.0 million, with exercise dates between 2028 and 2031[181] Tenant Concentrations Top Tenant Concentrations (% of Total Revenues, Six Months Ended June 30, 2025) | Tenant | % of Total Revenues | | :-------------------------- | :------------------ | | Senior Living Communities, LLC | 15% | | Bickford Senior Living | 12% | | National HealthCare Corporation (NHC) | 11% | | All others, net | 43% | | Escrow funds received from tenants | 3% | | Resident fees and services | 16% | - Bickford Senior Living has been on a cash basis of revenue recognition since Q2 2022 due to financial condition concerns[185] - The master lease for NHC, covering three ILFs and 32 SNFs, expires on December 31, 2026, with two five-year extension options[186] - Lease payments received from cash basis tenants decreased to $22,939 thousand for the six months ended June 30, 2025, from $26,854 thousand in the prior year[188] Occupancy Average Portfolio Occupancy (Q2 2025 vs. Q2 2024) | Segment | Q2 2025 | Q2 2024 | | :-------------- | :------ | :------ | | Senior Living | 83.9% | 83.1% | | Bickford | 85.2% | 85.4% | | SHOP | 89.1% | 87.0% | Tenant Monitoring - The company uses EBITDARM (Earnings Before Interest, Taxes, Depreciation, Amortization, Rent, and Management Fees) as a primary performance measure for tenants to assess their ability to meet obligations[194] Real Estate Investments Portfolio Coverage (Trailing 12-month, Q1 2025 vs. Q1 2024) | Property Type | Q1 2025 Coverage | Q1 2024 Coverage | Q1 2025 Occupancy | Q1 2024 Occupancy | | :-------------------- | :--------------- | :--------------- | :---------------- | :---------------- | | Senior Housing | 1.54x | 1.46x | 86.3% | 84.5% | | Skilled Nursing Facilities (SNF) | 3.04x | 2.97x | 83.9% | 81.9% | | Non-SNF Medical | 2.72x | 3.27x | 77.5% | 80.4% | | Total | 2.06x | 2.01x | 85.1% | 83.2% | Key Customer Coverage (Trailing 12-month, Q1 2025 vs. Q1 2024) | Customer | Q1 2025 Coverage | Q1 2024 Coverage | Q1 2025 Occupancy | Q1 2024 Occupancy | | :--------------- | :--------------- | :--------------- | :---------------- | :---------------- | | NHC | 4.16x | 3.96x | 88.8% | 88.2% | | Senior Living | 1.49x | 1.49x | 83.5% | 81.9% | | Bickford | 1.66x | 1.71x | 86.0% | 84.2% | Critical Accounting Policies and Estimates - There have been no significant changes to critical accounting policies and estimates from the Annual Report on Form 10-K for the year ended December 31, 2024[197] - No impairment charges were recognized during the three and six months ended June 30, 2025, compared to a $0.7 million impairment charge in the prior year period[198] - Credit loss reserves totaled $17.5 million for mortgage and other notes receivable and $0.1 million for unfunded loan commitments as of June 30, 2025[200] Results of Operations - For the three months ended June 30, 2025, rental income increased by $4.5 million (6.9%), resident fees and services (net of operating expenses) increased by $0.9 million (29.4%), and interest income increased by $0.4 million (6.9%)[203] - Legal expenses increased by $0.9 million, and proxy contest expenses of $1.3 million were incurred in Q2 2025, with no comparable costs in Q2 2024[203] - Loan and realty (gains) losses, net, shifted from a $1.1 million net loss in Q2 2024 to a $1.4 million net gain in Q2 2025, primarily due to a $1.8 million reduction in credit loss reserves in 2025 and a $0.7 million impairment charge in 2024[203] - For the six months ended June 30, 2025, rental income increased by $11.2 million (8.7%), resident fees and services (net of operating expenses) increased by $1.0 million (17.2%), and interest income increased by $0.9 million (7.7%)[205] - Legal expenses increased by $2.1 million, including $1.2 million for an unrealized SHOP transaction, and proxy contest expenses of $1.6 million were incurred in 2025, with no comparable costs in 2024[205] Liquidity and Capital Resources - As of June 30, 2025, the company had $322.0 million available on its $700.0 million revolving credit facility, $18.6 million in unrestricted cash, and $102.3 million of undrawn net proceeds from ATM forward sales agreements[206] Cash Flow Summary (Six Months Ended June 30, in thousands) | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------------------------- | :----- | :----- | :--------- | :--------- | | Net cash provided by operating activities | $106,295 | $101,566 | $4,729 | 4.7% | | Net cash used in investing activities | $(123,785) | $(29,544) | $(94,241) | NM | | Net cash provided by (used in) financing activities | $10,311 | $(79,736) | $90,047 | NM | - Total outstanding indebtedness was $1.1 billion as of June 30, 2025, with the $700.0 million revolving credit facility's maturity extended to October 2028 and the $200.0 million term loan's maturity extended to December 2025[212][213][215] - All $75.7 million of Fannie Mae term loans were repaid in Q2 2025[219] Contractual Obligations (as of June 30, 2025, in thousands) | Obligation Type | Total | Less than 1 Year | 1 - 3 Years | 3 - 5 Years | More than 5 Years | | :---------------------- | :---------- | :--------------- | :---------- | :---------- | :---------------- | | Debt, including interest | $1,280,419 | $294,905 | $171,109 | $409,099 | $405,306 | | Loan commitments | $72,720 | $41,109 | $31,611 | — | — | | Development commitments | $15,867 | — | $15,867 | — | — | | Total | $1,369,006 | $336,014 | $218,587 | $409,099 | $405,306 | FFO and FAD - NAREIT FFO attributable to common stockholders per diluted share increased by $0.07 (3.1%) to $2.34 for the six months ended June 30, 2025, compared to $2.27 in the prior year[251] - Normalized FFO attributable to common stockholders per diluted share increased by $0.08 (3.5%) to $2.37 for the six months ended June 30, 2025, compared to $2.29 in the prior year[251] - Normalized FAD attributable to common stockholders increased by $9.2 million (8.9%) to $111,958 thousand for the six months ended June 30, 2025, compared to $102,758 thousand in the prior year[251] - Normalized FAD for 2025 includes a $1.164 million adjustment for transaction costs related to a large SHOP transaction that did not materialize[249] Adjusted EBITDA - Adjusted EBITDA increased by $7.2 million (5.5%) to $138,408 thousand for the six months ended June 30, 2025, compared to $131,193 thousand in the prior year[253] - The Fixed Charge Coverage Ratio was 5.0x for the six months ended June 30, 2025, up from 4.6x in the prior year[253] Net Operating Income - Total Net Operating Income (NOI) increased by $12.7 million (9.1%) to $152,908 thousand for the six months ended June 30, 2025, compared to $140,196 thousand in the prior year[255] Net Operating Income (NOI) by Segment (Six Months Ended June 30, 2025, in thousands) | Segment | Amount | | :-------------------------- | :------- | | Real Estate Investments | $145,924 | | SHOP | $6,907 | | Non-segment / corporate | $77 | | Total | $152,908 | Item 3. Quantitative and Qualitative Disclosures About Market Risk. This section discusses the company's exposure to market risks, primarily focusing on interest rate fluctuations and their potential impact on debt, cash flows, and the fair value of financial instruments, as well as inflation risk Interest Rate Risk - As of June 30, 2025, $578.0 million of outstanding indebtedness was subject to variable interest rates[256] - A 50 basis point (bps) increase or decrease in variable interest rates would annually change interest expense by approximately $2.9 million, or $0.06 per common share[257] Interest Rates on Debt (as of June 30, 2025, in thousands) | Debt Type | Balance | % of Total | Weighted Average Interest Rate | | :-------------------------- | :---------- | :--------- | :----------------------------- | | Fixed rate | $550,000 | 48.8% | 3.49% | | Variable rate | $578,000 | 51.2% | 5.54% | | Total | $1,128,000 | 100.0% | 4.48% | - A 50 bps increase in market interest rates would decrease the estimated fair value of mortgages and notes by approximately $1.4 million[260] Inflation Risk - Tenant leases generally include annual rent escalators (fixed or CPI-based) and require tenants to pay all property operating expenses, which are expected to partially offset inflationary increases[261] Item 4. Controls and Procedures. This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting during the quarter Evaluation of Disclosure Control and Procedures - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[262] Changes in Internal Control over Financial Reporting - No changes in internal control over financial reporting were identified during the three months ended June 30, 2025, that materially affected or are reasonably likely to materially affect these controls[264] PART II. OTHER INFORMATION Item 1. Legal Proceedings This section states that the company's facilities are subject to routine legal claims and lawsuits, but management believes their ultimate resolution will not have a material adverse effect on the company's financial condition, results of operations, or cash flows - The company's facilities are subject to claims and potential lawsuits in the ordinary course of business[265] - Property managers, tenants, and borrowers are obligated to indemnify NHI against liabilities arising from operations, environmental, or title issues[265] - Management believes the ultimate resolution of all pending legal proceedings will not materially adversely affect the company's financial condition, results of operations, or cash flows[265] Item 1A. Risk Factors This section notes that there have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K, except for the addition of risks related to stockholder activism efforts - No material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2024, except for new risks related to stockholder activism[266] - Stockholder activism efforts could cause substantial costs, divert management's attention, and adversely affect the business[267] Item 5. Other Information This section states that no Rule 10b5-1 trading arrangements were adopted, modified, or terminated by the company's directors or officers during the fiscal quarter ended June 30, 2025 - No Rule 10b5-1 trading arrangements were adopted, modified, or terminated by the company's directors or officers during the fiscal quarter ended June 30, 2025[268] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, debt instruments, and various certifications and XBRL data files - Exhibits include Articles of Incorporation, Bylaws, Third Supplemental Indenture, CEO and CFO certifications (pursuant to 18 U.S.C. Section 1350 and Section 302/906 of Sarbanes-Oxley Act), and XBRL instance documents[269] Signatures This section contains the official signatures of the company's President, Chief Executive Officer, and Director, D. Eric Mendelsohn, and Chief Financial Officer, John L. Spaid, certifying the report - The report was signed by D. Eric Mendelsohn, President, Chief Executive Officer and Director, and John L. Spaid, Chief Financial Officer, on August 6, 2025[272]