10q10k10q10k.net

What changed in NATIONAL HEALTH INVESTORS INC's 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of NATIONAL HEALTH INVESTORS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+453 added−478 removedSource: 10-K (2024-02-20) vs 10-K (2023-02-21)

Top changes in NATIONAL HEALTH INVESTORS INC's 2023 10-K

453 paragraphs added · 478 removed · 369 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

131 edited+24 added−33 removed83 unchanged
Biggest changeOperators compete for residents and/or patients and staff based on quality of care, reputation, location and physical 12 Table of Contents appearance of facilities, services offered, family preference, physicians, staff and price. Competition is with other operators as well as companies managing multiple facilities, some of which are substantially larger and have greater resources than the operators of our facilities.
Biggest changeCompetition is with other operators as well as companies managing multiple facilities, some of which are substantially larger and have greater resources than the 12 Table of Contents operators of our facilities. Some of these facilities are operated for profit, while others are owned by governmental agencies or tax exempt not-for-profit entities.
Commitments and Contingencies In the normal course of business, we enter into a variety of commitments, typically consisting of funding of revolving credit arrangements, construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account, and commitments for the funding of construction for expansion or renovation to our existing properties under lease.
Commitments and Contingencies In the normal course of business, we enter into a variety of commitments, typically consisting of funding revolving credit arrangements, and construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account, and commitments for the funding of construction for expansion or renovation to our existing properties under lease.
Listed below are some of the highlights of our efforts to promote environmental sustainability at our properties and with our tenants. • We provide our triple-net lease operators capital improvement allowances for the redevelopment, expansions and renovations at our properties which may include energy efficient improvements like LED lighting and low emission carpeting, recycled materials and solar power; • We provide our development partners with capital to build new state-of-the-art properties with energy efficient components and design features; • We obtain Phase I environmental and Phase II reports if warranted as part of our due diligence procedures when acquiring properties and attempt to avoid buying real estate with known environmental contamination; • We strive for efficiency and sustainability in our corporate headquarters, participate in a recycling program, and encourage our employees to reduce, reuse and recycle waste.
Listed below are some of the highlights of our efforts to promote environmental sustainability at our properties and with our tenants. • We provide our triple-net lease operators capital improvement allowances for the redevelopment, expansions and renovations at our properties which may include energy efficient improvements like LED lighting and low emission carpeting, recycled materials and solar power; • We provide our development partners with capital to build new state-of-the-art properties with energy efficient components and design features; • We obtain Phase I and Phase II environmental reports if warranted as part of our due diligence procedures when acquiring properties and attempt to avoid buying real estate with known environmental contamination; and • We strive for efficiency and sustainability in our corporate headquarters, participate in a recycling program, and encourage our employees to reduce, reuse and recycle waste.
Our document retention practices strive to reduce paper usage and encourage electronic file sharing; and We are also subject to environmental risks and regulations in our business. See “ – Government Regulation – Environmental Regulations ” below; “ Item 1A.
Our document retention practices strive to reduce paper usage and encourage electronic file sharing. We are also subject to environmental risks and regulations in our business. See “ – Government Regulation – Environmental Regulations ” below; “ Item 1A.
To maintain our qualification as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year: • First, at least 75% of the value of our total assets must consist of: (a) cash or cash items, including certain receivables, (b) government securities, (c) real estate assets, including interests in real property, leaseholds and options to acquire real property and leaseholds, (d) interests in mortgages on real property (including an interest in an obligation secured by a mortgage on both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair market value of all the property securing the obligation) or on interests in real property, (e) stock in other REITs, (f) debt instruments issued by publicly offered REITs (i.e., REITs which are required to file annual and periodic reports with the SEC under the Securities Exchange Act of 1943, as amended (the “Exchange Act”)), (g) personal property leased in connection with real property to the extent that rents attributable to such personal property do not exceed 15% of the total rent received under the lease and are treated as “rents from real property”; and (h) investments in stock or debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or offerings of debt with at least a five year term; • Second, of our investments not included in the 75% asset class, the value of our interest in any one issuer’s securities may not exceed 5% of the value of our total assets; • Third, we may not own more than 10% of the voting power or value of any one issuer’s outstanding securities; • Fourth, no more than 20% of the value of our total assets may consist of the securities of one or more TRSs; • Fifth, no more than 25% of the value of our total assets may consist of the securities of TRSs and other non-TRS taxable subsidiaries and other assets that are not qualifying assets for purposes of the 75% asset test; and • Sixth, no more than 25% of our total assets may consist of debt instruments issued by publicly offered REITs that qualify as “real estate assets” only because of the express inclusion of “debt instruments issued by publicly offered REITs” in the definition of “real estate assets”.
To maintain our qualification as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year: • First, at least 75% of the value of our total assets must consist of: (a) cash or cash items, including certain receivables, (b) government securities, (c) real estate assets, including interests in real property, leaseholds and options to acquire real property and leaseholds, (d) interests in mortgages on real property (including an interest in an obligation secured by a mortgage on both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair market value of all the property securing the obligation) or on interests in real property, (e) stock in other REITs, (f) debt instruments issued by publicly offered REITs ( i.e ., REITs which are required to file 18 Table of Contents annual and periodic reports with the SEC under the Securities Exchange Act of 1943, as amended (the “Exchange Act”)), (g) personal property leased in connection with real property to the extent that rents attributable to such personal property do not exceed 15% of the total rent received under the lease and are treated as “rents from real property”; and (h) investments in stock or debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or offerings of debt with at least a five year term; • Second, of our investments not included in the 75% asset class, the value of our interest in any one issuer’s securities may not exceed 5% of the value of our total assets; • Third, we may not own more than 10% of the voting power or value of any one issuer’s outstanding securities; • Fourth, no more than 20% of the value of our total assets may consist of the securities of one or more TRSs; • Fifth, no more than 25% of the value of our total assets may consist of the securities of TRSs and other non-TRS taxable subsidiaries and other assets that are not qualifying assets for purposes of the 75% asset test; and • Sixth, no more than 25% of our total assets may consist of debt instruments issued by publicly offered REITs that qualify as “real estate assets” only because of the express inclusion of “debt instruments issued by publicly offered REITs” in the definition of “real estate assets”.
As residents typically receive assistance with activities of daily living such as bathing, grooming, administering medication and memory care services, we consider these facilities to be need-driven senior housing. On-site staff personnel are available to assist in minor medical needs on an as-needed basis. Operators of ALFs are typically paid from private sources without assistance from government.
As residents typically receive assistance with activities of daily living such as bathing, grooming, administering medication and memory care services, we consider these facilities to be need-driven senior housing. On-site staff personnel are available to assist in minor medical needs on an as-needed basis. Operators of ALFs are typically paid from private sources without assistance from the government.
Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing properties as either need-driven (assisted living facilities and senior living campuses) or discretionary (independent living facilities and entrance-fee communities). Our SHOP is comprised of 15 independent living facilities located throughout the United States. Real Estate Investments Senior Housing.
Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing properties as either need-driven (assisted living facilities and senior living campuses) or discretionary (independent living facilities and entrance-fee communities). Our SHOP segment is comprised of 15 independent living facilities located throughout the United States. Real Estate Investments Senior Housing.
The remaining master lease agreement covering 11 properties with an original maturity in 2023 was previously extended to 2028. • Reduced the combined rent for the portfolio to approximately $28.3 million (excluding the ALF in Virginia Beach acquired in the fourth quarter of 2022) per year through April 1, 2024, subject to a nominal annual increase, at which time the rent will be reset to a fair market value, but not less than 8.0% of our initial gross investment. • Required monthly payments beginning October 2022 through December 2024 based on a percentage of Bickford’s monthly revenues exceeding an established threshold to be applied to the outstanding pandemic-related deferrals granted to Bickford.
The remaining master lease agreement covering 11 properties with an original maturity in 2023 was previously extended to 2028. • Reduced the combined rent for the portfolio (excluding the ALF in Virginia Beach acquired in the fourth quarter of 2022) to approximately $28.3 million per year through April 1, 2024, subject to a nominal annual increase, at which time the rent will be reset to a fair market value, but not less than 8.0% of our initial gross investment. • Required monthly payments from October 2022 through December 2024 based on a percentage of Bickford’s monthly revenues exceeding an established threshold to be applied to the outstanding pandemic-related rent deferrals granted to Bickford.
For example, the Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) requires HHS, in conjunction with the Medicare Payment Advisory Commission, to work toward a unified payment system for post-acute care services provided by SNFs, inpatient rehabilitation facilities, home health agencies, and long-term care hospitals.
For example, the Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) requires HHS, in conjunction with the Medicare Payment Advisory Commission (“MedPAC”), to work toward a unified payment system for post-acute care services provided by SNFs, inpatient rehabilitation facilities, home health agencies, and long-term care hospitals.
Second, in general, at least 95% of our gross income for each taxable year (excluding gross income from prohibited transactions) must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities or any combination of these. Asset Test.
Second, in general, at least 95% of our gross income for each taxable year (excluding gross income from prohibited transactions) must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities or any combination of these. Asset Tests.
Effective April 1, 2022, we restructured and amended three of Bickford’s master lease agreements covering 28 properties and reached agreement on the repayment terms of its outstanding pandemic-related deferrals. Significant terms of these agreements are as follows: • Extended the maturity dates of the modified leases to 2033 and 2035.
Effective April 1, 2022, we restructured and amended three of Bickford’s master lease agreements covering 28 properties and reached agreement on the repayment terms of its outstanding pandemic-related rent deferrals. Significant terms of these agreements are as follows: • Extended the maturity dates of the modified leases to 2033 and 2035.
In our leasing operations, we offer to our tenants and to sellers of newly acquired properties a variety of inducements which originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded.
In our leasing operations, we offer to our tenants and to sellers of newly acquired properties a variety of inducements that originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded.
“Type A” EFCs, or “Lifecare” communities, such as Timber Ridge, held by us since January 31, 2020 in a joint venture, include substantially all future healthcare costs in the payment of an entrance fee and thereafter payment of a set service fee paid monthly.
“Type A” EFCs, or “Lifecare” communities, such as Timber Ridge, held by us since January 31, 2020 in a joint venture, include substantially all future healthcare costs in the payment of an entrance fee and thereafter payment of a monthly set service fee.
If we lose our status as a REIT (currently or with respect to any tax years for which the statute of limitations has not expired), we will face serious tax consequences that will substantially reduce the funds available to satisfy our obligations, to implement our business strategy and to make distributions to our stockholders for each of the years involved because: • We would be subject to U.S. federal income tax at the regular corporate rate applicable to regular C corporations on our taxable income, determined without reduction for amounts distributed to stockholders; • For tax years beginning after December 31, 2022, we would possibly be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases; • We would not be required to make any distributions to stockholders, and any dividends to stockholders would be taxable as ordinary income to the extent of our current and accumulated earnings and profits (which may be subject to tax at preferential rates to individual stockholders); and • Unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.
If we lose our status as a REIT (currently or with respect to any tax years for which the statute of limitations has not expired), we will face serious tax consequences that will substantially reduce the funds available to satisfy our obligations, to implement our business strategy and to make distributions to our stockholders for each of the years involved because: • We would be subject to U.S. federal income tax at the regular corporate rate applicable to regular C corporations on our taxable income, determined without reduction for amounts distributed to stockholders; 19 Table of Contents • For tax years beginning after December 31, 2022, we would possibly be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases; • We would not be required to make any distributions to stockholders, and any dividends to stockholders would be taxable as ordinary income to the extent of our current and accumulated earnings and profits (which may be subject to tax at preferential rates to individual stockholders); and • Unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.
Effective April 1, 2022, 15 senior housing ILFs previously part of the legacy Holiday Retirement (“Holiday”) properties were transferred from a triple-net lease to two separate ventures comprising our SHOP, which represents a new reportable segment.
Effective April 1, 2022, 15 senior housing ILFs previously part of the legacy Holiday Retirement (“Holiday”) properties were transferred from a triple-net lease to two separate ventures comprising our SHOP segment, which represents a new reportable segment in 2022.
Accordingly, no assurance can be given that we will be organized or will be able to operate in a manner so as to qualify or remain qualified as a REIT. Income Test. We must satisfy two gross income tests annually to maintain our qualification as a REIT.
Accordingly, no assurance can be given that we will be organized or will be able to operate in a manner so as to qualify or remain qualified as a REIT. Income Tests. We must satisfy two gross income tests annually to maintain our qualification as a REIT.
Concurrently with the settlement and dismissal, we transitioned 15 of the legacy Holiday ILFs into two separate partnership ventures that own the underlying independent living operations, forming our new SHOP segment.
Concurrently with the settlement and dismissal, we transitioned 15 of the legacy Holiday ILFs into two separate partnership ventures that own the underlying independent living operations, forming our SHOP segment.
Qualifying income for purposes of that 75% gross income test generally includes: • rents from real property; 18 Table of Contents • interest on debt secured by mortgages on real property, or on interests in real property (including interest on an obligation secured by a mortgage on both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair market value of all the property securing the obligation); • dividends or other distributions on, and gain from the sale of, shares in other REITs; • gain from the sale of real estate assets; and • income derived from the temporary investment of new capital that is attributable to the issuance of our shares of beneficial interest or a public offering of our debt with a maturity date of at least five years and that we receive during the one-year period beginning on the date on which we received such new capital.
Qualifying income for purposes of that 75% gross income test generally includes: • rents from real property; • interest on debt secured by mortgages on real property, or on interests in real property (including interest on an obligation secured by a mortgage on both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair market value of all the property securing the obligation); • dividends or other distributions on, and gain from the sale of, shares in other REITs; • gain from the sale of real estate assets; and • income derived from the temporary investment of new capital that is attributable to the issuance of our shares of beneficial interest or a public offering of our debt with a maturity date of at least five years and that we receive during the one-year period beginning on the date on which we received such new capital.
As of December 31, 2022, our portfolio included seven independent living facilities (“ILF”) leased to operators. ILFs offer specially designed residential units for active senior adults and provide various ancillary services for their residents including restaurants, activity rooms and social areas. Services provided by ILF operators are generally paid from private sources without assistance from government payors.
As of December 31, 2023, our portfolio included seven independent living facilities (“ILF”) leased to operators. ILFs offer specially designed residential units for active senior adults and provide various ancillary services for their residents including restaurants, activity rooms and social areas. Services provided by ILF operators are generally paid from private sources without assistance from government payors.
As of December 31, 2022, our portfolio included no medical office buildings (“MOB”). We have a $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a fund that invests in medical real estate, including MOBs. Historically, our investment strategy has included owning and leasing MOBs whose tenants are primarily physicians and other medical practitioners.
As of December 31, 2023, our portfolio included no medical office buildings (“MOB”). We have a $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a fund that invests in medical real estate, including MOBs. Historically, our investment strategy has included owning and leasing MOBs whose tenants are primarily physicians and other medical practitioners.
The following is a brief discussion of certain laws and regulations applicable to certain of our tenants, managers and borrowers and, in certain cases, to us. Licensure and Certification.
The following is a brief discussion of certain laws and regulations applicable to certain of our tenants, managers and borrowers and, in some cases, to us. Licensure and Certification.
These laws include: (i) federal and state false claims acts, which generally prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other federal or state healthcare programs; (ii) federal and state anti-kickback and fee-splitting statutes, including the federal Anti-Kickback Statute, which prohibits the payment or receipt of any consideration in exchange for referral of Medicare and Medicaid patients; (iii) federal and state physician self-referral laws, including the federal prohibition commonly referred to as the Stark Law, which generally prohibit referrals by physicians to entities for designated health services (which include hospital inpatient and outpatient services and some of the services provided in SNFs) with which the physician or an immediate family member has a financial relationship; and (iv) the federal Civil Monetary Penalties Law, which requires a lower burden of proof than other fraud and abuse laws.
These laws include but are not limited to: (i) federal and state false claims acts, which generally prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other federal or state healthcare programs; (ii) federal and state anti-kickback and fee-splitting statutes, including the federal Anti-Kickback Statute, which prohibits the payment or receipt of any consideration in exchange for referral of Medicare and Medicaid patients; (iii) federal and state physician self-referral laws, including the federal prohibition commonly referred to as the Stark Law, which generally prohibits referrals by physicians to entities for designated health services (which include hospital inpatient and outpatient services and some of the services provided in SNFs) with which the physician or an immediate family member has a financial relationship; and (iv) the federal Civil Monetary Penalties Law, which requires a lower burden of proof than other fraud and abuse laws.
Our stock, if any, of a TRS is not subject to the 10% or 5% asset tests. Instead, the value of all TRSs owned by us cannot exceed 20% of the value of our assets. We currently own all of the membership interests of NHI-SS TRS, LLC, a TRS and may form additional TRSs in the future.
Our stock, if any, of a TRS is not subject to the 10% or 5% asset tests. Instead, the value of all TRSs owned by us cannot exceed 20% of the value of our assets. We currently own all of the membership interests of NHI-SS TRS, LLC, and NHI-Discovery I TRS, LLC, and may form additional TRSs in the future.
As of December 31, 2022, our portfolio included 11 entrance-fee communities (“EFC”) leased to operators and mortgage loans secured by one EFC. EFCs, frequently referred to as continuing care retirement communities (“CCRC”), typically include a combination of detached cottages, an ILF, an ALF and a SNF on one campus.
As of December 31, 2023, our portfolio included 11 entrance-fee communities (“EFC”) leased to operators and mortgage loans secured by one EFC. EFCs, frequently referred to as continuing care retirement communities (“CCRC”), typically include a combination of detached cottages, an ILF, an ALF and a SNF on one campus.
Our arrangement with an affiliate of Life Care Services, which we completed in January 2020 and is structured to be compliant with the provisions of RIDEA, permits NHI to receive rent payments through a triple-net lease between a property company owned 75% by NHI and an operating company owned 25% by a taxable REIT subsidiary (“TRS”) of NHI and gives NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to the TRS.
Our arrangement with an affiliate of Life Care Services, which we completed in January 2020 and is structured to be compliant with the provisions of RIDEA, permits NHI to receive rent payments through a triple-net lease between a property company owned 80% by NHI and an unconsolidated operating company owned 25% by a taxable REIT subsidiary (“TRS”) of NHI and gives NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to the TRS.
As the decision to utilize the services of a SNF is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility. Hospitals. As of December 31, 2022, our portfolio included one hospital (“HOSP”) leased to an operator.
As the decision to utilize the services of a SNF is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility. Hospitals. As of December 31, 2023, our portfolio included one hospital (“HOSP”) leased to an operator.
Privacy and Security. Privacy and security regulations issued pursuant to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) restrict the use and disclosure of individually identifiable health information (“protected health information”), provide for individual rights, require safeguards for protected health information and require notification of breaches of unsecure protected health information.
Privacy and Security and Data Interoperability. Privacy and security regulations issued pursuant to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) restrict the use and disclosure of individually identifiable health information (“protected health information”), provide for individual rights, require safeguards for protected health information and require notification of breaches of unsecure protected health information.
These ventures, in which NHI owns a majority interest, own the underlying independent living operations and are structured to comply with REIT requirements that utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes.
These ventures, in which NHI holds a majority interest, own the underlying independent living operations and are structured to comply with REIT requirements that utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes.
Our tenants and borrowers that operate SNFs, nursing homes, hospitals, SLCs, ALFs and EFCs are typically subject to extensive and complex federal, state and local healthcare laws and regulations, including those relating to Medicare and Medicaid reimbursement, fraud and abuse, relationships with referral sources and referral recipients, licensure and certification, building codes, privacy and security of health information and other personal data, CON, appropriateness and classification of care, qualifications of medical and support personnel, distribution, maintenance and dispensing of pharmaceuticals, communications with patients and consumers, and the operation of healthcare facilities.
Our tenants and borrowers that operate SNFs, nursing homes, HOSPs, SLCs, ALFs and EFCs are typically subject to extensive and complex federal, state and local healthcare laws and regulations, including those relating to Medicare 13 Table of Contents and Medicaid reimbursement, fraud and abuse, relationships with referral sources and referral recipients, licensure and certification, building codes, privacy and security of health information and other personal data, CON, appropriateness and classification of care, qualifications of medical and support personnel, distribution, maintenance and dispensing of pharmaceuticals, communications with patients and consumers, and the operation of healthcare facilities.
ILFs are generally, but not always, unlicensed facilities and do not require the issuance of a CON as required for SNFs. As ILFs typically do not provide assistance with activities of daily living, we consider the decision to transition to an ILF to be discretionary. Entrance-Fee Communities.
ILFs are generally, but not always, unlicensed facilities and do not require the issuance of a CON as required for SNFs. As ILFs typically do not provide assistance with activities of daily living, we consider the decision to transition to an ILF to be discretionary. 6 Table of Contents Entrance-Fee Communities.
Various licenses, certifications and permits are required to operate SNFs, ALFs, EFCs, hospitals and, to a lesser degree, ILFs, to dispense narcotics, to handle radioactive materials and to operate equipment, among other regulated actions.
Various licenses, certifications and permits are required to operate SNFs, ALFs, EFCs, HOSPs and, to a lesser degree, ILFs, to dispense narcotics, to handle radioactive materials and to operate equipment, among other regulated actions.
Our revenues depend on the operating success of our tenants, borrowers and managers whose source and amount of revenues are determined by (i) the licensed beds or other capacity of the facility, (ii) their occupancy rate, (iii) the extent to which the services provided at each facility are utilized by the residents and patients, (iv) the mix of private pay, Medicare and Medicaid patients, and (v) the rates paid by private payors and by the Medicare and Medicaid programs.
Our revenues depend on the operating success of our tenants, borrowers and managers, whose sources and amounts of revenues are determined by (i) the licensed beds or other capacity of the facility, (ii) their occupancy rate, (iii) the extent to which the services provided at each facility are utilized by the residents and patients, (iv) the mix of private pay, Medicare and Medicaid patients, and (v) the rates paid by private payors and by the Medicare and Medicaid programs.
Tax Regulation 17 Table of Contents We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and since our formation, have filed our U.S. federal income tax return as a REIT.
Tax Regulation We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and since our formation, have filed our U.S. federal income tax return as a REIT.
As of December 31, 2022, our portfolio included 94 senior housing properties (“SHO”) leased to operators and mortgage loans secured by nine SHOs. The SHOs in our portfolio are either need-driven or discretionary for end users and consist of assisted living facilities, senior living campuses, independent living facilities, and entrance-fee communities, which are more fully described below.
As of December 31, 2023, our portfolio included 97 senior housing properties (“SHO”) leased to operators and mortgage loans secured by nine SHOs. The SHOs in our portfolio are either need-driven or discretionary for end users and consist of assisted living facilities, senior living campuses, independent living facilities, and entrance-fee communities, which are more fully described below.
In addition to the security of the lien against the property, we will generally require additional security and collateral in the form of either payment and performance completion bonds or completion guarantees by the borrower’s parent, affiliates of the borrower or one or more of the individuals who 8 Table of Contents control the borrower.
In addition to the security of the lien against the property, we will generally require additional security and collateral in the form of either payment and performance completion bonds or completion guarantees by the borrower’s parent, affiliates of the borrower or one or more of the individuals who control the borrower.
Nature of Investments Our investments are typically structured as acquisitions of properties through purchase-leaseback transactions, acquisitions of properties from other real estate investors, loans, or operations through structures allowed by the REIT Investment Diversification Empowerment Act of 2007 (“RIDEA”).
Nature of Investments 7 Table of Contents Our investments are typically structured as acquisitions of properties through purchase-leaseback transactions, acquisitions of properties from other real estate investors, loans, or operations through structures allowed by the REIT Investment Diversification Empowerment Act of 2007 (“RIDEA”).
As of December 31, 2022, our portfolio included 65 SNFs leased to operators and mortgage loans secured by eight SNFs. SNFs provide some combination of skilled and intermediate nursing and rehabilitative care, including speech, physical and occupational therapy. The operators of the SNFs receive payment from a combination of private pay sources and government payors such as Medicaid and Medicare.
As of December 31, 2023, our portfolio included 65 SNFs leased to operators and mortgage loans secured by seven SNFs. SNFs provide some combination of skilled and intermediate nursing and rehabilitative care, including speech, physical and occupational therapy. The operators of the SNFs receive payment from a combination of private pay sources and government payors such as Medicaid and Medicare.
We, along with our TRS, currently own all of the common interests in NHI PropCo Member LLC, an entity that will elect to be taxed as a REIT under the Internal Revenue Code (the “Subsidiary REIT”) and we may own and acquire direct or indirect interests in additional Subsidiary REITs in the future.
We, along with our TRS, currently own all of the common interests in NHI PropCo Member LLC, an entity that has elected to be taxed as a REIT under the Internal Revenue Code (the “Subsidiary REIT”) and we may own and acquire direct or indirect interests in additional Subsidiary REITs in the future.
Risk Factors – Risks Related to our Business and Operations - We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances” and “– We are subject to risks of damage from catastrophic weather and other natural or man-made disasters and the physical effects of climate change” for a description of the risks and regulations associated with environmental matters.
Risk Factors – Risks Related to our Business and Operations - We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances ” and “ We are subject to risks of damage from catastrophic weather and other natural or man-made disasters and the physical effects of climate change ” for a description of the risks and regulations associated with environmental matters.
The construction loans are secured by first mortgage liens on substantially all real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the property. Usual and customary covenants extend to the agreements, including the borrower’s obligation for payment of insurance and taxes.
The construction loan is secured by first mortgage liens on substantially all real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the property. Usual and customary covenants extend to the agreements, including the borrower’s obligation for payment of insurance and taxes.
SNFs are required to obtain state licenses and are highly regulated at the federal, state and local level. Operators in 11 of the 13 states in which we own SNFs must obtain a CON from the state before opening or expanding such facilities. Some SNFs also include assisted living beds.
SNFs are required to obtain state licenses and are highly regulated at the federal, state and local levels. Operators in 9 of the 11 states in which we own SNFs must obtain a CON from the state before opening or expanding such facilities. Some SNFs also include assisted living beds.
We consider the creditworthiness of the operator to be an important factor in underwriting the lease or loan investment, and we generally have the right to approve any changes in operators. During 2022, we made commitments to fund new investments in real estate and loans totaling approximately $101.5 million.
We consider the creditworthiness of the operator to be an important factor in underwriting the lease or loan investment, and we generally have the right to approve any changes in operators. During 2023, we made commitments to fund new investments in real estate and loans totaling approximately $74.5 million.
Straight-line rent of $0.4 million, $2.5 million and $4.3 million and interest revenue of $3.7 million, $3.2 million and $3.0 million were recognized from Senior Living for the years ended December 31, 2022, 2021 and 2020, respectively.
Straight-line rent revenue of $(1.2) million, $0.4 million and $2.5 million and interest revenue of $3.7 million, $3.7 million and $3.2 million were recognized from Senior Living for the years ended December 31, 2023, 2022 and 2021, respectively.
Need-Driven Senior Housing Assisted Living Facilities. As of December 31, 2022, our portfolio included 66 assisted living facilities (“ALF”) leased to operators and mortgage loans secured by eight ALFs. ALFs are free-standing facilities that provide basic room and board functions for elderly residents.
Need-Driven Senior Housing Assisted Living Facilities. As of December 31, 2023, our portfolio included 71 assisted living facilities (“ALF”) leased to operators and mortgage loans secured by eight ALFs. ALFs are free-standing facilities that provide basic room and board functions for elderly residents.
These communities appeal to residents because there is no need to relocate when health and medical needs 6 Table of Contents change. EFCs are classified as either Type A, B, or C depending upon the amount of healthcare benefits included in the entrance fee.
These communities appeal to residents because there is no need to relocate when health and medical needs change. EFCs are classified as Type A, B, or C depending upon the amount of healthcare benefits included in the entrance fee.
Services provided by hospitals are generally paid for by a combination of private pay sources and government payors. As the decision to utilize the services of a hospital is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility. Medical Office Building.
Services provided by HOSPs are generally paid for by a combination of private pay sources and government payors. As the decision to utilize the services of a HOSP is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility. Medical Office Building.
Tenants in our Real Estate Investments portfolio which individually provided more than 3% and collectively 59% of our total revenues were (parent companies, in alphabetical order): Discovery Senior Living (“Discovery”); Encore Senior Living; Health Services Management; Holiday; Life Care Services; National HealthCare Corporation (“NHC”); Senior Living Communities (“Senior Living”); and The Ensign Group.
Tenants in our Real Estate Investments portfolio which individually provided more than 3% and collectively 61% of our total revenues were (parent companies, in alphabetical order): Bickford Senior Living (“Bickford”); Discovery Senior Living (“Discovery”); Encore Senior Living; Health Services Management; Life Care Services; National HealthCare Corporation (“NHC”); Senior Living Communities (“Senior Living”); and The Ensign Group.
We have mortgage loans with original maturities generally five years or greater, with varying amortization schedules from interest-only to fully amortizing. Most of the loans are at a fixed interest rate; however, some interest rates increase based on a fixed schedule.
We have mortgage loans with original maturities generally less than five years, with varying amortization schedules from interest-only to fully amortizing. Most of the loans are at a fixed interest rate; however, some interest rates increase based on a fixed schedule.
Medicare is a federal health insurance program for persons age 65 and over, some disabled persons, and persons with end-stage renal disease. Medicare generally covers SNF services for beneficiaries who require skilled nursing or therapy services after a qualifying hospital stay. Medicare Part A generally pays a per diem rate for each beneficiary.
Medicare is a federal health insurance program for persons age 65 and over, some disabled persons, and persons with end-stage renal disease or Lou Gehrig’s disease/amyotrophic lateral sclerosis. Medicare generally covers SNF services for beneficiaries who require skilled nursing or therapy services after a qualifying hospital stay. Medicare Part A generally pays a per diem rate for each beneficiary.
The deferrals may be reduced by up to $6.0 million upon Bickford achieving certain performance targets and the sale or transition of certain properties to new operators of which $3.0 million was earned in the fourth quarter of 2022.
The deferrals may be reduced by up to $6.0 million upon Bickford achieving certain performance targets and the sale or transition of certain properties to new operators of which $2.5 million was earned in the first quarter of 2023 and $3.0 million was earned in the fourth quarter of 2022.
As of December 31, 2022, our portfolio included 66 medical facilities leased to operators and mortgage loans secured by eight medical facilities. The medical facilities within our portfolio consist of SNFs and a hospital, which are more fully described below. Skilled Nursing Facilities.
As of December 31, 2023, our portfolio included 66 medical facilities leased to operators and mortgage loans secured by seven medical facilities. The medical facilities within our portfolio consist of SNFs and a hospital, which are more fully described below. Skilled Nursing Facilities.
Investment Policies Our investment objectives are to (i) provide consistent and growing current income for distribution to our stockholders through investments primarily in healthcare-related facilities or in the operations thereof through independent third-party management, (ii) provide the opportunity to realize capital growth resulting from appreciation, if any, in the residual value of our portfolio properties, and (iii) preserve and protect stockholders’ capital through a balance of diversity, flexibility and liquidity.
Risk Factors - Risks Related to Our Status as a REIT.” Investment Policies Our investment objectives are to (i) provide consistent and growing current income for distribution to our stockholders through investments primarily in healthcare-related facilities or in the operations thereof through independent third-party management, (ii) provide the opportunity to realize capital growth resulting from appreciation, if any, in the residual value of our portfolio properties, and (iii) preserve and protect stockholders’ capital through a balance of diversity, flexibility and liquidity.
The financing is for a term of five years with two one-year extensions and carries an interest rate of 7.25%, per annum. Additionally, the loan conveys to NHI a purchase option at a stated minimum price of $38.3 million, subject to adjustment for market conditions.
The mortgage loan is for a term of five years with two one-year extensions and bears interest at a rate of 7.25% per annum. Additionally, the loan conveys to NHI a purchase option at a stated minimum price of $38.3 million, subject to adjustment for market conditions.
Licensure, certification and enrollment with government programs may be conditioned on requirements related to, among other things, the quality of medical care provided, qualifications of the operator’s administrative personnel and clinical staff, adequacy of the physical plant and equipment, capital and other expenditures, record keeping, dietary services, infection prevention and control, and patient rights.
Licensure, certification and enrollment with government programs may be conditioned on requirements related to, among other things, the quality of medical care provided, qualifications of the operator’s administrative personnel and clinical staff, disclosure of ownership and related information, adequacy of the physical plant and equipment, staff-to-patient or resident ratios, capital and other expenditures, record keeping, dietary services, infection prevention and control, and patient rights.
ALFs may be licensed and regulated in some states, but generally do not require the issuance of a Certificate of Need (“CON”) as is often required for skilled nursing facilities (“SNF”). Senior Living Campuses. As of December 31, 2022, our portfolio included 10 senior living campuses (“SLC”) leased to operators.
ALFs may be licensed and regulated in some states, but generally do not require the issuance of a Certificate of Need (“CON”) as is often required for skilled nursing facilities (“SNFs”). Senior Living Campuses. As of December 31, 2023, our portfolio included eight senior living campuses (“SLC”) leased to operators.
We cannot make any assessment as to the ultimate timing or the effect that any future reforms may have on our tenants’, managers’ and borrowers’ costs of doing business and on the amount of reimbursement by government and other third-party payors.
We cannot make any assessment as to the timing or the effect that any such changes may have on our tenants’, managers’ and borrowers’ costs of doing business and on the amount of reimbursement by government and other third-party payors.
Hospitals provide a wide range of inpatient and outpatient services, including acute psychiatric, behavioral and rehabilitation services, and are subject to extensive federal, state and local legislation and regulation. Hospitals undergo periodic inspections regarding standards of medical care, equipment and hygiene as a condition of licensure.
HOSPs provide a wide range of inpatient and outpatient services, which may include acute psychiatric, behavioral and rehabilitation services, and are subject to extensive federal, state and local legislation and regulation. HOSPs undergo periodic inspections regarding standards of medical care, equipment and hygiene as a condition of licensure.
As of December 31, 2022, we have eight mortgage loans bearing interest ranging from 7.0% to 8.25% per annum. Mezzanine loans. Frequently in situations calling for temporary financing or when our borrowers’ in-place lending arrangements prohibit the extension of mortgage security, we typically extend credit based on corporate and/or personal guarantees.
As of December 31, 2023, we had eight mortgage loans bearing interest ranging from 7.0% to 12.0% per annum. Mezzanine loans. Frequently in situations calling for temporary financing or when our borrowers’ in-place lending arrangements prohibit the extension of mortgage security, we extend credit based on corporate and/or personal guarantees.
Generally, the rent that we receive from our TRS in such structures will be treated as “rents from real property.” 19 Table of Contents Subsidiary REITs .
Generally, the rent that we receive from our TRS in such structures will be treated as “rents from real property.” Subsidiary REITs .
Senior Housing Operating Portfolio As of December 31, 2022, our portfolio included 15 ILFs with 1,732 units located throughout the United States which we consider to be discretionary senior housing as discussed in more detail above.
Senior Housing Operating Portfolio As of December 31, 2023, our portfolio included 15 ILFs with a combined 1,733 units located throughout the United States, which we consider to be discretionary senior housing as discussed in more detail above.
For fiscal year 2023, which started October 1, 2022, CMS estimates that payments to SNFs under the SNF PPS will increase by $904.0 million, or 2.7%, compared to fiscal year 2022. 14 Table of Contents CMS has implemented policies intended to shift Medicare to value-based payment methodologies that tie reimbursement to quality of care rather than quantity.
For fiscal year 2024, which started October 1, 2023, CMS estimates that payments to SNFs under the SNF PPS will increase by approximately $1.4 billion, or 4.0%, compared to fiscal year 2023. 14 Table of Contents CMS has implemented policies intended to shift Medicare to value-based payment methodologies that tie reimbursement to quality of care rather than quantity.
Noncompliance may result in penalties or other disincentives. Americans with Disabilities Act . Our properties generally must comply with the Americans with Disabilities Act (the “ADA”) and any similar state or local laws to the extent that such properties are public accommodations as defined in those statutes.
Americans with Disabilities Act . Our properties generally must comply with the Americans with Disabilities Act (the “ADA”) and any similar state or local laws to the extent that such properties are public accommodations as defined in those statutes.
As of December 31, 2022, we had investments of approximately $338.1 million in 15 properties with a combined 1,732 units located in eight states that are operated on behalf of the Company by two independent managers pursuant to the terms of separate management agreements that commenced April 1, 2022.
As of December 31, 2023, we had gross investments of approximately $347.4 million in 15 properties located in eight states with a combined 1,733 units that are operated on behalf of the Company by independent managers pursuant to the terms of separate management agreements that commenced April 1, 2022.
NHC - The facilities leased to NHC, a publicly held company, are under a master lease and consist of three independent living facilities and 32 skilled nursing facilities (four of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC).
NHC - The facilities leased to NHC, a publicly held company, are under a master lease and consist of three ILFs and 32 SNFs (four of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC).
Our portfolio of 17 mortgages along with other notes receivable totaled $248.5 million, excluding an allowance for expected credit losses of $15.3 million, as of December 31, 2022. Our SHOP segment is comprised of two ventures that own the operations of independent living facilities.
Our portfolio of 16 mortgages along with other notes receivable totaled $260.7 million, excluding an allowance for expected credit losses of $15.5 million, as of December 31, 2023. Our SHOP segment is comprised of two ventures that own the operations of independent living facilities.
Department of Health and Human Services (“HHS”) revises the reimbursement systems used to reimburse healthcare providers.
From time to time, the U.S. Department of Health and Human Services (“HHS”) revises the reimbursement systems used to reimburse healthcare providers.
There can be no assurance that future payment rates for either government or private payors will be sufficient to cover potential cost increases in providing services to patients.
There can be no assurance that future payment rates for either government or private payors will be sufficient to cover the cost of providing services to patients, including any cost increases.
Entities subject to HIPAA include health plans, healthcare clearinghouses, and most healthcare providers (including some of our managers, tenants and borrowers). Business associates of these entities who create, receive, maintain or transmit protected health information are also subject to certain HIPAA provisions. Violations of HIPAA may result in substantial civil and/or criminal fines and penalties.
Entities subject to HIPAA include health plans, healthcare clearinghouses, and most healthcare providers (including some of our managers, tenants and borrowers). Business associates of these entities who create, receive, maintain or transmit protected health information are also subject to certain HIPAA provisions.
In the event we are no longer required to pay dividends to maintain REIT status, this could adversely affect the value of our common stock. See “Item 1A. Risk Factors - Risks Related to Our Status as a REIT”.
In the event we are no longer required to pay dividends to maintain REIT status, this could adversely affect the value of our common stock. See “Item 1A.
As of December 31, 2022, our SHOP consisted of 15 ILFs with a combined 1,732 units located in eight states.
As of December 31, 2023, our SHOP segment consisted of 15 ILFs located in eight states with a combined 1,733 units.
Along with a competitive compensation program including incentive bonuses and a stock option plan, NHI provides a 401(k) plan with a safe harbor contribution, paid employee health insurance coverage and tuition reimbursement. As of December 31, 2022, we had 25 full-time employees, an increase of six over the total at December 31, 2021, and two part-time employees.
Along with a competitive compensation program including incentive bonuses and an equity incentive plan, NHI provides a 401(k) plan with a safe harbor contribution limit, paid employee health insurance coverage and tuition reimbursement. As of December 31, 2023, we had 26 full-time employees, an increase of one over the total at December 31, 2022.
However, we may choose to sell properties if they no longer meet our investment objectives. 20 Table of Contents We will not, without the approval of a majority of the Board of Directors and review of a committee comprised of disinterested directors, enter into any joint venture or partnership relationships with or acquire from or sell to any director, officer or employee of NHI, or any affiliate thereof, as the case may be, any of our assets or other property.
We will not, without the approval of a majority of the Board of Directors and review of a committee comprised of disinterested directors, enter into any joint venture or partnership relationships with or acquire from or sell to any director, officer or employee of NHI, or any affiliate thereof, as the case may be, any of our assets or other property.
Accordingly, the TRS holds our 25% equity interest in an unconsolidated operating company, and provides an organizational structure that allows the TRS to engage in a broad range of activities and share in revenues that would otherwise be non-qualifying income under the REIT gross income tests. The TRS is subject to state and federal income taxes. Senior Housing Operating Portfolio.
This organizational structure allows the TRS to engage in a broad range of activities and share in revenues that would otherwise be non-qualifying income under the REIT gross income tests. The TRS is subject to state and federal income taxes. Senior Housing Operating Portfolio.
The annual interest rates we receive on our 7 Table of Contents mortgage, construction and mezzanine loans ranged between 7.0% and 9.5% during 2022. We believe our lease and loan terms are competitive within our peer group. Typical characteristics of these transactions are as follows: Leases.
The annual interest rates we receive on our mortgage, construction and mezzanine loans ranged between 6.0% and 12.0% during 2023. We believe our lease and loan terms are competitive within our peer group. Typical characteristics of our investment transactions are as follows: Leases.
As of December 31, 2022, we had $33.5 million of development commitments for construction and renovation for ten properties, of which we had funded $25.7 million toward these commitments, with the remaining amount expected to be payable within 12 months.
As of December 31, 2023, we had $14.5 million of development commitments for construction and renovation of four properties, of which we had funded $11.0 million toward these commitments, with the remaining amount expected to be payable within 12 months.
For example, effective October 1, 2019, CMS implemented the Patient Driven Payment Model (“PDPM”). This payment methodology classifies beneficiaries into payment groups based on clinical factors using diagnosis codes rather than by volume of services.
For example, CMS uses the Patient Driven Payment Model (“PDPM”) payment methodology for SNF services, which classifies beneficiaries into payment groups based on clinical factors using diagnosis codes rather than by volume of services.
Rental income was $40.7 million for the year ended December 31, 2020. • In the third quarter of 2021, we sold nine of these properties for net proceeds of $119.7 million. • We received no rent from the Welltower-controlled affiliate due under the master lease after the change in tenant ownership occurred in late July 2021.
Rental income from our Holiday portfolio was $23.5 million in 2021 prior to the change in tenant ownership. • In the third quarter of 2021, we sold nine of these properties for net proceeds of $119.7 million. • We received no rent from the Welltower-controlled affiliate due under the master lease after the change in tenant ownership occurred in late July 2021.
Tenant Concentration The following table contains information regarding tenant concentration in our Real Estate Investments portfolio, excluding $2.6 million for our corporate office, $338.1 million for the SHOP segment, and a credit loss reserve of $15.3 million, based on the percentage of revenues for the years ended December 31, 2022, 2021 and 2020 related to tenants or affiliates of tenants, that exceed 10% of total revenue ( $ in thousands ): 9 Table of Contents As of December 31, 2022 Revenues 1 Asset Gross Real Notes Year Ended December 31, Class Estate 2 Receivable 2022 2021 2020 Senior Living EFC $ 573,631 $ 48,547 $ 51,183 18% $ 50,726 17% $ 50,734 15% NHC SNF 133,770 — 36,893 13% 37,735 12% 37,820 11% Bickford 3 ALF 414,870 32,727 N/A N/A 34,599 12% 49,451 15% Holiday 3 ILF — — N/A N/A N/A N/A 40,705 12% All others, net Various 1,329,461 167,205 144,534 52% 164,017 55% 144,448 44% Escrow funds received from tenants for property operating expenses Various — — 9,788 4% 11,638 4% 9,653 3% $ 2,451,732 $ 248,479 242,398 298,715 332,811 Resident fees and services 4 35,796 13% — —% — —% $ 278,194 $ 298,715 $ 332,811 1 Includes interest income on notes receivable and rental income from properties classified as held for sale. 2 Amounts include any properties classified as held for sale. 3 Revenues included in All others, net for years when less than 10%. 4 There is no tenant concentration in resident fees and services because these agreements are with individual residents.
Tenant Concentration The following table contains information regarding tenant concentration in our Real Estate Investments portfolio, excluding $2.6 million for our corporate office, $347.4 million for the SHOP segment, and a credit loss reserve of $15.5 million, based on the percentage of revenues for the years ended December 31, 2023, 2022 and 2021 related to tenants or affiliates of tenants that exceed 10% of total revenue ( $ in thousands ): 9 Table of Contents As of December 31, 2023 Revenues 1 Asset Gross Real Notes Year Ended December 31, Class Estate 2 Receivable 2023 2022 2021 Senior Living EFC $ 573,631 $ 48,950 $ 51,274 16% $ 51,183 18% $ 50,726 17% NHC SNF 133,770 — 37,335 12% 36,893 13% 37,735 12% Bickford 3 ALF 429,043 16,795 38,688 12% N/A N/A 34,599 12% All others, net Various 1,293,969 195,002 132,216 41% 144,534 52% 164,017 55% Escrow funds received from tenants for property operating expenses Various — — 11,513 4% 9,788 4% 11,638 4% $ 2,430,413 $ 260,747 271,026 242,398 298,715 Resident fees and services 4 48,809 15% 35,796 13% — —% $ 319,835 $ 278,194 $ 298,715 1 Includes interest income on notes receivable and rental income from properties classified as held for sale. 2 Amounts include any properties classified as held for sale. 3 Revenues included in All others, net for years when less than 10%. 4 There is no tenant concentration in Resident fees and services because these agreements are with individual residents.
As of December 31, 2022, we had investments of approximately $2.4 billion in 160 health care real estate properties located in 32 states and leased pursuant primarily to triple-net leases to 24 tenants consisting of 94 senior housing properties, 65 skilled nursing facilities and one hospital, excluding 13 properties classified as assets held for sale.
As of December 31, 2023, we had gross investments of approximately $2.4 billion in 163 healthcare real estate properties located in 31 states and leased primarily pursuant to triple-net leases to 25 tenants, consisting of 97 senior housing communities, 65 skilled nursing facilities and one hospital, excluding one property classified as assets held for sale.
In addition to reimbursement pressures and changes in governmental healthcare programs, healthcare facilities are experiencing increasing pressure from private payors attempting to control healthcare costs. In some cases, private payors rely on governmental reimbursement systems to determine reimbursement rates. Changes to Medicare and Medicaid that reduce payments under these programs may negatively impact payments from private payors.
In addition to reimbursement pressures and changes in governmental healthcare programs, healthcare facilities are experiencing increasing pressure from private payors attempting to control healthcare costs. In some cases, private payors rely on governmental reimbursement systems to determine reimbursement rates and policies.

… 108 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

91 edited+34 added−22 removed116 unchanged
Biggest changeSuch decreased occupancy is likely to continue in 2023, and could be further impacted by federal initiatives intended to reduce the number of multi-occupancy rooms in SNFs. In addition, actions our operators take to address COVID-19 have materially increased their operating costs, in comparison to pre-pandemic levels, and a future health crisis may also result in increased operating costs.
Biggest changeIn addition, actions our operators have taken to address contagious diseases such as COVID-19 have materially increased their operating costs, in comparison to pre-pandemic levels, and a future health crisis may also result in increased operating costs. Such costs include those related to enhanced health and safety precautions and increased retention and recruitment labor costs among other measures.
In some cases, we have had to, and may continue to have to, write-off unpaid rental payments, incur lease accounting charges due to the uncollectibility of rental payments and/or restructure our tenants’ and operators’ long-term rent obligations. In response to requests by operators adversely impacted by COVID-19, we provided pandemic-related rent concessions totaling $10.7 million during 2022.
In some cases, we have had to, and we may continue to have to, write-off unpaid rental payments, incur lease accounting charges due to the uncollectibility of rental payments and/or restructure our tenants’ and operators’ long-term rent obligations. In response to requests by operators adversely impacted by COVID-19, we provided pandemic-related rent concessions totaling $10.7 million during 2022.
Risks of dealing with parties outside NHI include limitations on unilateral major decisions opposed by other interests, the prospect of divergent goals of ownership including disputes regarding management, ownership or disposition of a property, or limitations on the transfer of our interests without the consent of our partners.
Risks of dealing with parties outside of NHI include limitations on unilateral major decisions opposed by other interests, the prospect of divergent goals of ownership including disputes regarding management, ownership or disposition of a property, or limitations on the transfer of our interests without the consent of our partners.
These risks include fluctuations in resident occupancy, operating expenses, and economic conditions; competition; certification and inspection laws, regulations, and standards; the availability of and increases in cost of general and professional liability insurance coverage; litigation; federal, state and local taxes and regulations; costs associated with government investigations and enforcement actions; the availability and increases in cost of labor; and other risks applicable to any operating business.
These risks include fluctuations in resident occupancy, operating expenses, and economic conditions; competition; certification and inspection laws, regulations, and standards; the availability and increases in cost of general and professional liability insurance coverage; litigation; federal, state and local taxes and regulations; costs associated with government investigations and enforcement actions; the availability and increases in cost of labor; and other risks applicable to any operating business.
Although our tenants and operators are primarily responsible for the condition of the property they occupy, we also could be held liable to a governmental authority or to third parties for property damage, personal injuries, and for investigation and clean-up costs incurred in connection with the contamination or we could be required to incur additional costs to change how the property is constructed or operated due to presence of such substances.
Although our tenants and operators are primarily responsible for the condition of the property they occupy, we also could be held liable to a governmental authority or to third parties for property damage, personal injuries, and investigation and clean-up costs incurred in connection with the contamination or we could be required to incur additional costs to change how the property is constructed or operated due to presence of such substances.
The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules dealing with REITs constantly are under review by persons involved in the legislative process, the U.S.
The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules dealing with REITs are constantly under review by persons involved in the legislative process, the U.S.
Federal, state and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure; certification and enrollment with government programs; facility operations; addition or expansion of facilities; services and equipment; allowable costs; the preparation and filing of cost reports; privacy and security of health related and other personal information; prices for services; quality of medical equipment and services; necessity and adequacy of medical care, patient rights, billing and coding for services and properly handling overpayments; maintenance of adequate records; relationships with physicians and other referrals sources and referral recipients; debt collection; communications with patients and consumers; interoperability; and information blocking.
Federal, state and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure; certification and enrollment with government programs; facility operations; addition or expansion of facilities; services and equipment; allowable costs; the preparation and filing of cost reports; privacy and security of health-related and other personal information; prices for services; quality of medical equipment and services; necessity and adequacy of medical care; patient rights; billing and coding for services and properly handling overpayments; maintenance of adequate records; relationships with physicians and other referral sources and referral recipients; debt collection; communications with patients and consumers; interoperability; and information blocking.
Construction and development projects involve risks such as (i) development of a project could be abandoned after expending significant resources resulting in loss of deposits or failure to recover expenses already incurred; (ii) development and construction costs of a project could exceed original estimates due to increased interest rates and higher material costs; (iii) project delays could results in increases in construction costs and debt service expenses as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, and regulatory hurdles; and (iv) financing for a project could be unavailable on favorable terms or at all.
Construction and development projects involve risks such as (i) development of a project could be abandoned after expending significant resources resulting in loss of deposits or failure to recover expenses already incurred; (ii) development and construction costs of a project could exceed original estimates due to increased interest rates and higher material costs; (iii) project delays could result in increases in construction costs and debt service expenses as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, and regulatory hurdles; and (iv) financing for a project could be unavailable on favorable terms or at all.
As a result, general and professional liability costs have increased and may continue to increase. Nationwide, long-term care liability insurance rates are increasing because of large jury awards in states like Texas and Florida. Both Texas and Florida have now adopted SNF liability laws that modify or limit tort damages.
As a result, general and professional liability costs have increased and may continue to increase. Nationwide, long-term care liability insurance rates are increasing because of large jury awards in states like Texas and Florida. Both Texas and Florida have adopted SNF liability laws that modify or limit tort damages.
However, we review environmental site assessment of the properties that we purchase or encumber prior to taking an interest in them. Those assessments are designed to meet the “all appropriate inquiry” standard, which qualifies us for the innocent purchaser defense if environmental liabilities arise.
However, we review environmental site assessments of the properties that we purchase or encumber prior to taking an interest in them. Those assessments are designed to meet the “all appropriate inquiry” standard, which qualifies us for the innocent purchaser defense if environmental liabilities arise.
SOFR is the preferred alternative rate for LIBOR that has been identified by the Alternative Reference Rates Committee (ARRC), a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York. SOFR is calculated based on short-term repurchase agreements, backed by U.S. Treasury securities.
SOFR is the preferred alternative rate for LIBOR that has been identified by the Alternative Reference Rates Committee, a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York. SOFR is calculated based on short-term repurchase agreements, backed by U.S. Treasury securities.
We are subject to risks associated with our joint venture investment with Life Care Services for Timber Ridge, an entrance fee CCRC, associated with Type A benefits offered to the residents of the joint venture's entrance fee community and related accounting requirements.
We are subject to risks relating to our joint venture investment with Life Care Services for Timber Ridge, an entrance fee CCRC, associated with Type A benefits offered to the residents of the joint venture's entrance-fee community and related accounting requirements.
We intend to operate as a REIT under the Internal Revenue Code and believe we have and will continue to operate in such a manner. In addition, we currently hold an interest in s Subsidiary REIT (and may in the future own or acquire additional interests in Subsidiary REITs).
We intend to operate as a REIT under the Internal Revenue Code and believe we have and will continue to operate in such a manner. In addition, we currently hold an interest in a Subsidiary REIT (and may in the future own or acquire additional interests in Subsidiary REITs).
Payment defaults or a decline in the operating performance by these or other tenants/operators could materially and adversely affect our business, financial condition and results of operations and our ability to pay expected dividends to our stockholders.
Payment defaults or a decline in the operating performance by any of these tenants or other tenants/operators could materially and adversely affect our business, financial condition and results of operations and our ability to pay expected dividends to our stockholders.
We could encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities, and newly acquired properties might require significant attention of NHI’s management that would otherwise be devoted to our existing business.
We could encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities, and newly acquired properties might require significant attention of our management that would otherwise be devoted to our existing business.
In addition, if an operator, borrower or tenant defaults on its lease or loan with us, our ability to replace the operator or tenant may be delayed by federal, state, or local approval processes. Our tenants’, operators’ and borrowers’ businesses are also affected by government and private payor reimbursement.
In addition, if an operator, borrower or tenant defaults on its lease or loan with us, our ability to replace the operator or tenant may be delayed by federal, state, or local approval processes. Our tenants’, operators’ and borrowers’ businesses are also affected by government and private payor reimbursement rates and policies.
We cannot give any assurance that these protective measures will completely eliminate any risk to us related to claims under the Deed and Indenture. As a result of the RIDEA structure, we have an investment in the operations of Timber Ridge. Timber Ridge is a Class A quality, Type A care CCRC.
We cannot give any assurance that these protective measures will eliminate any risk to us related to claims under the Deed and Indenture. As a result of the RIDEA structure, we have an investment in the operations of Timber Ridge, which is a Class A quality, Type A care CCRC.
Our ability to retain and motivate our management team and other personnel and attract suitable replacements should any such personnel leave, could have a significant impact on our financial condition and results of operations. We are exposed to the risk that our assets may be subject to impairment charges.
Our failure to retain and motivate our management team and other personnel and attract suitable replacements should any such personnel leave, could have a significant impact on our financial condition and results of operations. We are exposed to the risk that our assets may be subject to impairment charges.
We depend on the operating success of our tenants, managers and borrowers and if their financial condition or business prospects deteriorate, our financial condition and results of operations could be adversely affected. We rely on our tenants, managers and borrowers and their ability to perform their obligations to us,.
Risks Related to Our Managers, Tenants and Borrowers We depend on the operating success of our tenants, managers and borrowers and if their financial condition or business prospects deteriorate, our financial condition and results of operations could be adversely affected. We rely on our tenants, managers and borrowers and their ability to perform their obligations to us.
Our Board of Directors, in its sole discretion, may exempt a proposed transferee from the ownership limit and such an exemption has been granted through Excepted Holder Agreements to members of the Carl E. Adams family. Based on the Excepted Holder Agreements currently outstanding, the individual ownership limit for all other stockholders is approximately 7.5%.
Our Board of Directors, in its sole discretion, may exempt a proposed transferee from the ownership limit and such an exemption has been granted through Excepted Holder Agreements to members of the Carl E. Adams family. Based on the Excepted Holder Agreements currently outstanding, the 33 Table of Contents individual ownership limit for all other stockholders is approximately 7.5%.
Any of our tenants, managers or borrowers may experience a weakening in their overall financial condition, including as a result of deteriorating operating performance, changes in industry or market conditions, including rising interest rates or inflation, or other factors.
Any of our tenants, managers or borrowers may experience a weakening in their overall financial condition as a result of deteriorating operating performance, changes in industry or market conditions, such as rising interest rates or inflation, or other factors.
Consequently, we might be unable to maintain or increase our current dividend and the market price of our stock may decline. We are exposed to the risk that our managers, tenants and borrowers may become subject to bankruptcy or insolvency proceedings.
Consequently, we might be unable to maintain or increase our current dividends and the market price of our stock may decline. We are exposed to the risk that our managers, tenants and borrowers may become subject to bankruptcy or insolvency proceedings.
Natural and man-made disasters, including terrorist attacks and acts of nature such as hurricanes, tornados, earthquakes, flooding and wildfires, may cause damage to our properties or business disruption to our tenants, managers and borrowers. These adverse weather and natural or man-made events could cause substantial damage or loss to our properties which could exceed applicable property insurance coverage.
Natural and man-made disasters, including terrorist attacks and acts of nature such as hurricanes, tornados, earthquakes, flooding and wildfires, may cause damage to our properties or business disruption to our tenants, managers and borrowers. 28 Table of Contents These adverse weather and natural or man-made events could cause substantial damage or loss to our properties which could exceed applicable property insurance coverage.
We are exposed to the risk that we may not be fully indemnified by our tenants, managers and borrowers against future litigation. Our leases and notes require that the tenant/manager/borrowers name us as an additional insured party on their insurance policies covering professional liability or personal injury claims.
We are exposed to the risk that we may not be fully indemnified by our tenants, managers and borrowers against future litigation. Our facility leases and notes require that the tenants/managers/borrowers name us as an additional insured party on their insurance policies covering professional liability or personal injury claims.
More generally, the legislative and regulatory environment for healthcare products and services is dynamic, and Congress and certain state legislatures have considered or enacted a large number of laws and regulations intended to make major 24 Table of Contents changes in the healthcare system, including laws that affect how healthcare services are delivered and reimbursed.
More generally, the legislative and regulatory environment for healthcare products and services is dynamic, and Congress and certain state legislatures have considered or enacted a large number of laws and regulations intended to make major changes in the healthcare system, including laws that affect how healthcare services are delivered and reimbursed.
Any significant compromise or breach of our data security, whether external or internal, or misuse of our data, could disrupt our operations, result in significant costs, fines and lawsuits, harm our business relationships, increase our security and insurance costs and damage our reputation.
Any significant compromise or breach of our data security, whether external or internal, or misuse of our data, could disrupt our operations, result in significant costs, harm our business relationships, increase our security and insurance costs and damage our reputation.
We have covenants related to our indebtedness which impose certain operational limitations and a breach of those covenants could materially adversely affect our financial condition and results of operations. The terms of our current indebtedness as well as debt instruments that the Company may enter into in the future are subject to customary financial and operational covenants.
We have covenants related to our indebtedness which impose certain operational limitations and a breach of those covenants could materially adversely affect our financial condition and results of operations. The terms of our current indebtedness are, and debt instruments that the Company may enter into in the future may be, subject to customary financial and operational covenants.
Operational risks include, and our resulting revenues therefore depend on, among other things: (i) occupancy rates; (ii) rental rates charged to residents; (iii) our operators’ reputations and ability to attract and retain residents; (iv) general economic conditions and market factors that impact seniors including those exacerbated by the COVID-19 pandemic; (v) competition from other senior housing providers; (vi) compliance with federal, state, and local laws and regulations and industry standards; (vii) litigation involving our properties or residents, including but not limited to litigation related to COVID-19; (viii) the availability and cost of general and professional liability insurance coverage or increases in insurance policy deductibles; and (ix) the ability to control operating expenses, which have increased, and may continue to increase, due to the COVID-19 pandemic.
Operational risks include, and our revenues therefore depend on, among other things: (i) occupancy rates; (ii) rental rates charged to residents; (iii) our operators’ reputations and ability to attract and retain residents; (iv) general economic conditions and market factors that impact seniors including those exacerbated by the COVID-19 pandemic; (v) competition from other senior housing providers; (vi) compliance with federal, state, and local laws and regulations and industry standards, including but not limited to licensure requirements, where applicable; (vii) litigation involving our properties or residents; (viii) the availability and cost of general and professional liability insurance coverage or increases in insurance policy deductibles; and (ix) the ability to control operating expenses, which have increased, and may continue to increase.
If we determine that a significant impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our reported results of operations in the period in which the impairment charge occurs.
If we determine that a significant impairment has occurred, 29 Table of Contents we would be required to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our reported results of operations in the period in which the impairment charge occurs.
Risks Related to Our Debt 30 Table of Contents We may need to refinance existing debt or incur additional debt in the future, which may not be available on terms acceptable to us. We operate with a policy of incurring debt when, in the opinion of our Board of Directors, it is advisable.
Risks Related to Our Debt We may need to refinance existing debt or incur additional debt in the future, which may not be available on terms acceptable to us. We operate with a policy of incurring debt when, in the opinion of our Board of Directors, it is advisable.
A decrease in occupancy or increase in costs is likely to have a material adverse effect on the ability of our tenants and operators to meet their financial and other contractual obligations to us, including the payment of rent, as well as on our results of operations.
A decrease in occupancy or increase in costs is likely to have a material adverse effect on the ability of our tenants and operators to meet their financial and 22 Table of Contents other contractual obligations to us, including the payment of rent, as well as on our results of operations.
If either of these requirements are not satisfied, then the rents will not be qualifying rents. As part of acquisition of the real estate in January 2020, Timber Ridge PropCo accepted the property subject to trust liens previously granted to residents of Timber Ridge.
If either of these requirements are not satisfied, then the rents will not be qualifying rents. 25 Table of Contents As part of acquisition of the real estate in January 2020, Timber Ridge PropCo accepted the property subject to trust liens previously granted to residents of Timber Ridge.
Facilities that participate in Medicare or Medicaid must meet extensive program requirements, including physical plant and operational requirements. 25 Table of Contents Transfers of operations of facilities are subject to regulatory approvals not required for transfers of other types of real estate.
Facilities that participate in Medicare or Medicaid must meet extensive program requirements, including physical plant and operational requirements. Transfers of operations of facilities are subject to regulatory approvals not required for transfers of other types of real estate.
This increasing cost of debt could reduce our profitability by increasing the cost of financing our existing portfolio and our investment activity. Rising interest rates could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing.
This increasing cost of debt could 31 Table of Contents reduce our profitability by increasing the cost of financing our existing portfolio and our investment activity. Rising interest rates could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing.
We depend on our ability to retain our management team and other personnel and attract suitable replacements should any such personnel leave. 29 Table of Contents The management and governance of the Company depends on the services of certain key personnel, including senior management.
We depend on our ability to retain our management team and other personnel and attract suitable replacements should any such personnel leave. The management and governance of the Company depends on the services of certain key personnel, including senior management.
All dividends will be paid at the discretion of our Board and will depend upon our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board may deem relevant from time to time. There are no assurances of our ability to pay dividends in the future.
All dividends will be paid at the discretion of our Board of Directors and will depend upon our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board of Directors may deem relevant from time to time. There are no assurances of our ability to 32 Table of Contents pay dividends in the future.
These instruments also require the tenant/borrower to indemnify and hold us harmless for all claims arising out of or incidental to the occupancy and use of each facility. However, claims could exceed the policy limits, the insurance company could fail or coverage may not otherwise be available.
These instruments also require the tenants/borrowers to indemnify and hold us harmless for all claims arising out of or incidental to the occupancy and use of each facility. However, claims could exceed the policy limits, the insurance company could fail or coverage may not otherwise be available.
These laws also expose us to the possibility that we may become liable to reimburse the government for damages and costs it incurs in connection with the contamination. Generally, such liability attaches to a person based on the 28 Table of Contents person’s relationship to the property.
These laws also expose us to the possibility that we may become liable to reimburse the government for damages and costs it incurs in connection with the contamination. Generally, such liability attaches to a person based on the person’s relationship to the property.
Furthermore, infections at our facilities could lead to material increases in litigation costs for which our operators, or possibly we, may be liable.
Furthermore, infections of contagious diseases at our facilities could lead to material increases in litigation costs for which our operators, or possibly we, may be liable.
If their financial condition deteriorates, they may be unable or unwilling to make payments or perform their obligations to us in a timely manner if at all. Revenues for the operators of our properties are primarily driven by occupancy and reimbursement by Medicare, Medicaid and private payor.
If the financial condition of any of our tenants, managers or borrowers deteriorates, they may be unable or unwilling to make payments or perform their obligations to us in a timely manner if at all. Revenues for the operators of our properties are primarily driven by occupancy and reimbursement by Medicare, Medicaid and private payors.
With the periodic settlement of some of the outstanding resident loans in the course of normal entrance-fee community operations by Timber Ridge OpCo, the balance owing on the Deed and Indenture at December 31, 2022 was $13.6 million.
With the periodic settlement of some of the outstanding resident loans in the course of normal entrance-fee community operations by Timber Ridge OpCo, the balance owing on the Deed and Indenture at December 31, 2023 was $11.8 million.
A public health crisis may diminish the public trust in senior housing properties or medical facilities, especially those that have treated or house consumers affected by contagious diseases, which may result in a decline in consumers seeking services offered through our properties.
A public health crisis may diminish the public trust in senior housing properties or medical facilities, especially those that have treated or house consumers affected by contagious diseases, which may result in a decline in consumers seeking services offered through our properties. As a result, we may be more vulnerable to the effects of a public health crisis.
However, these relationships could influence the Board of Director’s decisions in with respect to the properties leased to and operated by NHC. As of December 31, 2022, NHC owned 1,630,642 shares (approximately 4%) of our common stock.
However, these relationships could influence the Board of Directors’ decisions with respect to the properties leased to and operated by NHC. As of December 31, 2023, NHC owned 1,630,642 shares of our common stock.
We may not be in a position to take advantage of future investment opportunities in the event that we are unable to access the capital markets on a timely basis or we are only able to obtain financing on unfavorable terms. Changes in interest rates may adversely affect our cash flows.
We may not be in a position to take advantage of future investment opportunities in the event that we are unable to access the capital markets on a timely basis or we are only able to obtain financing on unfavorable terms.
Any domestic TRS that we form will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed to us unless necessary to maintain our REIT qualification. Legislative, regulatory, or administrative changes could adversely affect us or our security holders.
Any domestic TRS that we form will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed to us unless necessary to maintain our REIT qualification.
If our projections prove to be inaccurate due to increased capital costs, lower occupancy or other factors, our investment in that property may not generate the cash flow we expected.
We estimate our return based on expected occupancy, rental rates and future capital costs. If our projections prove to be inaccurate due to increased capital costs, lower occupancy or other factors, our investment in that property may not generate the cash flow we expected.
The foregoing matters may, together or separately, have the effect of discouraging or making more difficult an acquisition or change of control of the Company.
The foregoing matters may, together or separately, have the effect of discouraging or making more difficult an acquisition or change of control of the Company. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
As of December 31, 2022, we had the potential to access the remaining $415.7 million through the issuance of common stock under our $500.0 million ATM program. In addition, we maintain an effective automatic shelf registration statement through which capital could be raised via the issuance of equity securities.
As of December 31, 2023, we had the potential to access all of the capacity of our $500.0 million at-the-market (“ATM”) equity program through the issuance of common stock. In addition, we maintain an effective automatic shelf registration statement through which capital could be raised via the issuance of equity securities.
Although our leases generally contain escalating rent clauses that provide a partial hedge against interest rate fluctuations, if interest rates rise, our interest costs for our existing floating rate debt and any new debt we incur would also increase.
Our revenues are derived mainly from fixed rate investments in real estate assets. Although our leases generally contain escalating rent clauses that provide a partial hedge against interest rate fluctuations, if interest rates rise, our interest costs for our existing floating rate debt and any new debt we incur would also increase.
To the extent any decrease in revenues and/or any increase in operating expenses of our operators results in a property not generating enough cash to make scheduled payments to us, our revenues, net income and funds from operations would be adversely affected.
An increase in our operators’ expenses and a failure of their revenues to increase at least with inflation could adversely affect our operators’ and our financial condition and our results of operations. 21 Table of Contents To the extent any decrease in revenues and/or any increase in operating expenses of our operators results in a property not generating enough cash to make scheduled payments to us, our revenues, net income and funds from operations would be adversely affected.
Our ability to pay dividends may be adversely affected upon the occurrence of any of the risks described herein. Our payment of dividends is subject to compliance with restrictions contained in our credit agreements, notes and any preferred stock that our Board may from time to time designate and authorize for issuance.
Our payment of dividends is subject to compliance with restrictions contained in our credit agreements, notes and any preferred stock that our Board of Directors may from time to time designate and authorize for issuance.
The successful performance of our real estate investments is materially dependent on the financial stability of our tenants/operators. For the year ended December 31, 2022, approximately 30% of our total revenue is generated by two tenants, including Senior Living (18%), and NHC (13%).
The successful performance of our real estate investments is materially dependent on the financial stability of our tenants/operators. For the year ended December 31, 2023, approximately 40% of our total revenue was generated by three tenants, Senior Living (16%), NHC (12%) and Bickford (12%).
Two of our board members, including our chairman of the Board of Directors, are also members of NHC’s board of directors. Those directors may have conflicting interests with holders of the Company’s common stock with respect to the NHC properties. During the year ended December 31, 2022, revenue from NHC represented 13% of our total revenue.
Those directors may have conflicting interests with holders of the Company’s common stock with respect to the NHC properties. During the year ended December 31, 2023, revenue from NHC represented 12% of our total revenue.
We and our security holders may be adversely affected by any new or amended law, regulation, or administrative interpretation. Investors are urged to consult with their tax advisors with respect to the status of any tax legislation and any other regulatory or administrative developments and proposals and their potential effect on investment in our securities.
Investors are urged to consult with their tax advisors with respect to the status of any tax legislation and any other regulatory or administrative developments and proposals and their potential effect on investment in our securities.
Because our operators are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not directly affect us. Increased operating costs could have an adverse impact on our operators if increases in their operating expenses exceed increases in their revenue, which may adversely affect their ability to pay rent owed to us.
Increased operating costs could have an adverse impact on our operators if increases in their operating expenses exceed increases in their revenue, which may adversely affect their ability to pay rent owed to us.
Failure by our managers to adequately manage these risks could have a material adverse effect on our business, results of operations and financial condition. 27 Table of Contents From time to time, disputes may arise between us and our managers regarding their performance or compliance with the terms of the agreements we have entered into with them, which in turn could adversely affect our results of operations.
From time to time, disputes may arise between us and our managers regarding their performance or compliance with the terms of the agreements we have entered into with them, which in turn could adversely affect our results of operations.
We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities and through the use of derivative instruments, such as interest rate swap agreements with major financial institutions.
We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities and through the use of derivative instruments, such as interest rate swap agreements with major financial institutions. Increased interest rates may also negatively affect the market price of our common stock and increase the cost of new equity capital.
Risk Related to Our Organizational Structure We have ownership limits in our charter with respect to our common stock and other classes of capital stock which may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders. 33 Table of Contents Our charter, subject to certain exceptions, contains restrictions on the ownership and transfer of our common and preferred stock that are intended to assist us in preserving our qualification as a REIT.
Risks Related to Our Organizational Structure We have ownership limits in our charter with respect to our common stock and other classes of capital stock which may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders.
Therefore, we are dependent on our managers to operate these communities in a manner that complies with applicable law, minimizes legal risk and maximizes the value of our investment.
Therefore, we are dependent on our managers to operate these communities in a manner that complies with applicable law, minimizes legal risk and maximizes the value of our investment. Failure by our managers to adequately manage these risks could have a material adverse effect on our business, results of operations and financial condition.
As a matter of course, we may store or process the personal data of employees and other persons as required to provide our services and such personal data or other data may be hosted or exchanged with our partners and other third-party providers.
As a matter of course, we may store or process the personal data of employees and other persons as required to provide our services and such personal data or other data may be hosted or exchanged with our partners and other third-party providers. 27 Table of Contents As with all companies that utilize information systems, our information systems, and those of our third-party service providers and vendors, may be vulnerable to continually evolving cybersecurity risks.
In addition, different interpretations or enforcement of, or changes to, applicable laws and regulations in the future could subject current or past practices to allegations of illegality or impropriety or could require our tenants, managers and borrowers to make changes to their facilities, equipment, personnel, services, and operating expenses If the operations, cash flows or financial condition of our tenants, operators and/or borrowers are materially adversely impacted by current or future government regulation, our revenue and operations may be adversely affected as well.
In addition, different interpretations or enforcement of, or changes to, applicable laws and regulations in the future could subject current or past practices to allegations of illegality or impropriety or could require our tenants, managers and borrowers to make changes to their facilities, equipment, personnel, services, and operating expenses.
Increased interest rates may also negatively affect the market price of our common stock and increase the cost of new equity capital. 31 Table of Contents We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future investments necessary to grow our business or meet maturing commitments.
We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future investments necessary to grow our business or meet maturing commitments.
In 2022, we recorded impairment charges totaling $51.6 million on 19 properties. In 2021, we recognized impairments of $51.8 million on ten properties.
In 2023, we recorded impairment charges totaling $1.6 million on four properties. In 2022, we recorded impairment charges of $51.6 million on 19 properties.
Risks Related to Our Managers, Tenants and Borrowers Actual or perceived risks associated with public health epidemics or outbreaks, such as the COVID-19 pandemic, have had and may in the future have a material adverse effect on our operators’ business and results of operations. 21 Table of Contents The business and results of operations of the operators of our properties and the Company have been and may continue to be affected by the COVID-19 pandemic, and could in the future be adversely affected by other pandemics, epidemics, outbreaks of infectious disease or other public health crises.
The business and results of operations of the operators of our properties and the Company have been and may continue to be affected by the COVID-19 pandemic, and could in the future be adversely affected by other pandemics, epidemics, outbreaks of infectious disease or other public health crises.
The tax laws or regulations governing REITs or the administrative interpretations thereof may be amended at any time. We cannot predict if or when any new or amended law, regulation, or administrative interpretation will be adopted, promulgated, or become effective, and any such change may apply retroactively.
We cannot predict if or when any new or amended law, regulation, or administrative interpretation will be adopted, promulgated, or become effective, and any such change may apply retroactively. We and our security holders may be adversely affected by any new or amended law, regulation, or administrative interpretation.
We cannot give any assurance that these protective measures will completely eliminate any risk to us related to future litigation, the costs of which could have a material adverse impact on us. Risks Related to Our Business and Operations We depend on the success of property development and construction activities, which may fail to achieve the operating results we expect.
We cannot give any assurance that these protective measures will eliminate any risk to us related to future litigation, the costs of which could have a material adverse impact on us.
Our SHOP structured communities expose us to various operational risks that may increase our costs or adversely affect our ability to generate revenues.
We are exposed to operational risks with respect to our SHOP structured communities. During 2022, we transitioned 15 of our legacy Holiday properties to be SHOP structured communities. Our SHOP structured communities expose us to various operational risks that may increase our costs or adversely affect our ability to generate revenues.
An oversupply of senior housing real estate may also apply downward pressure to the occupancy rates of our operators. Expenses for the facilities are driven by the costs of labor, food, utilities, taxes, insurance and rent or debt service. Liability insurance and staffing costs continue to increase for our operators.
Expenses for the facilities are driven by the costs of labor, food, utilities, taxes, insurance and rent or debt service. Liability insurance and staffing costs continue to increase for our operators. Historically low unemployment has created significant wage pressure for our operators.
As a result, as of January 31, 2023 we have approximately $1.2 billion in outstanding indebtedness and approximately $498.0 million available to draw under our unsecured revolving credit facility. We have a $50.0 million term loan maturing in November 2023 and $240.0 million maturing in September 2023.
As a result, as of January 31, 2024 we have approximately $1.2 billion in outstanding indebtedness and approximately $427.0 million available to draw under our unsecured revolving credit facility. Our ability to raise reasonably priced capital is not guaranteed.
Fitch Ratings (“Fitch”) reaffirmed its BBB- and “Stable” outlook on the Company on December 9, 2021 and S&P Global Ratings (“S&P Global”) also reaffirmed its BBB- and “Stable” outlook on the Company at November 14, 2022.
Moody's Investors Services (“Moody's”) reaffirmed its Baa3 rating and “Stable” outlook on the Company on October 16, 2023; Fitch Ratings (“Fitch”) reaffirmed its BBB- and “Stable” outlook on the Company on May 15, 2023; and S&P Global Ratings (“S&P Global”) also reaffirmed its BBB- and “Stable” outlook on the Company at November 14, 2023.
The result of any of the foregoing risks could materially and adversely affect our business, financial conditions and results of operations and our ability to make distributions to our stockholders. 23 Table of Contents Two members of our Board of Directors are also members of the board of directors of NHC, and their interests may differ from those of our stockholders.
The result of any of the foregoing risks could materially and adversely affect our business, financial conditions and results of operations and our ability to make distributions to our stockholders.
We depend on revenues derived mainly from fixed rate investments in real estate assets, while a portion of our debt used to finance those investments bears interest at variable rates. Our business model assumes that we can earn a spread between the returns earned from our investments in real estate as compared to our cost of debt and/or equity capital.
Our business model assumes that we can earn a spread between the returns earned from our investments in real estate as compared to our cost of debt and/or equity capital. Interest rates have been increasing over the past year and, as a result, the spread and our profitability on our investments have decreased.
Hardware, software or applications we obtain from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time.
The methods used to obtain unauthorized access, disable, misappropriate, manipulate, or degrade service or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time.
Internal Revenue Service (the “IRS”) and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations.
Internal Revenue Service (the “IRS”) and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investment in us.
Several states face budgetary pressures that have resulted, and will likely continue to result, in reduced Medicaid funding, through such measures as tightening patient eligibility requirements, reducing coverage, and enrolling Medicaid recipients in managed care programs. In addition, CMS may implement or oversee changes through new or modified demonstration projects, including those authorized pursuant to Medicaid waivers.
State budgetary pressures have resulted, and will likely continue to result, in reduced spending or reduced spending growth for Medicaid programs in many states, including measures such as tightening patient eligibility requirements, reducing coverage, and enrolling Medicaid recipients in managed care programs.
Following the filing of a lawsuit, NHI was able to settle the dispute and terminate the master lease with respect to these properties effective April 1, 2022. In the event of another tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property.
In the event of a tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property.
Any reductions in Medicare or Medicaid reimbursement could have an adverse effect on the financial operations of our borrowers, operators and tenants who operate SNFs. Further, reductions in payments under government healthcare programs may negatively impact payments from private payors, as some private payors rely on government payment systems to determine payment rates.
Further, reductions in payments under government healthcare programs may negatively impact payments from private payors, as some private payors rely on government payment systems to determine payment rates.
When we decide to invest in the renovation of an existing property or in the development of a new property, we make assumptions about the future potential cash flows of that property. We estimate our return based on expected occupancy, rental rates and future capital costs.
Risks Related to Our Business and Operations We depend on the success of property development and construction activities, which may fail to achieve the operating results we expect. 24 Table of Contents When we decide to invest in the renovation of an existing property or in the development of a new property, we make assumptions about the future potential cash flows of that property.
Historically low unemployment has created significant wage pressure for our operators. In addition, inflation, both real and anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services for our operators.
In addition, inflation, both real and anticipated, as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services for our operators. Because our operators are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not directly affect us.
We may incur additional debt by borrowing under our 2022 Credit Agreement, mortgaging properties we own and/or issuing debt securities in a public offering or in a private transaction. Our ability to raise reasonably priced capital is not guaranteed.
In November 2023, the $50.0 million of private placement notes due November 2023 were repaid primarily with proceeds from the revolving credit facility. We may incur additional debt by borrowing under our 2022 Credit Agreement, mortgaging properties we own and/or issuing debt securities in a public offering or in a private transaction.

… 67 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed1 unchanged
Biggest changePROPERTIES OWNED OR ASSOCIATED WITH MORTGAGE LOAN INVESTMENTS AS OF DECEMBER 31, 2022 ( $ in thousands ) Real Estate Investments SHOP Gross Net Operating Location SHO SNF HOSP ILF Investment 1 Income 2 South Carolina 4 4 — 2 $ 336,291 $ 34,282 Texas — 21 — — 298,599 28,599 Florida 3 10 — — 224,378 26,017 Tennessee 3 16 — — 50,792 16,453 Washington 3 — — 1 200,530 15,127 Connecticut 3 — — — 138,877 13,003 North Carolina 6 — — — 137,141 11,096 Arkansas — — — 2 50,152 9,163 Oklahoma 1 — 1 1 96,675 8,381 Wisconsin 2 1 — — 49,905 7,048 Georgia 2 — — 2 96,521 6,882 Oregon 3 3 — — 95,259 4,850 Indiana 9 — — — 94,237 4,542 Iowa 7 — — — 40,237 3,450 Massachusetts 1 — — — 52,108 3,425 California 2 — — 5 139,833 3,009 Alabama 1 2 — — 17,260 2,945 Missouri 1 5 — — 27,695 2,580 Maryland 1 — — — 46,431 2,533 Michigan 5 — — — 44,138 2,531 Minnesota 5 — — — 31,144 2,389 Nebraska 3 — — — 28,682 2,133 Illinois 13 — — — 196,481 1,770 Kentucky — 1 — — 2,143 1,312 Ohio 4 — — 1 86,753 1,290 Idaho 1 — — — 9,673 932 Arizona — 1 — — 7,131 864 New Jersey — — — 1 24,919 751 Pennsylvania 2 — — — 29,367 691 Colorado 1 — — — 7,600 642 Louisiana 4 — — — 15,000 (71) Virginia 4 1 — — 51,396 (2,696) 94 65 1 15 2,727,348 215,923 Corporate office 2,550 — Non-geographic 8,469 Net operating income from properties sold, held for sale and note payoffs 15,821 $ 2,729,898 $ 240,213 1 Excludes assets held for sale. 2 Includes interest income and other. 35 Table of Contents PROPERTIES ASSOCIATED WITH MORTGAGE LOAN INVESTMENTS AS OF DECEMBER 31, 2022 ($ in thousands) Interest Location SHO SNF Investment Income Florida 1 — $ 10,000 $ 583 Indiana 3 — 10,297 727 Michigan 1 — 14,700 1,341 South Carolina 1 — 32,700 2,371 Texas — 5 42,295 384 Virginia 1 3 18,181 2,554 Wisconsin 2 — 36,404 2,884 9 8 $ 164,577 10,844 Other non-mortgage income 13,854 Interest income and other $ 24,698 10-YEAR LEASE EXPIRATIONS The following table provides additional information on our leases which are scheduled to expire based on the maturity contained in the most recent lease agreement or extension.
Biggest changePROPERTIES OWNED AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2023 ( $ in thousands ) Real Estate Investments SHOP Gross Net Operating Location SHO SNF HOSP ILF Investment 1 Income South Carolina 4 4 — 2 $ 337,957 $ 30,940 Texas — 21 — — 298,599 28,187 Florida 2 10 — — 213,658 24,234 Tennessee 3 16 — — 50,792 17,681 Washington 3 — — 1 202,045 13,591 Connecticut 3 — — — 139,418 13,156 North Carolina 6 — — — 138,138 11,156 Arkansas — — — 2 50,973 1,190 Oklahoma 1 — 1 1 97,257 8,491 Wisconsin 2 1 — — 49,905 5,248 Georgia 2 — — 2 97,761 6,192 Oregon 3 3 — — 95,259 8,905 Indiana 9 — — — 93,063 7,298 Iowa 7 — — — 40,237 4,557 Massachusetts 1 — — — 52,108 3,596 California 1 — — 5 123,267 3,852 Alabama 1 2 — — 17,260 3,326 Missouri 1 5 — — 27,695 2,911 Maryland 2 — — — 65,788 4,360 Michigan 5 — — — 44,138 3,635 Minnesota 5 — — — 31,144 2,415 Nebraska 3 — — — 28,682 3,160 Illinois 13 — — — 196,481 13,177 Kentucky — 1 — — 2,143 1,326 Ohio 6 — — 1 102,786 5,198 Idaho 1 — — — 9,673 932 Arizona — 1 — — 7,131 886 New Jersey — — — 1 25,672 272 Pennsylvania 2 — — — 29,356 1,822 Colorado 1 — — — 7,600 646 Louisiana 4 — — — 15,000 2,267 Virginia 5 1 — — 68,685 4,916 Nevada 1 — — — 18,137 1,434 97 65 1 15 2,777,808 240,957 Corporate office 2,550 — Non-geographic — 55 Net operating income from properties sold and held for sale — 5,924 $ 2,780,358 $ 246,936 1 Excludes assets held for sale. 36 Table of Contents PROPERTIES ASSOCIATED WITH MORTGAGE LOAN INVESTMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2023 ($ in thousands) Net Interest Location SHO SNF Investment Income Florida 3 — $ 11,550 $ 666 Indiana 2 — 8,518 618 Michigan 1 — 14,700 1,341 South Carolina 1 — 32,700 2,371 Texas — 5 42,380 3,209 Virginia — 2 2,587 467 Wisconsin 2 — 49,999 4,016 9 7 162,434 12,688 Other non-mortgage 82,837 9,111 $ 245,271 $ 21,799 10-YEAR LEASE EXPIRATIONS The following table provides additional information on our leases which are scheduled to expire based on the maturity contained in the most recent lease agreement or extension.
Annualized Percentage of Number Number Gross Rent** Annualized Year of Properties of Units/Beds ( $ in thousands ) Gross Rent 2023 2 254 $ 3,136 1.5 % 2024 — — — — % 2025 1 42 553 0.3 % 2026 35 4,897 37,481 17.8 % 2027 3 619 12,432 5.9 % 2028 13 832 11,587 5.5 % 2029 29 4,319 69,829 33.2 % 2030 5 439 1,283 0.6 % 2031 3 274 4,790 2.3 % 2032 3 416 5,338 2.5 % Thereafter 66 5,599 63,995 30.4 % 100.0 % **Annualized Gross Rent refers to the amount of lease revenue that our portfolio would have generated in 2022 if all leases were in effect for the twelve-month calendar year, regardless of the commencement date, maturity date, or renewals.
Annualized Percentage of Number Number Gross Rent** Annualized Year of Properties of Units/Beds ( $ in thousands ) Gross Rent 2025 3 296 $ 2,370 1.1 % 2026 35 4,897 37,937 17.1 % 2027 3 619 13,949 6.3 % 2028 12 591 11,106 5.0 % 2029 29 4,451 73,457 33.1 % 2030 4 183 1,615 0.7 % 2031 3 274 4,934 2.2 % 2032 2 213 3,210 1.4 % Thereafter 72 6,002 73,182 33.1 % 100.0 % **Annualized Gross Rent refers to the amount of lease revenue that our portfolio would have generated in 2023 if all leases were in effect for the twelve-month calendar year, regardless of the commencement date, maturity date, or renewals.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+1 added−11 removed1 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS Our healthcare facilities are subject to claims and suits in the ordinary course of business.
Biggest changeITEM 3. LEGAL PROCEEDINGS Healthcare facilities in our portfolio are subject to claims and suits in the ordinary course of business.
While there may be lawsuits pending against us and certain of the managers, owners and/or tenants of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no direct material adverse effect on our financial condition, results of operations or cash flows. Welltower, Inc.
While there may be lawsuits pending against us and certain of the managers, owners and/or tenants of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no direct material adverse effect on our financial condition, results of operations or cash flows.
In addition, such claims may include, among other things, professional liability and general liability claims, as well as regulatory proceedings related to our SHOP segment.
Such claims may include, among other things, professional liability and general liability claims, as well as regulatory proceedings related to our SHOP segment.
Removed
In June 2021, Welltower announced that it would acquire certain assets from the senior housing portfolio of Holiday, a privately held senior living management company, that included 17 senior living facilities governed by a master lease originally executed between a Holiday subsidiary and NHI in 2013.
Added
See Note 9 to the consolidated financial statements for further discussion of the Company’s legal proceedings.
Removed
We received no rent due under the master lease from the tenant for these facilities after this change in tenant ownership occurred in late July 2021. 36 Table of Contents On December 20, 2021, NHI and its subsidiaries NHI-REIT of Next House, LLC, Myrtle Beach Retirement Resident LLC, and Voorhees Retirement Residence LLC filed suit against Welltower, Inc., Welltower Victory II TRS LLC, and Well Churchill Leasehold Owner LLC (collectively the "Defendants") in the Delaware Court of Chancery (Case No. 2021-1097-MTZ).
Removed
In the litigation, we contended that the Defendants repeatedly failed to honor their legal obligations to NHI.
Removed
In particular, we asserted that the Defendants acquired assets from a third party, Holiday, that included leases to NHI senior living facilities and fraudulently induced NHI to consent to the assignment of the leases, and then immediately failed to pay rent or provide a promised security agreement that was intended to secure against their default, all as part of an effort to pressure NHI to agree to new conditions outside the assignment agreement or force a sale of the properties to the Defendants.
Removed
The lawsuit further asserted that the Defendants owed unpaid contractual rent. In connection with a memorandum of understanding between the parties dated March 4, 2022, NHI applied the remaining approximately $8.8 million lease deposit to past due rents in the first quarter of 2022.
Removed
Also, as provided by the memorandum of understanding, Welltower transferred approximately $6.9 million to an escrow account to be released upon satisfactory transition of the facility operations and mutual dismissal of the lawsuit. NHI and certain of its subsidiaries entered into a settlement agreement dated March 31, 2022 with Defendants formalizing the terms to settle the lawsuit.
Removed
NHI and certain of its subsidiaries terminated the master lease with Well Churchill Leasehold Owner, LLC as successor in interest to NHI Master Tenant LLC, effective April 1, 2022, upon completion of the transition of the properties subject to the master lease, as follows: (i) one property was sold to a third party, (ii) one property was transitioned to an existing operator relationship and leased pursuant to an existing master lease, and (iii) the remaining 15 properties were transitioned into two new SHOP partnership ventures.
Removed
See Note 5 to our consolidated financial statements for more information on these new ventures.
Removed
Also effective April 1, 2022, the parties agreed to dismiss the lawsuit and mutually release all claims related to or arising out of the litigation and the $6.9 million in escrowed funds were released to NHI and recognized as rental income for the year ended December 31, 2022.
Removed
We recognized a loss of approximately $0.7 million, reflected in “ Loss on operations transfer, net” on the Consolidated Statement of Income for the year ended December 31, 2022. This net loss represents the amount of net working capital deficit assumed by NHI in connection with the transfer of operations following the termination of the master lease.
Removed
The net working capital assumed by NHI on April 1, 2022 was comprised primarily of facility furniture, fixtures and equipment, net resident accounts receivable, accounts payable and other accrued liabilities.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed10 unchanged
Biggest changeThe MSCI US REIT Index includes securities with exposure to core real estate (e.g. residential and retail properties) as well as securities with exposure to other types of real estate (e.g. casinos, theaters). 38 Table of Contents 2017 2018 2019 2020 2021 2022 NHI $100.00 $105.71 $120.04 $109.20 $96.51 $94.79 MSCI $100.00 $95.43 $120.09 $110.99 $158.79 $119.87 S&P 500 $100.00 $95.62 $125.72 $148.85 $191.58 $156.88 The graph above is not deemed to be “soliciting material” and is “furnished” and shall not be deemed to be “filed” with the SEC or incorporated by reference in any filing under Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.
Biggest changeThe MSCI US REIT Index includes securities with exposure to core real estate ( e.g . residential and retail properties) as well as securities with exposure to other types of real estate ( e.g. casinos and theaters). 38 Table of Contents 2018 2019 2020 2021 2022 2023 NHI $100.00 $113.55 $103.30 $91.29 $88.28 $100.99 MSCI $100.00 $125.84 $116.31 $166.39 $125.61 $123.16 S&P 500 $100.00 $131.49 $155.68 $200.37 $164.08 $185.52 The graph above is not deemed to be “soliciting material” and is “furnished” and shall not be deemed to be “filed” with the SEC or incorporated by reference in any filing under Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.
Carl E. Adams and Jennie Mae Adams and their lineal descendants. Based on these agreements, the ownership limit for all other stockholders is approximately 7.5%. If a stockholder’s stock ownership exceeds the limit, then such shares over the limit become Excess Stock within the meaning in the Company’s charter and lose rights to vote and receive dividends in certain situations.
Carl E. Adams and Jennie Mae Adams and their lineal descendants. Based on these agreements, the ownership limit for all other stockholders is approximately 7.5%. If a stockholder’s stock ownership exceeds the limit, then such shares over the limit become “Excess Shares” within the meaning in the Company’s charter and lose rights to vote and receive dividends in certain situations.
Therefore, under certain circumstances, our required distributions may exceed the cash available for distribution. Our common stock is traded on the New York Stock Exchange under the symbol “NHI.” As of February 13, 2023, there were approximately 689 holders of record of shares and 56,540 beneficial owners of shares.
Therefore, under certain circumstances, our required distributions may exceed the cash available for distribution. Our common stock is traded on the New York Stock Exchange under the symbol “NHI.” As of February 15, 2024, there were approximately 644 holders of record of shares and 53,236 beneficial owners of shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

130 edited+25 added−43 removed59 unchanged
Biggest changeInvestment Activity in the consolidated financial statements for more information. 52 Table of Contents Results of Operations The significant items affecting revenues and expenses are described below ( $ in thousands ): Years Ended December 31, Period Change 2022 2021 $ % Revenues: Rental income HOSP leased to Vizion Health $ 3,471 $ 2,034 $ 1,437 70.6 % EFCs leased to Senior Living Communities 47,098 45,037 2,061 4.6 % ALFs leased to Chancellor Senior Living 2,845 8,500 (5,655) (66.5) % SHOs leased to Discovery Senior Living 6,683 8,652 (1,969) (22.8) % SHOs leased to The Ensign Group 25,902 24,427 1,475 6.0 % SHOs leased to Holiday Retirement — 13,024 (13,024) (100.0) % ALFs leased to Bickford Senior Living 18,710 24,652 (5,942) (24.1) % Other new and existing leases 91,234 91,524 (290) (0.3) % Current year disposals and assets held for sale 28,650 26,958 1,692 6.3 % 224,593 244,808 (20,215) (8.3) % Straight-line rent adjustments, new and existing leases (16,681) 14,603 (31,284) NM Escrow funds received from tenants for property operating expenses 9,788 11,638 (1,850) (15.9) % Total Rental Income 217,700 271,049 (53,349) (19.7) % Resident fees and services 35,796 — 35,796 NM Interest income from mortgage and other notes Vizion Health 1,702 1,027 675 65.7 % Encore Senior Living construction loans 2,579 1,835 744 40.5 % Montecito Medical Real Estate 1,792 161 1,631 NM Mortgage loan payoffs 6,581 10,164 (3,583) (35.3) % Other existing mortgages and notes 11,729 11,347 382 3.4 % Total Interest Income from Mortgage and Other Notes 24,383 24,534 (151) (0.6) % Other income 315 3,132 (2,817) (89.9) % Total Revenue 278,194 298,715 (20,521) (6.9) % Expenses: Depreciation SHOs leased to Holiday Retirement — 9,296 (9,296) (100.0) % ALFs leased to Bickford Senior Living 10,307 11,611 (1,304) (11.2) % ALFs leased to Chancellor Senior Living 2,157 3,529 (1,372) (38.9) % SHOP depreciation 6,408 — 6,408 NM Current year disposals and assets held for sale 4,984 9,845 (4,861) (49.4) % Other new and existing assets 47,024 46,517 507 1.1 % Total Depreciation 70,880 80,798 (9,918) (12.3) % Interest 44,917 50,810 (5,893) (11.6) % Senior housing operating expenses 28,193 — 28,193 NM General and administrative 22,768 18,431 4,337 23.5 % Taxes and insurance on leased properties 9,788 11,638 (1,850) (15.9) % Loan and realty losses 61,911 52,766 9,145 17.3 % Other expenses 3,399 1,696 1,703 NM 241,856 216,139 25,717 11.9 % Loss on operations transfer, net (710) — (710) NM Gain on note receivable payoff 1,113 — 1,113 NM Loss on early retirement of debt (151) (1,912) 1,761 (92.1) % 53 Table of Contents Gains (losses) from equity method investment 569 (1,545) 2,114 NM Gains on sales of real estate, net 28,342 32,498 (4,156) (12.8) % Other income — 350 (350) (100.0) % Net income 65,501 111,967 (46,466) (41.5) % Less: net loss (income) attributable to noncontrolling interests 902 (163) 1,065 NM Net income attributable to common stockholders $ 66,403 $ 111,804 $ (45,401) (40.6) % NM - not meaningful Financial highlights for the year ended December 31, 2022, compared to 2021 were as follows: • Rental income recognized from our tenants decreased $53.3 million, or 19.7%, as a result of the Holiday portfolio transition of approximately $13.0 million, dispositions of 22 properties for approximately $7.0 million, net of new investments funded since December 2021.
Biggest changeRefer to Notes 3 and 4 to the consolidated financial statements included in this Annual Report on Form 10-K for more information. 51 Table of Contents Results of Operations The significant items affecting revenues and expenses are described below ( $ in thousands ): Years Ended December 31, Period Change 2023 2022 $ % Revenues: Rental income ALFs leased to Silverado Senior Living $ 2,445 $ — $ 2,445 NM EFCs leased to Senior Living 48,836 47,209 1,627 3.4 % ALFs leased to NHC 38,567 34,990 3,577 10.2 % ALFs leased to Chancellor Health Care 4,755 2,471 2,284 92.4 % SHOs leased to Discovery 9,487 6,683 2,804 42.0 % SHOs leased to Holiday Retirement — 15,588 (15,588) (100.0) % ALFs leased to Bickford 34,821 26,757 8,064 30.1 % Other new and existing leases 88,439 84,680 3,759 4.4 % Disposals and assets held for sale 5,924 13,770 (7,846) (57.0) % 233,274 232,148 1,126 0.5 % Straight-line rent adjustments, new and existing leases 6,961 (16,681) 23,642 NM Amortization of lease incentives (2,521) (7,555) 5,034 (66.6) % Escrow funds received from tenants for property operating expenses 11,513 9,788 1,725 17.6 % Total Rental Income 249,227 217,700 31,527 14.5 % Resident fees and services 48,809 35,796 13,013 36.4 % Interest income from mortgage and other notes Encore Senior Living construction loans 4,016 2,579 1,437 55.7 % Capital Funding Group 3,209 384 2,825 NM Mortgage loan payoffs 225 7,776 (7,551) (97.1) % Other existing mortgages and notes 13,998 13,644 354 2.6 % Total Interest Income from Mortgage and Other Notes 21,448 24,383 (2,935) (12.0) % Other income 351 315 36 11.4 % Total Revenue 319,835 278,194 41,641 15.0 % Expenses: Depreciation SHOs leased to Holiday Retirement — 2,326 (2,326) (100.0) % SHOP depreciation 9,158 6,408 2,750 42.9 % Disposals and assets held for sale 268 2,629 (2,361) (89.8) % Other new and existing assets 60,547 59,517 1,030 1.7 % Total Depreciation 69,973 70,880 (907) (1.3) % Interest 58,160 44,917 13,243 29.5 % Senior housing operating expenses 39,587 28,193 11,394 40.4 % Legal 507 2,555 (2,048) (80.2) % Share-based compensation 4,605 8,613 (4,008) (46.5) % Taxes and insurance on leased properties 11,513 9,788 1,725 17.6 % Loan and realty losses, net 1,376 61,911 (60,535) (97.8) % Other expenses 15,158 14,999 159 1.1 % 200,879 241,856 (40,977) (16.9) % Gain (loss) on operations transfer, net 20 (710) 730 NM Gain on note receivable payoff — 1,113 (1,113) (100.0) % Loss on early retirement of debt (73) (151) 78 (51.7) % Gains from equity method investment 555 569 (14) (2.5) % 52 Table of Contents Gains on sales of real estate, net 14,721 28,342 (13,621) (48.1) % Other income 202 — 202 NM Net income 134,381 65,501 68,880 NM Less: net loss attributable to noncontrolling interests 1,273 902 371 41.1 % Net income attributable to stockholders 135,654 66,403 69,251 NM Less: net income attributable to unvested restricted stock awards (57) — (57) NM Net income attributable to common stockholders $ 135,597 $ 66,403 $ 69,194 NM NM - not meaningful Financial highlights for the year ended December 31, 2023, compared to 2022, were as follows: • Rental income recognized from our tenants increased $31.5 million, or 14.5%, primarily as a result of a decrease in pandemic-related rent concessions granted of approximately $10.7 million and new investments funded since December 2022.
These costs are subject to amortization over the term of the new debt instrument and may result in the write-off of fees associated with debt which has been replaced or modified. Debt Maturities - Reference Note 8 to the consolidated financial statements for more information on our debt maturities.
These costs are subject to amortization over the term of the new debt instrument and may result in the write-off of fees associated with debt which has been replaced or modified. Debt Maturities - Reference Note 8, Debt to the consolidated financial statements for more information on our debt maturities.
At-the-Market (ATM) Equity Program - We maintain an ATM program which allows us to sell our common stock directly into the market and have entered into an ATM equity offering sales agreement pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $500.0 million of the Company’s common shares.
At-the-Market (ATM) Equity Program - We maintain an ATM equity program which allows us to sell our common stock directly into the market and have entered into an ATM equity offering sales agreement pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $500.0 million of the Company’s common shares.
We expect to meet our short-term liquidity needs largely through cash generated from operations and borrowings under our revolving credit facility, refer to the Unsecured Bank Credit Facility discussion above, and sales from real estate investments, although we may choose to seek alternative sources of liquidity.
We expect to meet our short-term liquidity needs largely through cash generated from operations and borrowings under our unsecured revolving credit facility (refer to the Unsecured Bank Credit Facility discussion above) and sales from real estate investments, although we may choose to seek alternative sources of liquidity.
From this segregation of the sources of cash flow, we are able to establish whether the lease is, in essence, a sale or financing based in it having transferred substantially all of the fair value of the leased asset. Accordingly, management’s projected residual values represent significant assumptions in our accounting for leases.
From this segregation of the sources of cash flow, we are able to establish whether the lease is, in essence, a sale or financing based on it having transferred substantially all of the fair value of the leased asset. Accordingly, management’s projected residual values represent significant assumptions in our accounting for leases.
The current SOFR spreads and facility fee for our revolving credit facility and 2023 Term Loan reflect our ratings compliance based on the applicable margin for SOFR loans at a debt rating of BBB-/Baa3 in the Interest Rate Schedule provided below in summary format: Interest Rate Schedule SOFR Spread Debt Ratings Revolving Credit Facility Revolving Credit Facility Fee 2023 Term Loan A+/A1 0.725% 0.125% 0.75% A/A2 0.725% 0.125% 0.80% A-/A3 0.725% 0.125% 0.85% BBB+/Baa1 0.775% 0.150% 0.90% BBB/Baa2 0.850% 0.200% 1.00% BBB-/Baa3 1.050% 0.250% 1.25% Lower than BBB-/Baa3 1.400% 0.300% 1.65% Beyond the applicable ratios detailed above, if our credit rating from at least two credit rating agencies is downgraded below “BBB-/Baa3” the debt under our credit agreements will be subject to defined increases in interest rates and fees.
The current SOFR spreads and facility fee for our revolving credit facility and 2025 Term Loan reflect our ratings compliance based on the applicable margin for SOFR loans at a debt rating of BBB-/Baa3 in the Interest Rate Schedule provided below in summary format: Interest Rate Schedule SOFR Spread Debt Ratings Revolving Credit Facility Revolving Credit Facility Fee 2025 Term Loan A+/A1 0.725% 0.125% 0.75% A/A2 0.725% 0.125% 0.80% A-/A3 0.725% 0.125% 0.85% BBB+/Baa1 0.775% 0.150% 0.90% BBB/Baa2 0.850% 0.200% 1.00% BBB-/Baa3 1.050% 0.250% 1.25% Lower than BBB-/Baa3 1.400% 0.300% 1.65% Beyond the applicable ratios detailed above, if our credit rating from at least two credit rating agencies is downgraded below “BBB-/Baa3” the debt under our debt agreements will be subject to defined increases in interest rates and fees.
We cannot reasonably estimate at this time the probability that any other purchase options will be exercised in the future. Consideration to be received from the exercise of any tenant purchase option is expected to exceed our net investment in the leased property or properties.
We cannot reasonably estimate at this time the probability that any purchase options will be exercised in the future. Consideration to be received from the exercise of any tenant purchase option is expected to exceed our net investment in the leased property or properties.
Sources and Uses of Funds Our primary sources of cash include rent payments, receipts from residents, principal and interest payments on mortgage and other notes receivable, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our loans and revolving credit facility.
Sources and Uses of Funds Our primary sources of cash include rent payments, receipts from residents, principal and interest payments on mortgage and other notes receivable, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our loans and unsecured revolving credit facility.
During the year ended December 31, 2022, we recorded impairments of approximately $51.6 million on 19 properties which were sold or classified as held for sale related to our Real Estate Investments reportable segment.
During the year ended December 31, 2022, we recorded impairments of approximately $51.6 million on 19 properties which were sold or classified as held for sale related to our Real Estate Investments segment.
We do not expect to utilize borrowings to satisfy the payment of dividends and project that cash flows from operations will be adequate to fund dividends at the current rate. We intend to comply with REIT dividend requirements that we distribute at least 90% of our annual taxable income for the year ended December 31, 2022 and thereafter.
We do not expect to utilize borrowings to satisfy the payment of dividends and project that cash flows from operations will be adequate to fund dividends at the current rate. We intend to comply with REIT dividend requirements that we distribute at least 90% of our annual taxable income for the year ended December 31, 2023 and thereafter.
During the year ended December 31, 2022, we did not have any significant renewing or expiring leases. Most of our existing leases contain annual escalators in rent payments. For financial statement purposes, rental income is recognized on a straight-line basis over the term of the lease.
During the year ended December 31, 2023, we did not have any significant renewing or expiring leases. Most of our existing leases contain annual escalators in rent payments. For financial statement purposes, rental income is recognized on a straight-line basis over the term of the lease.
We make judgments about which entities are variable interest entities (“VIEs”) based on an assessment of whether (i) the total equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) as a group, the holders of the equity investment at risk do not have a controlling financial interest, or (iii) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.
We make judgments about which entities are VIEs based on an assessment of whether (i) the total equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) as a group, the holders of the equity investment at risk do not have a controlling financial interest, or (iii) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.
The 2022 Credit Agreement requires that we calculate specified financial statement metrics and meet or exceed a variety of financial ratios, which are usual and customary in nature. These ratios are calculated quarterly and as of December 31, 2022, were within required limits for each reporting period in 2022 and 2021.
The 2022 Credit Agreement requires that we calculate specified financial statement metrics and meet or exceed a variety of financial ratios, which are usual and customary in nature. These ratios are calculated quarterly and as of December 31, 2023, we were within required limits for each reporting period in 2023 and 2022.
The base rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the 56 Table of Contents Agent’s prime rate, (ii) the federal funds rate on such day plus 0.50% or (iii) the adjusted Term SOFR for a one-month tenor in effect on such day plus 1.0%.
The base rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the agent’s prime rate, (ii) the federal funds rate on such day plus 55 Table of Contents 0.50% or (iii) the adjusted Term SOFR for a one-month tenor in effect on such day plus 1.0%.
Taxable income is determined in accordance with the Internal Revenue Code and differs from net income for financial statements purposes determined in accordance with U.S. generally accepted accounting principles (“GAAP”). Our Board of Directors has historically directed the Company toward maintaining a strong balance sheet.
Taxable income is determined in accordance with the Internal Revenue Code and differs from net income for financial statements purposes determined in accordance with U.S. generally accepted accounting principles (“GAAP”). Our Board of Directors has historically directed the Company towards maintaining a strong balance sheet.
FFO & FAD These supplemental performance measures may not be comparable to similarly titled measures used by other REITs. Consequently, our Funds From Operations (“FFO”), Normalized FFO and Normalized Funds Available for Distribution (“FAD”) may not provide a meaningful measure of our performance as compared to that of other REITs.
FFO & FAD These supplemental performance measures described below may not be comparable to similarly titled measures used by other REITs. Consequently, our Funds From Operations (“FFO”), Normalized FFO and Normalized Funds Available for Distribution (“FAD”) may not provide a meaningful measure of our performance as compared to that of other REITs.
Natural Disasters During the year ended December 31, 2022, our properties incurred minimal to no damage relating to natural disaster events. We or our tenants may incur unplanned costs for minor repairs and restoring operations, as well as costs to evacuate employees and residents.
Natural Disasters During the year ended December 31, 2023, our properties incurred minimal to no damage relating to natural disaster events. We or our tenants may incur unplanned costs for minor repairs and restoring operations, as well as costs to evacuate employees and residents.
When an economic downturn whose duration is expected to span a year or more is encountered, such as the potential impact of the COVID-19 pandemic, we consider projections about an expected economic recovery before we conclude that evidence of impairment exists.
When an economic downturn whose duration is expected to span a year or more is encountered, such as the COVID-19 pandemic, we consider projections about an expected economic recovery before we conclude that evidence of impairment exists.
Occupancy The following table summarizes the average portfolio occupancy for Senior Living Communities, Bickford and SHOP for the periods indicated, excluding development properties in operation less than 24 months, notes receivable, and properties transitioned to new tenants or disposed.
Occupancy The following table summarizes the average portfolio occupancy for Senior Living, Bickford and SHOP for the periods indicated, excluding development properties in operation less than 24 months, notes receivable, and properties transitioned to new tenants or disposed of.
These considerations include, but are not limited to, our power to direct the activities that most significantly impact the entity's economic performance, the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity, and our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity.
These considerations include, but are not limited to, our power to direct the activities that most significantly impact the entity's economic performance, the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the 44 Table of Contents entity, and our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity.
Executive Overview National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed real estate investment trust specializing in sale-leaseback, joint-venture, and mortgage and mezzanine financing of need-driven and discretionary senior housing and medical facility investments. We operate through two reportable segments: Real Estate Investments and SHOP.
Executive Overview National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed REIT specializing in sale-leaseback, joint venture, and mortgage and mezzanine financing of need-driven and discretionary senior housing and medical facility investments. We operate through two reportable segments: Real Estate Investments and SHOP.
We believe that the carrying amounts of our real estate properties are recoverable and that mortgage and other notes receivable, net of reserves, are realizable and supported by the value of the underlying collateral. However, it is possible that future events could require us to make additional significant adjustments to these carrying amounts. Refer to Note 3.
We believe that the carrying amounts of our real estate properties are recoverable and that mortgage and other notes receivable, net of reserves, are realizable and supported by the value of the underlying collateral. However, it is possible that future events could require us to make additional significant adjustments to these carrying amounts.
The leases for our properties in the Real Estate Investments segment generally require the tenant to pay for all repairs and maintenance expenses and a minimum amount of capital expenditures each year. The tenants are also required to maintain insurance coverage at least equal to the replacement cost of a property.
The leases for our properties in the Real Estate Investments segment generally require the tenant to pay for all repairs and maintenance expenses and a minimum amount of capital expenditures each year. The tenants are also required to maintain 60 Table of Contents insurance coverage at least equal to the replacement cost of a property.
Therefore, we do not expect material expenditures in 2023 related to existing properties in the Real Estate Investments segment. The capital funding commitments in our SHOP segment are principally for improvements to our facilities.
Therefore, we do not expect material expenditures in 2024 related to existing properties in the Real Estate Investments segment. The capital funding commitments in our SHOP segment are principally for improvements to our facilities.
Business” and “Item 1A. Risk Factors” above. This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Business” and “Item 1A. Risk Factors” above. This section of this Annual Report on Form 10-K generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use for real estate allocation. Impairments of Real Estate Properties.
While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use for real estate allocation.
We reduced the carrying value of any impaired properties to estimated fair values, or with respect to the properties classified as held for sale, to estimated fair value less costs to sell. We have no significant intangible assets currently recorded on our Consolidated Balance Sheet as of December 31, 2022, that would require assessment for impairment.
We reduced the carrying value of any impaired properties to estimated fair values, or with respect to the properties classified as held for sale, to estimated fair value less estimated transactions costs. We have no significant intangible assets currently recorded on our Consolidated Balance Sheet as of December 31, 2023, that would require assessment for impairment.
Debt Obligations As of December 31, 2022, we had outstanding debt of $1.1 billion. Reference Note 8 to the consolidated financial statements for additional information about our outstanding indebtedness. Also, reference “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for more details on our indebtedness and the impact of interest rate risk.
Debt Obligations As of December 31, 2023, we had outstanding debt of $1.1 billion. Reference Note 8 to the consolidated financial statements for additional information about our outstanding indebtedness. Also, reference “Item 7a. Quantitative and Qualitative Disclosures About Market Risk” for more details on our indebtedness and the impact of interest rate risk.
The Guarantors are either owned, controlled or are affiliates of the Company.
The Guarantors are either owned by, controlled by or are affiliates of the Company.
The Revised Repurchase Plan is effective for a period of one year and does not require us to repurchase any specific number of shares. The Revised Repurchase Plan may be suspended or discontinued at any time.
The stock repurchase plan is effective for a period of one year and does not require us to repurchase any specific number of shares. It may be suspended or discontinued at any time.
There is a correlation between demand for this type of community and the strength of the housing market. Medical Facilities within our portfolio receive payment primarily from Medicare, Medicaid and health insurance. These properties include skilled nursing facilities and a hospital that attract patients who have a need for acute or complex medical attention, preventative medicine, or rehabilitation services.
There is a correlation between demand for this type of community and the strength of the housing market. Medical Facilities within our portfolio receive payment primarily from Medicare, Medicaid and health insurance. These properties include SNFs and a HOSP that attract patients who have a need for acute or complex medical attention, preventative medicine, or rehabilitation services.
The credit loss liability for unfunded loan commitments was $0.7 million as of December 31, 2022 and is estimated using the same methodology as for our funded mortgage and other notes receivable based on the estimated amount that we expect to fund.
The credit loss liability for unfunded loan commitments was $0.3 million as of December 31, 2023 and is estimated using the same methodology as our funded mortgage and other notes receivable based on the estimated amount that we expect to fund.
We remain in compliance with all debt covenants under the unsecured bank credit facility, 2031 Senior Notes and other debt agreements. 57 Table of Contents When we take on new debt or when we modify or replace existing debt, we incur debt issuance costs.
We remain in compliance with all debt covenants under the unsecured revolving credit facility, 2031 Senior Notes and other debt agreements. 56 Table of Contents When we take on new debt or when we modify or replace existing debt, we incur debt issuance costs.
Historically, the Company has distributed at least 100% of annual taxable income. Dividends declared for the fourth quarter of each fiscal year are paid by the end of the following January and are, with some exceptions, treated for tax purposes as having been paid in the fiscal year just ended as provided in IRS Code Sec. 857(b)(8).
Historically, the Company has distributed at least 100% of annual taxable income. Dividends declared for the fourth quarter of each fiscal year are paid by the end of the following January and are, with some exceptions, treated for tax purposes as having been paid in the fiscal year just ended as provided in Internal Revenue Service Code Section 857(b)(8).
The sufficiency of credit enhancements (e.g. tenant deposits and guarantees) as a protection against economic downturn will be a focus as we monitor economic and financial conditions, including the effects of the COVID-19 pandemic. The metrics presented in the tables above give no effect to the presence of these security deposits.
The sufficiency of credit enhancements ( e.g . tenant deposits and guarantees) as a protection against economic downturn will be a focus as we monitor economic and financial conditions. The metrics presented in the tables above give no effect to the presence of these security deposits.
We expect our SHOP ventures to incur approximately $7.6 million in capital expenditures during 2023 that we anticipate will be funded partially from the net operating income generated from the ventures and additional capital contributions from the partners. We expect to fund our commitments to the ventures for capital expenditures with our operating cash flow and other existing liquidity sources.
We expect our SHOP ventures to incur approximately $12.0 million in capital expenditures during 2024 that we anticipate will be funded partially from the net operating income generated from the ventures and additional capital contributions from the partners. We expect to fund our commitments to the ventures for capital expenditures with our operating cash flow and other existing liquidity sources.
Senior Housing – Discretionary includes independent living facilities and entrance-fee communities which primarily attract private payment for services from residents who are making the lifestyle choice of living in an age-restricted multi-family community that offers social programs, meals, housekeeping and in some cases access to healthcare services. Discretionary properties are subject to limited regulatory oversight.
Senior Housing – Discretionary includes ILFs and EFCs which primarily attract private payment for services from residents who are making the lifestyle choice of living in an age-restricted multi-family community that offers social programs, meals, housekeeping and in some cases access to healthcare services. Discretionary properties are subject to limited regulatory oversight.
Amortization of lease inducement payments against revenues was $1.0 million for both the years ended December 31, 2021 and 2020. Capital funding commitments Capital expenditures related to our Real Estate Investments segment are primarily for the acquisition of new investments.
Amortization of lease inducement payments against revenues was $1.0 million for the year ended December 31, 2021. Capital Funding Commitments Capital expenditures related to our Real Estate Investments segment are primarily for the acquisition of new investments.
The third-party managers, or related parties of the managers, own equity interests in the respective ventures. Real Estate Investments As of December 31, 2022, we had investments in real estate and mortgage and other notes receivable involving 177 facilities located in 32 states.
The third-party managers, or related parties of the managers, own equity interests in the respective ventures. Real Estate Investments As of December 31, 2023, we had investments in real estate and mortgage and other notes receivable involving 179 facilities located in 31 states.
These investments consisted of properties with an original cost of approximately $2.4 billion, rented under primarily triple-net leases to 24 tenants, and $248.5 million aggregate carrying value of mortgage and other notes receivable, excluding an allowance for expected credit losses of $15.3 million, due from 14 borrowers.
These investments consisted of properties with an aggregate original cost of approximately $2.4 billion, rented under primarily triple-net leases to 25 tenants, and with $260.7 million in aggregate carrying value of mortgage and other notes receivable, excluding an allowance for expected credit losses of $15.5 million, due from 14 borrowers.
Senior Housing – Need-Driven includes assisted living facilities and senior living campuses which primarily attract private payment for services from residents who require assistance with activities of daily living. Need-driven properties are subject to regulatory oversight.
Senior Housing – Need-Driven includes ALFs and SLCs which primarily attract private payment for services from residents who require assistance with activities of daily living. Need-driven properties are subject to regulatory oversight.
A summary of these tenant options is presented below ( $ in thousands ): Asset Number of Lease 1st Option Option Contractual Type Properties Expiration Open Year Basis 1 Rent SHO 2 May 2035 2027 i $ 5,868 SNF 1 September 2028 2028 ii $ 501 1 Tenant purchase options generally give the lessee an option to purchase the underlying property for consideration determined by (i) a fixed base price plus a specified share in any appreciation; or (ii) fixed base price.
A summary of these tenant options is presented below ( $ in thousands ): Asset Number of Lease 1st Option Option Contractual Rent For Year Ended Type Properties Expiration Open Year Basis 1 December 31, 2023 SHO 2 May 2035 2027 i $ 6,092 SNF 1 September 2028 2028 ii $ 511 1 Tenant purchase options generally give the lessee an option to purchase the underlying property for consideration determined by (i) a fixed base price plus a specified share in any appreciation; or (ii) fixed base price.
Upon repayment, we expensed approximately $0.2 million of unamortized loan costs associated with this loan which is included in “ Loss on early retirement of debt ” in our Consolidated Statement of Income for the year ended December 31, 2022.
Upon repayment, we expensed approximately $0.1 million of unamortized loan costs associated with this loan which are included in “ Loss on early retirement of debt ” in our Consolidated Statement of Income for the year ended December 31, 2023.
Material Cash Requirements We had approximately $26.4 million in cash and cash equivalents on hand and $498.0 million in availability under our unsecured revolving credit facility as of January 31, 2023. Our expected material cash requirements for the twelve months ended December 31, 2023 and thereafter consist of long-term debt maturities; interest on long-term debt; and contractually obligated expenditures.
Material Cash Requirements We had approximately $18.8 million in cash and cash equivalents on hand and $427.0 million in availability under our unsecured revolving credit facility as of January 31, 2024. Our expected material cash requirements for the twelve months ended December 31, 2024 and thereafter consist of long-term debt maturities; interest on long-term debt; and contractually obligated expenditures.
Amortization of lease inducement payments against revenues was $7.6 million for the year ended December 31, 2022, which includes the write-off of $7.1 million of lease incentives related to Bickford in the second quarter of 2022 as discussed in more detail in Note 3 to the consolidated financial statements.
Amortization of lease inducement payments against revenues was $7.6 million for the year ended December 31, 2022, which includes the write-off of $7.1 million of lease incentives related to Bickford in the second quarter of 2022 as discussed in more detail in Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K.
We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. 65 Table of Contents The following table reconciles NOI to net income, the most directly comparable GAAP metric ( $ in thousands ): Years Ended December 31, NOI Reconciliations: 2022 2021 Net income $ 65,501 $ 111,967 (Gains) losses from equity method investment (569) 1,545 Interest income and other — (350) Loss on early retirement of debt 151 1,912 Gain on note receivable payoff (1,113) — Loss on operations transfer, net 710 — Gains on sales of real estate, net (28,342) (32,498) Loan and realty losses 61,911 52,766 General and administrative 22,768 18,431 Franchise, excise and other taxes 844 788 Legal 2,555 908 Interest 44,917 50,810 Depreciation 70,880 80,798 Consolidated net operating income (NOI) $ 240,213 $ 287,077 NOI by segment: Real Estate Investments $ 232,295 $ 283,945 SHOP 7,603 — Non-Segment/Corporate 315 3,132 Total NOI $ 240,213 $ 287,077 66 Table of Contents
We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. 64 Table of Contents The following table reconciles NOI to net income, the most directly comparable GAAP metric ( $ in thousands ): Years Ended December 31, NOI Reconciliations: 2023 2022 2021 Net income $ 134,381 $ 65,501 $ 111,967 (Gains) losses from equity method investment (555) (569) 1,545 Other income (202) — (350) Loss on early retirement of debt 73 151 1,912 Gain on note receivable payoff — (1,113) — (Gain) loss on operations transfer, net (20) 710 — Gains on sales of real estate, net (14,721) (28,342) (32,498) Loan and realty losses, net 1,376 61,911 52,766 General and administrative 19,314 22,768 18,431 Franchise, excise and other taxes 449 844 788 Legal 507 2,555 908 Interest 58,160 44,917 50,810 Depreciation 69,973 70,880 80,798 Consolidated NOI $ 268,735 $ 240,213 $ 287,077 NOI by segment: Real Estate Investments $ 259,162 $ 232,295 $ 283,945 SHOP 9,222 7,603 — Non-Segment/Corporate 351 315 3,132 Total NOI $ 268,735 $ 240,213 $ 287,077 65 Table of Contents
We evaluate the recoverability of the carrying values of our properties on a property-by-property basis.
Impairments of Real Estate Properties We evaluate the recoverability of the carrying values of our properties on a property-by-property basis.
Our SHOP segment is comprised of the operations of 15 independent living facilities that provide residential living and other services for residents located throughout the United States that are operated on behalf of the Company by two independent managers pursuant to the terms of separate management agreements.
Our SHOP segment is comprised of two ventures that own the operations of 15 ILFs that provide residential living and other services for residents located throughout the United States that are operated on behalf of the Company by independent managers pursuant to the terms of separate management agreements that commenced April 1, 2022.
We calculate our fixed charge coverage ratio as approximately 5.9x for the year ended December 31, 2022 (see our discussion under the heading Adjusted EBITDA including a reconciliation to our net income).
We calculate our fixed charge coverage ratio as approximately 4.5x for the year ended December 31, 2023 (see our discussion under the heading Adjusted EBITDA including a reconciliation to our net income).
One of our consolidated real estate partnerships, Discovery PropCo, has committed to fund up to $2.0 million toward the purchase of condominium units located at one of the facilities of which $1.0 million has been funded as of December 31, 2022.
Discovery PropCo has committed to fund up to $2.0 million toward the purchase of condominium units located at one of the facilities of which $1.0 million has been funded as of December 31, 2023.
Borrowings under the 2022 Credit Agreement bear interest, at our election, at either (i) Term Secured Overnight Financing Rate (“SOFR”) (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40%, (ii) Daily SOFR (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40% or (iii) the “base rate” plus a margin ranging from 0.00% to 0.40%.
Borrowings under the 2022 Credit Agreement bear interest, at our election, at one of the following (i) Term SOFR (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40%, (ii) Daily SOFR (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40% or (iii) the “base rate” plus a margin ranging from 0.00% to 0.40%.
Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative, and should be supplemented with a measure such as FFO. The term FFO was designed by the REIT industry to address this issue.
Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative, and should be supplemented with a measure such as FFO.
The details of any future offerings, along with the use of proceeds from any securities offered, will be described in a prospectus supplement or other offering materials, at the time of offering. Our shelf registration statement expires in March 2023. We expect to file a new shelf registration statement in the first quarter of 2023.
The details of any future offerings, along with the use of proceeds from any securities offered, will be described in a prospectus supplement or other offering materials, at the time of offering. Our shelf registration statement expires in March 2026.
The following table reconciles net income, the most directly comparable GAAP metric, to Adjusted EBITDA ($ in thousands ): Years ended December 31, 2022 2021 2020 Net income $ 65,501 $ 111,967 $ 185,311 Interest expense 44,917 50,810 52,882 Franchise, excise and other taxes 844 788 534 Depreciation 70,880 80,798 83,150 NHI’s share of EBITDA adjustments for unconsolidated entities 2,976 2,848 1,495 Gains on sales of real estate, net (28,342) (32,498) (21,316) Impairments of real estate 51,555 51,817 — Loss on operations transfer, net 710 — — Litigation settlement — (616) — Gain on note receivable payoff (1,113) — — Loss on early retirement of debt 151 1,912 3,924 Non-cash write-off of straight-line rents receivable and lease amortization 36,353 709 380 Non-cash rental income (3,000) — — Note receivable credit loss expense 10,356 949 991 Lease termination fee — (2,464) — Recognition of unamortized note receivable commitment fees — (375) — Adjusted EBITDA $ 251,788 $ 266,645 $ 307,351 Interest expense at contractual rates $ 42,487 $ 40,866 $ 43,458 Interest rate swap payments, net — 7,306 6,352 Principal payments 389 371 1,082 Fixed Charges $ 42,876 $ 48,543 $ 50,892 Fixed Charge Coverage 5.9x 5.5x 6.0x For all periods presented, EBITDA reflects GAAP interest expense, which excludes amounts capitalized during the period.
The following table reconciles “ Net income ”, the most directly comparable GAAP metric, to Adjusted EBITDA ($ in thousands ): Years ended December 31, 2023 2022 2021 Net income $ 134,381 $ 65,501 $ 111,967 Interest expense 58,160 44,917 50,810 Franchise, excise and other taxes 449 844 788 Depreciation 69,973 70,880 80,798 NHI’s share of EBITDA adjustments for unconsolidated entities 2,432 2,976 2,848 Gains on sales of real estate, net (14,721) (28,342) (32,498) Impairments of real estate 1,642 51,555 51,817 (Gain) loss on operations transfer, net (20) 710 — Litigation settlement — — (616) Gain on note receivable payoff — (1,113) — Loss on early retirement of debt 73 151 1,912 Non-cash write-off of straight-line rents receivable and lease amortization — 36,353 709 Non-cash rental income (2,500) (3,000) — Note receivable credit loss expense (266) 10,356 949 Lease termination fee — — (2,464) Recognition of unamortized note receivable commitment fees — — (375) Adjusted EBITDA $ 249,603 $ 251,788 $ 266,645 Interest expense at contractual rates $ 55,603 $ 42,487 $ 40,866 Interest rate swap payments, net — — 7,306 Principal payments 408 389 371 Fixed Charges $ 56,011 $ 42,876 $ 48,543 Fixed Charge Coverage 4.5x 5.9x 5.5x For all periods presented, EBITDA reflects GAAP interest expense, which excludes amounts capitalized during the period.
We classify all of the properties in our Real Estate Investments portfolio as either senior housing or medical facilities. Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing properties as either need-driven (assisted living facilities and senior living campuses) or discretionary (independent living and entrance-fee communities).
We classify all of the properties in our Real Estate Investments portfolio as either senior housing or medical facilities. Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing properties as either need-driven (ALFs and SLCs) or discretionary (ILFs and EFCs).
The following table reconciles net income, the most directly comparable GAAP metric, to FFO, Normalized FFO and Normalized FAD and is presented for both basic and diluted weighted average common shares for FFO and Normalized FFO ( $ in thousands, except share and per share amounts ): 63 Table of Contents Years ended December 31, 2022 2021 2020 Net income attributable to common stockholders $ 66,403 $ 111,804 $ 185,126 Elimination of certain non-cash items in net income: Real estate depreciation 70,734 80,798 83,150 Real estate depreciation related to noncontrolling interests (1,393) (839) (777) Gains on sales of real estate, net (28,342) (32,498) (21,316) Impairments of real estate 51,555 51,817 — NAREIT FFO attributable to common stockholders 158,957 211,082 246,183 Loss on operations transfer, net 710 — — Portfolio transition costs, net of noncontrolling interests 426 — — Gain on note receivable payoff (1,113) — — Loss on early retirement of debt 151 1,912 3,924 Non-cash write-offs of straight-line receivable and lease incentives 36,353 709 380 Non-cash rental income (3,000) — — Recognition of unamortized note receivable commitment fees — (375) — Lease termination fee — (2,464) — Litigation settlement — (616) — Normalized FFO attributable to common stockholders 192,484 210,248 250,487 Straight-line lease revenue, net (12,563) (15,312) (20,791) Straight-line lease revenue, net, related to noncontrolling interests 124 91 111 Straight-line lease expense related to equity method investment (16) 46 113 Non-real estate depreciation 146 — — Non-real estate depreciation related to noncontrolling interest (16) — — Amortization of lease incentives 446 1,026 987 Amortization of original issue discount 322 295 303 Amortization of debt issuance costs 2,155 2,404 2,979 Amortization related to equity method investment (847) 1,109 1,261 Note receivable credit loss expense 10,356 949 991 Equity method investment capital expenditures (420) (420) (420) Equity method investment non-refundable fees received 1,206 622 660 Equity method investment distributions (569) — — Non-cash share-based compensation 8,613 8,415 3,061 Senior housing portfolio recurring capital expenditures (390) — — Normalized FAD attributable to common stockholders $ 201,031 $ 209,473 $ 239,742 BASIC Weighted average common shares outstanding 44,774,708 45,714,221 44,696,285 NAREIT FFO attributable to common stockholders per share $ 3.55 $ 4.62 $ 5.51 Normalized FFO attributable to common stockholders per share $ 4.30 $ 4.60 $ 5.60 DILUTED Weighted average common shares outstanding 44,794,236 45,729,497 44,698,004 NAREIT FFO attributable to common stockholders per share $ 3.55 $ 4.62 $ 5.51 Normalized FFO attributable to common stockholders per share $ 4.30 $ 4.60 $ 5.60 64 Table of Contents Adjusted EBITDA We consider Adjusted EBITDA to be an important supplemental measure because it provides information which we use to evaluate our performance and serves as an indication of our ability to service debt.
The following table reconciles “ Net income attributable to common stockholders ”, the most directly comparable GAAP metric, to FFO, Normalized FFO and Normalized FAD and is presented for both basic and diluted weighted average common shares for FFO and Normalized FFO ( $ in thousands, except share and per share amounts ): 62 Table of Contents Years ended December 31, 2023 2022 2021 Net income attributable to common stockholders $ 135,597 $ 66,403 $ 111,804 Elimination of certain non-cash items in net income: Real estate depreciation 69,436 70,734 80,798 Real estate depreciation related to noncontrolling interests (1,585) (1,393) (839) Gains on sales of real estate, net (14,721) (28,342) (32,498) Impairments of real estate 1,642 51,555 51,817 NAREIT FFO attributable to common stockholders 190,369 158,957 211,082 Gain (loss) on operations transfer, net (20) 710 — Portfolio transition costs, net of noncontrolling interests — 426 — Gain on note receivable payoff — (1,113) — Loss on early retirement of debt 73 151 1,912 Non-cash write-offs of straight-line receivable and lease incentives — 36,353 709 Non-cash rental income (2,500) (3,000) — Recognition of unamortized note receivable commitment fees — — (375) Lease termination fee — — (2,464) Litigation settlement — — (616) Normalized FFO attributable to common stockholders 187,922 192,484 210,248 Straight-line lease revenue, net (6,961) (12,563) (15,312) Straight-line lease revenue, net, related to noncontrolling interests 58 124 91 Straight-line lease expense related to equity method investment (14) (16) 46 Non-real estate depreciation 537 146 — Non-real estate depreciation related to noncontrolling interest (49) (16) — Amortization of lease incentives 2,521 446 1,026 Amortization of lease incentive related to noncontrolling interests (434) — — Amortization of original issue discount 322 322 295 Amortization of debt issuance costs 2,325 2,155 2,404 Amortization related to equity method investment (1,633) (847) 1,109 Note receivable credit loss (income) expense (266) 10,356 949 Equity method investment capital expenditures (210) (420) (420) Equity method investment non-refundable fees received 1,327 1,206 622 Equity method investment distributions (555) (569) — Non-cash share-based compensation 4,605 8,613 8,415 SHOP recurring capital expenditures (1,845) (390) — SHOP recurring capital expenditures related to noncontrolling interests 191 — — Normalized FAD attributable to common stockholders $ 187,841 $ 201,031 $ 209,473 BASIC Weighted average common shares outstanding 43,388,794 44,774,708 45,714,221 NAREIT FFO attributable to common stockholders per share $ 4.39 $ 3.55 $ 4.62 Normalized FFO attributable to common stockholders per share $ 4.33 $ 4.30 $ 4.60 DILUTED Weighted average common shares outstanding 43,389,466 44,794,236 45,729,497 NAREIT FFO attributable to common stockholders per share $ 4.39 $ 3.55 $ 4.62 Normalized FFO attributable to common stockholders per share $ 4.33 $ 4.30 $ 4.60 63 Table of Contents Adjusted EBITDA We consider Adjusted EBITDA to be an important supplemental measure because it provides information which we use to evaluate our performance and serves as an indication of our ability to service debt.
These properties are operated by two third-party property managers that manage our communities in exchange for the receipt of a management fee, and as such, we are not directly exposed to the credit risk of the managers in the same manner or to the same extent as we are to our triple-net tenants.
The properties in each venture are operated by a property manager in exchange for a management fee, and as such, we are not directly exposed to the credit risk of the managers in the same manner or to the same extent as we are to our triple-net tenants.
Investing Activities – Net cash provided by investing activities for the year ended December 31, 2022 was comprised primarily of the proceeds from the sales of real estate of approximately $169.0 million and the collection of principal on mortgage and other notes receivable of $119.2 million, offset by $90.8 million of investments in mortgage and other notes and renovations and acquisitions of real estate.
Investing Activities – Net cash used in investing activities for the year ended December 31, 2023 was comprised primarily of the proceeds from the sales of real estate of approximately $57.0 million and the collection of principal on mortgage and other notes receivable of $13.5 million, offset by $85.2 million of investments in mortgage and other notes receivable and renovations and acquisitions of real estate and equipment.
As of December 31, 2022, the revolver and term loan bore interest at a rate of one-month Term SOFR (plus a 10 bps spread adjustment) plus 105 bps and 125 bps, based on our debt ratings, or 5.51% and 5.71%, respectively. The facility fee for the revolver was 25 bps per annum.
As of December 31, 2023, the unsecured revolving credit facility and 2025 Term Loan bore interest at a rate of one-month Term SOFR (plus a 10 bps spread adjustment) plus 105 bps and 125 bps, based on our debt ratings, or 6.49% and 6.69%, respectively. The facility fee for the unsecured revolving credit facility was 25 bps per annum.
If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the property exceeds the fair value of the property. Refer to Note 3. Investment Activity to our consolidated financial statements for more details.
If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the property exceeds the fair value of the property. Refer to Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for more details.
The acquisition price was $17.2 million, including $0.2 million in closing costs, and the cancellation of an outstanding construction note receivable of $14.0 million including interest.
The acquisition price was $17.3 million, including the satisfaction of an outstanding construction note receivable of $14.2 million including interest, cash consideration of $0.5 million and approximately $0.1 million in closing costs.
Senior Notes Offering - In January 2021, we issued $400.0 million aggregate principal amount of 3.00% senior notes that mature on February 1, 2031 and pay interest semi-annually on February 1 and August 1 of each year (the “2031 Senior Notes”). The 2031 Senior Notes were sold at an issue price of 99.196% of face value before the underwriters’ discount.
Senior Notes Offering - In January 2021, we issued $400.0 million in aggregate principal amount of 3.00% senior notes that mature on February 1, 2031 and pay interest semi-annually on February 1 and August 1 of each year (the “2031 Senior Notes”).
Our net proceeds from the 2031 Senior Notes offering, after deducting underwriting discounts and expenses, were approximately $392.3 million and were used to repay a $100.0 million term loan and reduce borrowings outstanding under our revolving credit facility.
The 2031 Senior Notes were sold at an issue price of 99.196% of face value before the underwriters’ discount. Our net proceeds from the 2031 Senior Notes offering, after deducting underwriting discounts and expenses, were approximately $392.3 million and were used to repay a $100.0 million term loan and reduce borrowings outstanding under our unsecured revolving credit facility.
Diluted FFO assumes the exercise of stock options and other potentially dilutive securities. 62 Table of Contents Our Normalized FFO per diluted common share for the year ended December 31, 2022 decreased $0.30 or 6.5% over the same period in 2021.
Diluted FFO per share assumes the exercise of stock options and other potentially dilutive securities. Our Normalized FFO per diluted common share for the year ended December 31, 2023 increased $0.03 or 0.7% over the same period in 2022.
We believe our current liquidity position, supplemented by our ability to generate positive cash flows from operations in the future, and our low net leverage will be sufficient to meet all of our short-term and long-term financial commitments. 60 Table of Contents Loan and Development Commitments and Contingencies The following tables summarize information as of December 31, 2022 related to our outstanding commitments and contingencies which are more fully described in the notes to the consolidated financial statements ( $ in thousands ): Asset Class Type Total Funded Remaining 1 Loan Commitments: Bickford Senior Living SHO Construction $ 28,900 $ (28,853) $ 47 Encore Senior Living SHO Construction 50,725 (36,375) 14,350 Senior Living Communities SHO Revolving Credit 20,000 (15,847) 4,153 Timber Ridge OpCo SHO Working Capital 5,000 — 5,000 Watermark Retirement SHO Working Capital 5,000 (1,976) 3,024 Montecito Medical Real Estate MOB Mezzanine Loan 50,000 (20,255) 29,745 $ 159,625 $ (103,306) $ 56,319 1 Of the total, $26,574 is expected to be payable within 12 months with the remaining commitment due between three to five years.
We believe our current liquidity position, supplemented by our ability to generate positive cash flows from operations in the future, and our low net leverage will be sufficient to meet all of our short-term and long-term financial commitments. 59 Table of Contents Loan and Development Commitments and Contingencies The following tables summarize information as of December 31, 2023 related to our outstanding commitments and contingencies which are more fully described in the notes to the consolidated financial statements ( $ in thousands ): Asset Class Type Total Funded Remaining 1 Loan Commitments: Encore Senior Living SHO Construction $ 50,725 $ (49,846) $ 879 Senior Living SHO Revolving Credit 20,000 (16,250) 3,750 Timber Ridge OpCo SHO Working Capital 5,000 — 5,000 Watermark Retirement SHO Working Capital 5,000 (2,976) 2,024 Montecito Medical Real Estate MOB Mezzanine Loan 50,000 (20,255) 29,745 $ 130,725 $ (89,327) $ 41,398 1 As of December 31, 2023, $11,653 of the funding obligations are expected to be payable within 12 months with the remaining commitment due between three to five years.
Giving effect to significant acquisitions, financings, disposals and payoffs on an annualized basis, our consolidated net debt to Adjusted EBITDA ratio is approximately 4.7x for the year ended December 31, 2022 ( $ in thousands ): Consolidated Total Debt $ 1,147,511 Less: cash and cash equivalents (19,291) Consolidated Net Debt $ 1,128,220 Adjusted EBITDA $ 251,788 Annualized impact of recent investments, disposals and payoffs (9,496) $ 242,292 Consolidated Net Debt to Adjusted EBITDA 4.7x Supplemental Guarantor Financial Information The Company’s $940.0 million bank credit facility, unsecured private placement notes due January 2023 through January 2027 with an aggregate principal amount of $400.0 million and 2031 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s subsidiaries, except for certain excluded subsidiaries (“Guarantors”).
Giving effect to significant acquisitions, financings, disposals and payoffs on an annualized basis, our consolidated net debt to Adjusted EBITDA ratio is approximately 4.5x for the year ended December 31, 2023 ( $ in thousands ): Consolidated Total Debt $ 1,135,051 Less: cash and cash equivalents (22,347) Consolidated Net Debt $ 1,112,704 Adjusted EBITDA $ 249,603 Annualized impact of recent investments, disposals and payoffs (1,669) $ 247,934 Consolidated Net Debt to Adjusted EBITDA 4.5x Supplemental Guarantor Financial Information The Company’s $900.0 million bank credit facility, unsecured private placement notes due September 2024 through January 2027 with an aggregate principal amount of $225.0 million and 2031 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s subsidiaries, except for certain excluded subsidiaries (“Guarantors”).
Included in rental income for the year ended December 31, 2022, is approximately $26.0 million in write-offs of straight-line rents receivable for three tenants placed on cash basis of rental income recognition, and $7.1 million in write-offs of lease incentives related to Bickford. • Resident fees and services and senior housing operating expenses include revenues and expenses from our SHOP activities which commenced on April 1, 2022.
Included in rental income for the year ended December 31, 2022 are write offs in the second quarter of 2022 of $18.1 million of straight-line rents receivable and $7.1 million of lease incentives related to placing Bickford on the cash basis of revenue recognition, partially offset by the recognition of the Holiday lease deposit and escrow of $15.6 million. • Resident fees and services and senior housing operating expenses include revenues and expenses from our SHOP activities which commenced on April 1, 2022.
On February 17, 2023, our Board of Directors terminated the current stock repurchase program and authorized a revised repurchase program (the “Revised Repurchase Plan”) pursuant to which we may purchase up to $160.0 million in shares of our issued and outstanding common stock, par value $0.01 per share.
On February 16, 2024, our Board of Directors renewed the stock repurchase plan pursuant to which we may purchase up to $160.0 million in shares of our issued and outstanding common stock, par value $0.01 per share.
The amendment modifies the existing covenants to align with provisions in the 2022 Credit Agreement and to accrue interest on borrowings based on SOFR (plus a credit spread adjustment) that were previously based on LIBOR, with no change to the existing applicable interest rate margins.
Concurrently with the execution of the 2022 Credit Agreement, we amended our $300.0 million 2023 Term Loan to modify the existing covenants to align with provisions in the 2022 Credit Agreement and to accrue interest on borrowings based on SOFR (plus a credit spread adjustment) that were previously based on LIBOR, with no change to the existing applicable interest rate margins.
Medical properties are subject to state and federal regulatory oversight and, in the case of hospitals, Joint Commission accreditation. Senior Housing Operating Portfolio Effective April 1, 2022, 15 senior housing ILFs previously part of the legacy Holiday Retirement properties were transferred from a triple-net lease to two separate ventures comprising our SHOP, which represents a new reportable segment.
Medical properties are subject to state and federal regulatory oversight and, in the case of hospitals, Joint Commission accreditation. Senior Housing Operating Portfolio Effective April 1, 2022, we transitioned the operations of 15 ILFs previously leased pursuant to a triple-net lease into two new ventures comprising our SHOP activities.
We fund our real estate investments primarily through: (1) operating cash flow, (2) debt offerings, including bank lines of credit and term debt, both unsecured and secured, and (3) the sale of equity securities.
Our Real Estate Investments segment consists of real estate investments and leases, mortgages and other notes receivables in ILFs, ALFs, EFCs, SLCs, SNFs and a HOSP. We fund our real estate investments primarily through: (1) operating cash flow, (2) debt offerings, including bank lines of credit and term debt, both unsecured and secured, and (3) the sale of equity securities.
While we believe that the net carrying amounts of our notes receivable and other investments are realizable, it is possible that future events could require us to make significant adjustments or revisions to these estimates.
While we believe that the net carrying amounts of our notes receivable and other investments are realizable, it is possible that future events could require us to make significant adjustments or revisions to these estimates. During the third quarter of 2023, we designated as non-performing a mortgage note receivable of $2.1 million due from Bickford.
See Note 5 to the consolidated financial statements. • Funds received for reimbursement of property operating expenses totaled $9.8 million for the year ended December 31, 2022, and are reflected as a component of rental income.
Revenues less expenses from our SHOP segment increased $1.6 million, or 21%. See Note 5 to the consolidated financial statements. • Funds received for reimbursement of property operating expenses totaled $11.5 million for the year ended December 31, 2023, and are reflected as a component of rental income.
Financing Activities – Net cash used in financing activities for the year ended December 31, 2022 differs from the same period in 2021 primarily as a result of an approximately $167.2 million decrease in net borrowings, inclusive of the $400.0 million senior note offering in 2021 discussed below, an approximately $47.9 million decrease in proceeds from issuance of common stock, an approximately $21.1 million decrease in dividend payments, and approximately $152.0 million used to repurchase common stock in 2022.
Financing Activities – Net cash used in financing activities for the year ended December 31, 2023 differs from the same period in 2022 primarily as a result of an approximately $81.0 million increase in net borrowings, a decrease of $8.8 million in proceeds from noncontrolling interests, a decrease in the repurchase of common stock of approximately $152.0 million, a decrease in debt issuance cost of $1.9 million and a decrease in dividend payments of approximately $5.5 million compared to 2022.
In January 2023, we repaid a $125.0 million of private placement notes that were issued in January 2015 primarily with proceeds from the revolving credit facility. At January 31, 2023, $202.0 million was outstanding under the revolving credit facility.
During 2023, we repaid $175.0 million of private placement notes primarily with proceeds from the unsecured revolving credit facility. At January 31, 2024, $273.0 million was outstanding under the revolving credit facility.
This consideration will drive accounting for the alternative classifications among either operating, sales-type, or direct financing types of leases. For classification purposes, we distinguish cash flows that follow under terms of the lease from those that will derive, subsequent to the lease, from the ultimate disposition or re-deployment of the asset.
For classification purposes, we distinguish cash flows that follow under terms of the lease from those that will derive, subsequent to the lease, from the ultimate disposition or re-deployment of the asset.
Assets Held for Sale and Long-Lived Assets At December 31, 2022, 13 properties in our Real Estate Investments reportable segment, with an aggregate net real estate balance of $43.3 million, were classified as assets held for sale on our Consolidated Balance Sheet.
Assets Held for Sale and Long-Lived Assets At December 31, 2023, one property in our Real Estate Investments segment, with a net real estate balance of $5.0 million, was classified as assets held for sale on our Consolidated Balance Sheet.
Tenant Concentration As discussed in Note 3 to the consolidated financial statements, we have two tenants (including their affiliated entities, which are the legal tenants) from whom we individually derive at least 10% of our total revenues. NHC is a publicly traded company and we do not report specific occupancy information from them.
Tenant Concentration As discussed in Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K, we have three tenants (including their affiliated entities, which are the legal tenants) from whom we individually derive at least 10% of our total revenues.
The acquisition price also included a reduction of $2.5 million in Bickford’s outstanding pandemic-related deferrals. We added the community to an existing master lease with Bickford was added to an existing master lease with Bickford at an initial rate of 8.0%, with annual CPI escalators subject to a floor and ceiling.
The acquisition price also included a reduction of $2.5 million in Bickford’s outstanding pandemic-related rent deferrals that has been recognized in “ Rental income. ” We added the community to an existing master lease with Bickford at an initial lease rate of 8.0%. Capital Funding Group, Inc.

… 118 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−0 removed2 unchanged
Biggest changeThe following table sets forth certain information with respect to our debt ($ in thousands) : December 31, 2022 December 31, 2021 Balance 1 % of total Rate 2 Balance 1 % of total Rate 2 Fixed rate: Private placement notes - unsecured $ 400,000 34.5 % 4.15 % $ 400,000 31.9 % 4.15 % Senior notes - unsecured 400,000 34.5 % 3.00 % 400,000 31.9 % 3.00 % Fannie Mae term loans - secured, non-recourse 76,649 6.6 % 3.96 % 77,038 6.2 % 3.97 % Variable rate: Bank term loans - unsecured 240,000 20.8 % 5.71 % 375,000 30.0 % 1.41 % Revolving credit facility - unsecured 42,000 3.6 % 5.51 % — — % — % $ 1,158,649 100.0 % 3.91 % $ 1,252,038 100.0 % 2.95 % 1 Differs from carrying amount due to unamortized discounts and loan costs. 2 Total is weighted average rate 67 Table of Contents To highlight the sensitivity of our term loans, senior notes and secured mortgage debt to changes in interest rates, the following summary shows the effects on fair value (“FV”) assuming a parallel shift of 50 basis points (“bps”) in market interest rates for a contract with similar maturities as of December 31, 2022 ( $ in thousands ): Balance Fair Value 1 FV reflecting change in interest rates Fixed rate: -50 bps +50 bps Private placement notes - unsecured $ 400,000 $ 384,747 $ 387,998 $ 381,545 Senior notes - unsecured 400,000 317,298 328,850 306,190 Fannie Mae term loans - secured, non-recourse 76,649 71,950 72,746 71,163 1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.
Biggest changeThe following table sets forth certain information with respect to our debt ($ in thousands) : December 31, 2023 December 31, 2022 Balance 1 % of total Rate 2 Balance 1 % of total Rate 2 Fixed rate: Private placement notes - unsecured $ 225,000 19.6 % 4.28 % $ 400,000 34.5 % 4.15 % Senior notes - unsecured 400,000 34.9 % 3.00 % 400,000 34.5 % 3.00 % Fannie Mae term loans - secured, non-recourse 76,241 6.7 % 3.96 % 76,649 6.6 % 3.96 % Variable rate: Bank term loans - unsecured 200,000 17.4 % 6.69 % 240,000 20.8 % 5.71 % Revolving credit facility - unsecured 245,000 21.4 % 6.49 % 42,000 3.6 % 5.51 % $ 1,146,241 100.0 % 4.70 % $ 1,158,649 100.0 % 3.91 % 1 Differs from carrying amount due to unamortized discounts and loan costs. 2 Total is weighted average rate 66 Table of Contents To highlight the sensitivity of our term loans, senior notes and secured mortgage debt to changes in interest rates, the following summary shows the effects on fair value (“FV”) assuming a parallel shift of 50 basis points (“bps”) in market interest rates for a contract with similar maturities as of December 31, 2023 ( $ in thousands ): Balance Fair Value 1 FV reflecting change in interest rates Fixed rate: -50 bps +50 bps Private placement notes - unsecured $ 225,000 $ 216,435 $ 218,516 $ 214,379 Senior notes - unsecured 400,000 332,129 342,836 321,787 Fannie Mae term loans - secured, non-recourse 76,241 74,171 74,647 73,698 1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.
A 50 basis-point increase in market rates would decrease the estimated fair value of our mortgage and other loans by approximately $3.5 million, while a 50 basis-point decrease in such rates would increase their estimated fair value by approximately $2.7 million. Equity Price Risk The Company is not subject to equity risk since it owns no marketable securities.
A 50 basis-point increase in market rates would decrease the estimated fair value of our mortgage and other loans by approximately $2.7 million, while a 50 basis-point decrease in such rates would increase their estimated fair value by approximately $2.7 million. Equity Price Risk The Company is not subject to equity risk since it owns no marketable securities.
Substantially all of our leases require the tenant to pay all operating expenses for the property, whether paid directly by the tenant or reimbursed to us. We believe that inflationary increases will be at least partially offset by the contractual rent increases and expense reimbursements described above. 68 Table of Contents
Substantially all of our leases require the tenant to pay all operating expenses for the property, whether paid directly by the tenant or reimbursed to us. We believe that inflationary increases will be at least partially offset by the contractual rent increases and expense reimbursements described above. 67 Table of Contents
We may engage in hedging strategies to manage our exposure to market risks in the future, depending on an analysis of the interest rate environment and the costs and risks of such strategies. We had no derivative financial instruments outstanding during 2022.
We may engage in hedging strategies to manage our exposure to market risks in the future, depending on an analysis of the interest rate environment and the costs and risks of such strategies. We had no derivative financial instruments outstanding during 2023.
The unused portion ($658.0 million at December 31, 2022) of our revolving credit facility, should it be drawn upon, is subject to variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and loans receivable unless such instruments mature or are otherwise terminated.
The unused portion ($455.0 million at December 31, 2023) of our unsecured revolving credit facility, should it be drawn upon, is subject to variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and loans receivable unless such instruments mature or are otherwise terminated.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risk At December 31, 2022, we were exposed to market risks related to fluctuations in interest rates on approximately $282.0 million of variable-rate indebtedness and on our mortgage and other notes receivable.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risk At December 31, 2023, we were exposed to market risks related to fluctuations in interest rates on approximately $445.0 million of variable-rate indebtedness and on our mortgage and other notes receivable.
Inflation Risk Our real estate leases generally provide for annual increases in contractual rent due based on a fixed amount or percentage or based on increases in the CPI. Leases with increases based on CPI may contain a minimum or a cap on the maximum annual increase.
Inflation Risk Our real estate leases generally provide for annual increases in contractual rent due based on a fixed amount or percentage or based on increases in the Consumer Price Index (“CPI”). Leases with increases based on CPI may contain a minimum or a cap on the maximum annual increase.
At December 31, 2022, the fair value of our mortgage and other notes receivable, discounted for estimated changes in the risk-free rate, was approximately $227.6 million.
At December 31, 2023, the fair value of our mortgage and other notes receivable, discounted for estimated changes in the risk-free rate, was approximately $237.6 million.
Assuming a 50 basis-point increase or decrease in the interest rate related to variable-rate debt, and assuming no change in the outstanding balance as of December 31, 2022, net interest expense would increase or decrease annually by approximately $1.4 million or $0.03 per common share on a diluted basis.
Assuming a 50 basis-point increase or decrease in the interest rate related to variable-rate debt, and assuming no change in the outstanding balance as of December 31, 2023, net interest expense would increase or decrease annually by approximately $2.2 million or $0.05 per common share on a diluted basis.

Other NHI 10-K year-over-year comparisons