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What changed in NATIONAL HEALTH INVESTORS INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of NATIONAL HEALTH INVESTORS INC's 2023 and 2024 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 2024 report.

+501 added−466 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-20)

Top changes in NATIONAL HEALTH INVESTORS INC's 2024 10-K

501 paragraphs added · 466 removed · 375 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

123 edited+17 added−31 removed84 unchanged
Biggest changeTenant 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.
Biggest changeTenant Concentration The following table contains information regarding tenant concentration in our Real Estate Investments segment, excluding $2.6 million for our corporate office, $358.4 million for the SHOP segment, and a credit loss reserve of $20.2 million, based on the percentage of revenues for the years ended December 31, 2024, 2023 and 2022 related to tenants or affiliates of tenants that exceed 10% of total revenue ( $ in thousands ): 9 Ta ble of Contents As of December 31, 2024 Revenues 1 Asset Gross Real Notes Year Ended December 31, Class Estate 2 Receivable 2024 2023 2022 Senior Living Communities EFC $ 577,243 $ 43,916 $ 53,570 16% $ 51,274 16% $ 51,183 18% Bickford Senior Living 2 ALF 428,068 16,072 41,720 12% 38,688 12% N/A N/A NHC SNF 133,770 — 40,016 12% 37,335 12% 36,893 13% All others, net Various 1,453,506 229,187 134,289 41% 132,216 41% 144,534 52% Escrow funds received from tenants for property operating expenses Various — — 11,165 3% 11,513 4% 9,788 4% $ 2,592,587 $ 289,175 280,760 271,026 242,398 Resident fees and services 3 54,421 16% 48,809 15% 35,796 13% $ 335,181 $ 319,835 $ 278,194 1 Includes interest income on notes receivable and rental income from properties classified as assets held for sale. 2 Revenues included in All others, net for years when less than 10%. 3 There is no tenant concentration in “ Resident fees and services” because these agreements are with individual residents.
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.
Our revenues depend on the operating success of our managers, tenants and borrowers, 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.
As the decision to transition to an EFC is typically made as a lifestyle choice and not as the result of a pressing medical concern, we consider the decision to transition to an EFC to be discretionary. Accordingly, the predominant source of revenue for operators of EFCs is from private payor sources. Medical.
As the decision to transition to an EFC is typically made as a lifestyle choice and not as the result of a pressing medical concern, we consider the decision to transition to an EFC to be discretionary. Accordingly, the predominant source of revenue for operators of EFCs is from private payor sources.
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.
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; and “ Item 1A.
Noncompliance with applicable laws and regulations may result in the imposition of civil and criminal penalties that could adversely affect the operations and financial condition of tenants, managers or borrowers, which in turn may adversely affect us.
Noncompliance with applicable laws and regulations may result in the imposition of civil and criminal penalties that could adversely affect the operations and financial condition of managers, tenants or borrowers, which in turn may adversely affect us.
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.
The following is a brief discussion of certain laws and regulations applicable to certain of our managers, tenants and borrowers and, in some cases, to us. Licensure and Certification.
The failure of any tenant, manager or borrower to comply with such laws and regulations could affect its ability to operate its facility or facilities and could adversely affect any such tenant’s or borrower’s ability to make lease or debt payments to us.
The failure of any manager, tenant or borrower to comply with such laws and regulations could affect its ability to operate its facility or facilities and could adversely affect any such tenant’s or borrower’s ability to make lease or debt payments to us.
CON requirements are not uniform throughout the United States and are subject to change. We cannot predict the impact of regulatory changes with respect to CONs on the operations of our tenants, managers and borrowers. Medicare and Medicaid Reimbursement.
CON requirements are not uniform throughout the United States and are subject to change. We cannot predict the impact of regulatory changes with respect to CONs on the operations of our managers, tenants and borrowers. Medicare and Medicaid Reimbursement.
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.
We cannot make any assessment as to the timing or the effect that any such changes may have on our managers’, tenants’ and borrowers’ costs of doing business and on the amount of reimbursement by government and other third-party payors.
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.
Qualifying income for purposes of the 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.
In making new investments, we consider such factors as (i) the geographic area and type of property, (ii) the location, construction quality, condition and design of the property, (iii) the current and anticipated cash flow and its adequacy to meet operational needs, and lease or mortgage obligations to provide a competitive income return to our investors, (iv) the growth, tax and regulatory environments of the communities in which the properties are located, (v) occupancy and demand for similar facilities in the same or nearby communities, (vi) the quality, experience and creditworthiness of the management operating the facilities located on the property and (vii) the mix of private and government-sponsored residents.
In making new investments, we consider such factors as (i) the geographic area and type of property, (ii) the location, construction quality, condition and design of the property, (iii) the current and anticipated cash flow and its adequacy to meet operational needs, and for lease or mortgage obligations to provide a competitive income return to our investors, (iv) the growth, tax and regulatory environments of the communities in which the properties are located, (v) occupancy and demand for similar facilities in the same or nearby communities, (vi) the quality, experience and creditworthiness of the management operating the facilities located on the property and (vii) the mix of private and government-sponsored residents.
We monitor our triple-net tenant credit quality and identify any material changes by performing the following activities: • Obtaining financial statements on a monthly, quarterly and annual basis to assess the operational trends of our tenants and the financial position and capability of those tenants • Calculating the operating cash flow for each of our tenants • Calculating the lease service coverage ratio and other ratios pertinent to our tenants • Obtaining property-level occupancy rates for our tenants • Verifying the payment of real estate taxes by our tenants • Obtaining certificates of insurance for each tenant • Obtaining reviewed or audited financial statements of our tenant corporate guarantors on an annual basis, if applicable • Conducting a periodic inspection of our properties to ascertain proper maintenance, repair and upkeep • Monitoring those tenants with indications of continuing and material deteriorating credit quality through discussions with our executive management and Board of Directors Mortgage loans.
We monitor our triple-net lease tenant credit quality and identify any material changes by performing the following activities: • Obtaining financial statements on a monthly, quarterly and annual basis to assess the operational trends of our tenants and the financial position and capability of those tenants • Calculating the operating cash flow of our tenants • Calculating the lease service coverage ratio and other ratios pertinent to our tenants • Obtaining property-level occupancy rates for our tenants • Verifying the payment of real estate taxes by our tenants • Obtaining certificates of insurance for our tenants • Obtaining reviewed or audited financial statements of our tenant corporate guarantors on an annual basis, if applicable • Conducting a periodic inspection of our properties to ascertain proper maintenance, repair and upkeep • Monitoring those tenants with indications of continuing and material deteriorating credit quality through discussions with our executive management and Board of Directors Mortgage loans.
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.
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 with minor medical needs on an as-needed basis. Operators of ALFs are typically paid from private sources without assistance from the government.
Accordingly, while we intend to continue to qualify to be taxed as a REIT, the actual results of our operations for any particular year might not satisfy these requirements for qualification and taxation as a REIT. Accordingly, no assurance can be given that the actual results of our operation for any particular taxable year will satisfy such requirements.
Accordingly, while we intend to continue to qualify to be taxed as a REIT, the actual results of our operations for any particular year might not satisfy these requirements for qualification and taxation as a REIT. Accordingly, no assurance can be given that the actual results of our operations for any particular taxable year will satisfy such requirements.
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.
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.
The Medicare Part A payment rates cover most services to be provided to a beneficiary for a limited benefit period, including room and board, skilled nursing care, therapy, and medications. CMS updates Medicare payment rates annually.
The Medicare Part A payment rates cover most services provided to a beneficiary for a limited benefit period, including room and board, skilled nursing care, therapy, and medications. CMS updates Medicare payment rates annually.
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.
As of December 31, 2024, 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.
The Internal Revenue Code defines a REIT as a corporation, trust or association: (1) that is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (3) that would otherwise be taxable as a domestic corporation, but for Sections 856 through 859 of the Internal Revenue Code; (4) that is neither a financial institution nor an insurance company to which certain provisions of the Internal Revenue Code apply; (5) the beneficial ownership of which is held by 100 or more persons; (6) during the last half of each taxable year, not more than 50% in value of the outstanding stock of which is owned, directly or constructively, by five or fewer individuals, as defined in the Internal Revenue Code to also include certain entities; and (7) which meets certain other tests regarding the nature of its income and assets.
The Internal Revenue Code defines a REIT as a corporation, trust or association: (1) that is managed by one or more trustees or directors; (2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest; (3) that would otherwise be taxable as a domestic corporation, but for Sections 856 through 859 of the Internal Revenue Code; (4) that is neither a financial institution nor an insurance company to which certain provisions of the Internal Revenue Code apply; (5) the beneficial ownership of which is held by 100 or more persons; 16 Ta ble of Contents (6) during the last half of each taxable year, not more than 50% in value of the outstanding stock of which is owned, directly or constructively, by five or fewer individuals, as defined in the Internal Revenue Code to also include certain entities; and (7) which meets certain other tests regarding the nature of its income and assets.
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.
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 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.
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 where the lease contains fixed escalators. Certain of our tenants hold purchase options allowing them to acquire properties they currently lease from NHI.
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 where the lease contains fixed escalators. Certain of our tenants hold purchase options allowing them to acquire properties they currently lease from us.
Sanctions for failure to comply with these laws and regulations include (but are not limited to) loss of licensure and ability to participate in the Medicare, Medicaid, and other government healthcare programs, suspension of or non-payment for new admissions, fines, as well as potential criminal penalties.
Sanctions for failure to comply with applicable laws and regulations include (but are not limited to) loss of licensure and ability to participate in the Medicare, Medicaid, and other government healthcare programs, suspension of or non-payment for new admissions, and fines, as well as potential criminal penalties.
Budgetary pressures are expected to continue in the future, and many states are actively seeking ways to reduce Medicaid spending, including for nursing home and assisted living care, by methods such as capitated payments, reductions in reimbursement rates, and increased enrollment in managed Medicaid plans.
Budgetary pressures are expected to continue in the future, and many states are actively seeking ways to reduce Medicaid spending, including for nursing home and assisted living care, by methods such as capitated payments, reductions in reimbursement rates and/or coverage, and increased enrollment in managed Medicaid plans.
Our qualification and taxation as a REIT depends upon our ability to meet on a continuing basis, through actual annual operating results, the various qualification tests and organizational requirements imposed under the Internal Revenue Code, including qualification tests based on NHI’s assets, income, distributions and stock ownership.
Our qualification and taxation as a REIT depend upon our ability to meet on a continuing basis, through actual annual operating results, the various qualification tests and organizational requirements imposed under the Internal Revenue Code, including qualification tests based on NHI’s assets, income, distributions and stock ownership.
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.
The annual interest rates we receive on our mortgage, construction and mezzanine loans ranged between 6.0% and 12.0% during 2024. We believe our lease and loan terms are competitive within our peer group. Typical characteristics of our investment transactions are as follows: Leases.
In most cases, the owner of the facility is committed to make minimum annual capital expenditures for the purpose of maintaining or upgrading their respective facility. Additionally, most of our loans are collateralized by first or second mortgage liens and corporate or personal guarantees.
In most cases, the owner of the facility is committed to make minimum annual capital expenditures for the purpose of maintaining or upgrading its respective facility. Additionally, most of our loans are collateralized by first or second mortgage liens and corporate or personal guarantees.
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.
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.
We have provided a $20.0 million revolving line of credit to Senior Living whose borrowings under the revolver are to be used for working capital and to finance construction projects within its portfolio, including building additional units. Beginning January 1, 2025, availability under the revolver will be reduced to $15.0 million.
We have provided a $20.0 million revolving line of credit to Senior Living whose borrowings under the revolver are to be used for working capital needs and to finance construction projects within its portfolio, including building additional units. Beginning January 1, 2025, availability under the revolver was reduced to $15.0 million.
We may also obtain a purchase option to acquire the facility at a future date and, if purchased, will lease the facility back to the borrower. During the term of the construction loan, funds are usually advanced 8 Table of Contents pursuant to draw requests made by the borrower in accordance with the terms and conditions of the loan.
We may also obtain a purchase option to acquire the facility at a future date and, if purchased, will lease the facility back to the borrower. During the term of the construction loan, funds are usually advanced 8 Ta ble of Contents pursuant to draw requests made by the borrower in accordance with the terms and conditions of the loan.
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”.
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 Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, 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”. 17 Ta ble of Contents Distribution Requirements.
Classification of Properties in our Portfolio We operate our business through two reportable segments: Real Estate Investments and SHOP. We classify all of the properties in our Real Estate Investments portfolio as either senior housing or medical properties.
Classification of Properties in our Portfolio We operate our business through two reportable segments: Real Estate Investments and SHOP. We classify all of the properties in our Real Estate Investments segment as either senior housing or medical 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. 6 Table of Contents 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. Entrance-Fee Communities.
Competition 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.
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. Some of these facilities are operated for profit, while others are owned by governmental agencies or tax-exempt not-for-profit entities.
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.
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 physicians from referring Medicare and Medicaid patients for designated health services (which include hospital inpatient and 14 Ta ble of Contents outpatient services and some of the services provided in SNFs) to entities 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.
The tenure of our current employees includes six who have been with the Company for over five years (but less than ten years), and three who have been with the Company over ten years (but less than 20 years). Two of our employees have been with the Company over 20 years.
The tenure of our current employees includes eight who have been with the Company for over five years (but less than ten years), and three who have been with the Company over ten years (but less than 20 years). Two of our employees have been with the Company over 20 years.
As of December 31, 2023, we had three construction loans bearing interest ranging from 8.5% to 9.0% per annum. Other notes receivable.
As of December 31, 2024, we had three construction loans bearing interest ranging from 8.5% to 9.0% per annum. Other notes receivable.
ITEM 1. BUSINESS General 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 Senior Housing Operating Portfolio (“SHOP”).
ITEM 1. BUSINESS General 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.
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 ” in this Annual Report for a description of the risks and regulations associated with environmental matters.
These mezzanine loans sometimes combine with an NHI purchase option covering the subject property. As of December 31, 2023, we had seven mezzanine loans bearing interest rates ranging from approximately 6.0% to 10.0% per annum. Construction loans. From time to time, we provide construction loans that become mortgage loans upon the completion of the construction of the subject facility.
These mezzanine loans sometimes combine with an NHI purchase option covering the subject property. As of December 31, 2024, we had eight mezzanine loans bearing interest rates ranging from approximately 6.0% to 10.0% per annum. Construction loans. From time to time, we provide construction loans that become mortgage loans upon the completion of the construction of the subject facility.
The reimbursement rates are set forth under a prospective payment system (“PPS”), an acuity-based classification system that uses nursing and therapy indexes, adjusted by additional factors such as geographic differences in wage rates, to calculate per diem rates for each Medicare beneficiary.
Medicare Part A generally pays a per diem rate for each beneficiary. The reimbursement rates are set forth under a prospective payment system (“PPS”), an acuity-based classification system that uses nursing and therapy indexes, adjusted by additional factors such as geographic differences in wage rates, to calculate per diem rates for each Medicare beneficiary.
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.
We 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.
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.
These 6 Ta ble of Contents 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.
The toll free number is 877-880-2974 and the communications may be made anonymously, if desired. ▪ The NHI Restated Audit Committee Charter. ▪ The NHI Revised Compensation Committee Charter. ▪ The NHI Revised Nominating and Corporate Governance Committee Charter. ▪ The NHI Corporate Governance Guidelines.
The toll free number is 877-880-2974 and the communications may be made anonymously, if desired. ▪ The NHI Restated Audit Committee Charter. ▪ The NHI Revised Compensation Committee Charter. ▪ The NHI Revised Nominating and Corporate Governance Committee Charter. ▪ The NHI Corporate Governance Guidelines. ▪ The NHI Insider Trading Policy.
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”).
Nature of Investments 7 Ta ble 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 and Empowerment Act (“RIDEA”) of 2007.
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.
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.
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, 2024, our Real Estate Investments segment 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.
SLCs contain one or more buildings that include skilled nursing beds combined with an independent or assisted living facility that provides basic room and board functions for elderly residents. They may also provide assistance to residents with activities of daily living such as bathing, grooming and administering medication.
SLCs contain one or more buildings that typically include higher acuity level of care, for example, skilled nursing beds combined with an independent or assisted living facility that provides basic room and board functions for elderly residents. They may also provide assistance to residents with activities of daily living such as bathing, grooming and administering medication.
New or expanding privacy and security laws could require substantial further investment in resources to comply with regulatory changes as privacy and security laws impose additional obligations. In addition, healthcare providers and industry participants are subject to a growing number of requirements intended to promote the interoperability and exchange of patient information. Noncompliance may result in penalties or other disincentives.
New or expanding privacy and security laws could require substantial further investment in resources to comply with regulatory changes as privacy and security laws impose additional obligations. In addition, healthcare providers and industry participants are subject to a growing number of requirements intended to promote the interoperability and exchange of patient information.
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.
As of December 31, 2024, we had gross investments of approximately $358.4 million in 15 properties located in eight states with a combined 1,732 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.
We consider our employee relations to be good. Certain essential services such as internal audit, tax compliance, information technology and legal services are outsourced to third-party professional firms. Government Regulation Overview.
We consider our employee relations to be good. 12 Ta ble of Contents Certain essential services such as internal audit, tax compliance, information technology and legal services are outsourced to third-party professional firms. Government Regulation Overview.
We make reference to the parent companies whenever we describe our business with these tenants, their subsidiaries and/or affiliates regardless of the specific subsidiary entity indicated on the lease or loan documents. For the year ended December 31, 2023, our SHOP segment comprised approximately 3% of our NOI which is managed by two regional operators.
We make reference to the parent companies whenever we describe our business with our tenants, their subsidiaries and/or affiliates regardless of the specific subsidiary entity indicated on the lease or loan documents. For the year ended December 31, 2024, our SHOP segment comprised approximately 4% of our NOI and these properties are managed by two regional operators.
Any changes in government or private payor reimbursement policies that reduce payments to levels that are insufficient to cover the cost of providing patient care could adversely affect the operating revenues of managers, tenants and borrowers in our properties that rely on such payments, and thereby adversely affect their ability to make their lease or debt payments to us.
Any changes in government or private payor reimbursement policies that reduce payments to levels that are insufficient to cover the cost of providing patient care or significant decreases in enrollment or coverage under the Medicare and/or Medicaid programs could adversely affect the operating revenues of managers, tenants and borrowers in our properties that rely on such payments, and thereby adversely affect their ability to make their lease or debt payments to us.
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.
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, parental leave and tuition reimbursement. As of December 31, 2024, we had 30 full-time employees, an increase of four over the total at December 31, 2023.
We have provided two revolving lines of credit to borrowers involved in the senior housing industry who have provided either personal and business guarantees or other assets as security that bear interest at a fixed rate of 8.0% per annum and a variable rate of 8.9% as of December 31, 2023. RIDEA Transactions.
We have provided three revolving lines of credit to borrowers involved in the senior housing industry, who have provided either personal and business guarantees or other assets as security, which bear interest at a fixed rate of 8.0% to 8.50% per annum and a variable rate of 9.4% as of December 31, 2024. RIDEA transactions.
Bickford Construction Loans - As of December 31, 2023, we had one fully funded construction loan of $14.7 million to Bickford bearing interest at 9.0% per annum.
Bickford Construction and Mortgage Loans - As of December 31, 2024, we had one fully funded construction loan of $14.7 million outstanding to Bickford bearing interest at 9.0% per annum.
As of December 31, 2023, our SHOP segment consisted of 15 ILFs located in eight states with a combined 1,733 units.
As of December 31, 2024, our SHOP segment consisted of 15 ILFs located in eight states, with a combined 1,732 units.
Of those employees, 22 are located in the Murfreesboro, Tennessee office, with one employee in each of Colorado, Florida, Oregon and Texas.
Of those employees, 25 are located in the Murfreesboro, Tennessee office, with one employee in each of Colorado, Florida, Oregon, Texas and North Carolina.
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.
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. 18 Ta ble of Contents During 2024, we made commitments to fund new investments in real estate and loans totaling approximately $246.5 million.
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.
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.
Our investments in real estate and mortgage loans are secured by real estate located within the United States. Information about revenues from our tenants, resident fees, and borrowers, and our net income, cash flows and balance sheet can be found in “Item 8.
Our investments in real estate and mortgage loans are secured by real estate located within the United States. Information about revenues from our tenants, resident fees, and borrowers, and our net income, cash flows and balance sheet can be found in “Item 8. Financial Statements and Supplementary Data” of this Annual Report.
Several other states have enacted comprehensive consumer data privacy laws, providing residents of those states with additional or expanded rights with respect to their personal information such as a right to opt out of certain processing activities for sensitive data and a right to a portable copy of their personal information.
For example, several states have enacted comprehensive consumer data privacy laws, providing residents of those states with additional or expanded rights with respect to their personal information such as a right to know what personal information is collected and how it is used, a right to opt out of certain processing activities for sensitive data and a right to a portable copy of their personal information.
Operator Composition For the year ended December 31, 2023, approximately 24% of our Real Estate Investments and SHOP portfolio net operating income (“NOI”) was from publicly owned operators, 68% was from regional operators, 4% was from privately owned national chains and 1% was from smaller operators.
Operator Composition For the year ended December 31, 2024, approximately 25% of our Real Estate Investments and SHOP segments net operating income (“NOI”) was from publicly owned operators, 62% was from regional operators, 4% was from privately owned national chains and 1% was from smaller operators.
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.
Our portfolio of 16 mortgages along with other notes receivable totaled $289.2 million, excluding an allowance for expected credit losses of $20.2 million, as of December 31, 2024. Our SHOP segment is comprised of two ventures that own the operations of independent living facilities.
Federal and state legislative and regulatory bodies, including at the executive level, continue to signal increased scrutiny and potential rulemaking surrounding the creation, adoption, and leveraging of artificial intelligence and/or machine learning based or enhanced tools, systems, and functions.
Federal and state legislative and regulatory bodies, including at the executive level, continue to signal increased scrutiny and to propose or enact legislation and regulations addressing the creation, adoption, and leveraging of artificial intelligence and/or machine learning based or enhanced tools, systems, and functions.
In addition, under the SNF Quality Reporting Program, CMS requires SNFs to report certain quality data, and SNFs that fail to do so are subject to payment reductions. Under the SNF Value-Based Purchasing Program, CMS reduces SNF Medicare payments by 2 percentage points, and redistributes the majority of these funds as incentive payments based on SNF quality measure performance.
In addition, under the SNF Quality Reporting Program, CMS requires SNFs to report certain quality data, and SNFs that fail to do so are subject to payment reductions. Under the SNF Value-Based Purchasing Program, CMS withholds 2% of SNF PPS payments, and redistributes between 50% and 70% of these funds to SNFs as incentive payments based on quality measure performance.
There are several other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security of personal data that may not be preempted by HIPAA.
There are several other laws and legislative and regulatory initiatives and proposals at the federal and state levels addressing privacy and security of personal data that may not be preempted by HIPAA and that impact our business or the business of our managers, tenants and borrowers.
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.
For fiscal year 2025, which started October 1, 2024, CMS estimates that payments to SNFs under the SNF PPS will increase by approximately $1.4 billion, or 4.2%, compared to fiscal year 2024. CMS has implemented policies intended to shift Medicare towards value-based payment methodologies that link reimbursement to the quality of care provided rather than the quantity of services rendered.
Our Real Estate Investments segment consists of real estate investments and lease, mortgage and other notes receivables in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities and a hospital.
Our Real Estate Investments segment consists of real estate investments, leases, and mortgage and other notes receivable in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities and hospitals.
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.
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. Covered entities must report breaches involving unsecured protected health information to the affected individuals, the U.S.
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.
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.
During the second quarter of 2022, we converted Bickford to the cash basis of revenue recognition based upon information obtained from Bickford regarding 10 Table of Contents its financial condition that raised substantial doubt as to its ability to continue as a going concern.
Bickford has been on the cash basis of revenue recognition since the second quarter of 2022 based upon information obtained from Bickford regarding its financial condition that raised substantial doubt as to its ability to continue as a going concern.
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.
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 this Annual Report.
State privacy laws typically provide for civil penalties for violations, and some states provide a private right of action for data breaches, which may increase data breach litigation. Beyond providing residents with certain explicit rights, consumer data privacy laws call for affirmative data protection impact assessments to be conducted by subject businesses for certain personal information processing activities.
Consumer data privacy laws also require subject businesses to conduct affirmative data protection impact assessments for certain personal information processing activities. State privacy laws typically provide for civil penalties for violations, and some states provide a private right of action for data breaches, which may increase data breach litigation.
As of December 31, 2023, we had an aggregate of $11.6 million in remaining contingent lease inducement commitments in four lease agreements which are generally based on the performance of facility operations and may or may not be met by the tenant. At December 31, 2023, we had funded $2.7 million toward these commitments.
As of December 31, 2024, we had an aggregate of $16.9 million in remaining contingent lease inducement commitments in four lease agreements which are generally based on the performance of facility operations and may or may not be met by the tenant.
To increase transparency with regard to direct and indirect owning and managing entities, the rule establishes definitions of REIT and private equity company for purposes of Medicare enrollment and requires providers to disclose whether an owner or manager is a REIT or private equity company. In addition, CMS issued requirements for certain healthcare facilities in response to the COVID-19 pandemic.
To increase transparency with regard to direct and indirect owning and managing entities, the rule establishes definitions of REIT and private equity company for purposes of Medicare enrollment and requires providers to disclose whether an owner or manager is a REIT or private equity company.
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.
Medicare is a federal health insurance program for persons aged 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 13 Ta ble of Contents beneficiaries who require skilled nursing or therapy services after a qualifying hospital stay.
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.
Medical As of December 31, 2024, our Real Estate Investments segment included 66 medical facilities leased to operators and mortgage loans secured by six medical facilities. The medical facilities within our portfolio consist of SNFs and hospitals, which are more fully described below. Skilled Nursing Facilities.
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.
Noncompliance may result in penalties or other disincentives. 15 Ta ble of Contents 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.
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.
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.
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).
NHC - As of December 31, 2024, we leased three ILFs and 32 SNFs to NHC, a publicly held company, under a master lease (four of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC) that expires on December 31, 2026.
As of December 31, 2023, $11.7 million of the funding obligations are payable within 12 months with the remaining commitments due between three to five years.
As of December 31, 2024, $35.9 million of the funding obligations was payable within 12 months with the remaining commitments due between three to five years.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeDespite the security measures we have in place, and any additional measures we may implement in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to service interruptions, outages, cyber-attacks and security breaches and incidents, human error, earthquakes, hurricanes, floods, pandemics, fires, other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest, computer viruses, ransomware, and other malicious software, changes in social, political, or regulatory conditions or in laws and policies, or other changes or events.
Biggest changeDespite the security measures we have in place, and any additional measures we may implement in the future, our facilities and systems, and those of our third-party service providers and vendors, could be vulnerable to damage and service interruptions from a variety of sources including telecommunications or network failures, cyber-attacks and security breaches and incidents (including data theft, computer viruses, ransomware and other malicious software), human error, fires, natural disasters, power losses, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest.
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.
Risks Related to Our Managers, Tenants and Borrowers We depend on the operating success of our managers, tenants 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 managers, tenants and borrowers and their ability to perform their obligations to us.
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.
Any of our managers, tenants 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.
We are exposed to risks related to governmental regulations and payors, principally Medicare and Medicaid, and the effect of changes to laws, regulations and reimbursement rates on our tenants’ and borrowers’ business. Our tenants, managers and borrowers are subject to complex federal, state and local laws and regulations relating to governmental healthcare programs. See “Item 1.
We are exposed to risks related to governmental regulations and payors, principally Medicare and Medicaid, and the effect of changes to laws, regulations and reimbursement rates on our tenants’ and borrowers’ business. Our managers, tenants and borrowers are subject to complex federal, state and local laws and regulations relating to governmental healthcare programs. See “Item 1.
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.
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 services or 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.
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.
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 managers, tenants and borrowers to make changes to their facilities, equipment, personnel, services, and operating expenses.
There is uncertainty with regard to whether, when and what health reform initiatives will be adopted in the future and the impact of such reform efforts on providers and other healthcare industry participants, including our tenants, managers and borrowers.
There is uncertainty with regard to whether, when and what health reform initiatives will be adopted in the future and the impact of such reform efforts on providers and other healthcare industry participants, including our managers, tenants and borrowers.
We are exposed to the risk that the cash flows of our tenants, managers and borrowers may be adversely affected by increased liability claims and liability insurance costs. ALF and SNF operators have experienced substantial increases in both the number and size of patient care liability claims in recent years.
We are exposed to the risk that the cash flows of our managers, tenants and borrowers may be adversely affected by increased liability claims and liability insurance costs. ALF and SNF operators have experienced substantial increases in both the number and size of patient care liability claims in recent years.
Beginning in 2008, early residents of Timber Ridge executed loans to the then-owner/operators backed by liens and entered into a Deed of Trust and Indenture of Trust (the “Deed and Indenture”) for the benefit of the trustee on behalf of all residents who made mortgage loans to the owner/operator in accordance with a resident agreement.
Beginning in 2008, early residents of Timber Ridge executed mortgage loans to the then-owner/operators backed by liens and entered into a Deed of Trust and Indenture of Trust (the “Deed and Indenture”) for the benefit of the trustee on behalf of all residents who made mortgage loans to the owner/operator in accordance with a resident agreement.
Our business, like that of other REITs, involves the receipt, storage and transmission of information about our Company, our tenants, managers and borrowers, and our employees, some of which is entrusted to third-party service providers and vendors.
Our business, like that of other REITs, involves the receipt, storage and transmission of information about our Company, our managers, tenants and borrowers, and our employees, some of which is entrusted to third-party service providers and vendors.
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.
These risks include fluctuations in resident occupancy rates, 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.
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.
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 CCRC.
The sale of the property or the replacement of an operator that has defaulted on its lease or loan could also be delayed by the approval process of any federal, state or local agency necessary for the transfer of the property or the replacement of the operator with a new operator licensed to manage the facility.
The sale of the property or the replacement of an operator that has defaulted on its lease or mortgage loan could also be delayed by the approval process of any federal, state or local agency necessary for the transfer of the property or the replacement of the operator with a new operator licensed to manage the facility.
Revenues from government reimbursement have, and may continue to, come under pressure due to reimbursement cuts resulting from federal and state budget shortfalls and constraints, and both governmental and private payors are increasingly imposing more stringent cost control measures.
Revenues from government reimbursement have, and may continue to, come under pressure due to reimbursement cuts resulting from federal and state budget shortfalls and other constraints, and both governmental and private payors are increasingly imposing more stringent cost control measures.
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.
Facilities that participate in Medicare or Medicaid must meet extensive program requirements, including physical plant and operational requirements. Transfers of operations of these facilities are subject to regulatory approvals not required for transfers of other types of real estate.
A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.
A TRS may earn income that would not be qualifying income if earned directly by its parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS.
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.
If the financial condition of any of our other managers, tenants 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 rates and reimbursement by Medicare, Medicaid and private payors.
We depend on our ability to reinvest cash in real estate investments in a timely manner and on acceptable terms. From time to time, we will have cash available from principal payments on our notes receivable and the sale of properties, including tenant purchase option exercises, under the terms of master leases or similar financial support arrangements.
We depend on our ability to reinvest cash in real estate investments in a timely manner and on acceptable terms. From time to time, we will have cash available from principal payments on our mortgage and other notes receivable and the sale of properties, including tenant purchase option exercises, under the terms of master leases or similar financial support arrangements.
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.
We are exposed to the risk that we may not be fully indemnified by our managers, tenants and borrowers against future litigation. Our facility leases and loans require that the managers, tenants, borrowers name us as an additional insured party on their insurance policies covering professional liability or personal injury claims.
The ever-evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our respective systems and processes, and there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data.
The ever-evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our respective systems and processes, and there is no guarantee that these systems and processes will be adequate to safeguard against all data security breaches or misuses of data.
In addition, due to rising interest rates, we may experience restrictions in our liquidity based on certain financial covenant requirements, our inability to refinance maturing debt in part or in full as it comes due and higher debt service costs and reduced yields relative to cost of debt.
In addition, due to high interest rates, we may experience restrictions in our liquidity based on certain financial covenant requirements, our inability to refinance maturing debt in part or in full as it comes due and higher debt service costs and reduced yields relative to cost of debt.
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%).
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, 2024, approximately 40% of our total revenue was generated by three tenants, Senior Living (16%), NHC (12%) and Bickford (12%).
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.
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 public health conditions; (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.
Periods of weak economic growth in the U.S. which affect housing sales, investment returns and personal incomes may adversely affect senior housing occupancy rates. An oversupply of senior housing real estate may also apply downward pressure to the occupancy rates of our operators.
Periods of weak economic growth in the U.S. that affect housing sales, investment returns and personal incomes may adversely affect senior housing occupancy rates. An oversupply of senior housing real estate may also apply downward pressure to the occupancy rates of our operators.
Increased inflation and interest rates could have an adverse impact on our variable rate debt, our ability to borrow money, and general and administrative expenses, as these costs could increase at a rate higher than our rental and other revenue.
High inflation and interest rates could have an adverse impact on our variable rate debt, our ability to borrow money, and general and administrative expenses, as these costs could increase at a rate higher than our rental and other revenue.
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%.
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%.
By terms of the resident loan assumption agreement, during the term of the lease (seven years with two renewal options), Timber Ridge OpCo is to indemnify Timber Ridge PropCo for any repayment by Timber Ridge PropCo of these liabilities under the guarantee.
By terms of the resident loan assumption agreement, during the term of the lease (seven years with two five-year renewal options), Timber Ridge OpCo is to indemnify Timber Ridge PropCo for any repayment by Timber Ridge PropCo of these liabilities under the guarantee.
As a Type A entrance-fee community the entrance fee is divided into a refundable and non-refundable portion depending upon the resident’s chosen contract program. The refundable portion of the upfront entrance fee is recorded as a liability on the financial statements of Timber Ridge OpCo.
As a Type A CCRC, the entrance fee is divided into a refundable and non-refundable portion depending upon the resident’s chosen contract program. The refundable portion of the upfront entrance fee is recorded as a liability on the financial statements of Timber Ridge OpCo.
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.
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 managers, tenants 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.
We believe the structure of the joint venture does not require that Timber Ridge OpCo’s financial statements be consolidated into NHI, but if we are unable to properly maintain that structure or become required for any reason to consolidate Timber Ridge OpCo’s financial statements into ours, the results would have a material adverse impact on our financial results.
We believe the structure of our investment does not require that Timber Ridge OpCo’s financial statements be consolidated into NHI, but if we are unable to properly maintain that structure or become required for any reason to consolidate Timber Ridge OpCo’s financial statements into ours, the results would have a material adverse impact on our financial results.
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.
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 pay dividends in the future.
Certain tenants in our portfolio account for a significant percentage of the rent we expect to generate from our portfolio, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
A small number of tenants in our portfolio account for a significant percentage of the rent we expect to generate from our portfolio, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.
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.
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.
For example, the Budget Control Act of 2011 (“BCA”) requires automatic spending reductions to reduce the federal deficit, resulting in a uniform payment reduction across all Medicare programs of 2% per fiscal year that extends through the first seven months of 2032.
For example, the Budget Control Act of 2011 requires automatic spending reductions to reduce the federal deficit, resulting in a uniform payment reduction across all Medicare programs of 2% per fiscal year that extends through the first eight months of 2032.
To meet these tests, we may be required to forego investments or acquisitions we might otherwise make. Thus, compliance with the REIT requirements may materially hinder our performance.
To meet these tests, we may be required to forgo investments or acquisitions we might otherwise make. Thus, compliance with the REIT requirements may materially hinder our performance.
Our charter provides that any transfer that would cause NHI to be beneficially owned by fewer than 100 persons or would cause NHI to be “closely held” under the Internal Revenue Code would be void, which, subject to certain exceptions, results in no person or entity being allowed to own, actually or constructively, more than 9.9% of the outstanding shares of our stock.
Our charter provides that any transfer that would cause NHI to be beneficially owned by fewer than 100 persons or would cause NHI to be “closely held” under the Internal Revenue Code would be void, which, subject to certain exceptions, results in no person or entity being allowed to own, 34 Ta ble of Contents actually or constructively, more than 9.9% of the outstanding shares of our stock.
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.
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.
Delays in reinvesting our cash may negatively impact revenues and the amount of distributions to stockholders. Competition for acquisitions may result in increased prices for properties. We may face increased competition for acquisition opportunities from other well-capitalized investors, including publicly traded and privately held REITs, private real estate funds, partnerships and others.
Delays in reinvesting our cash may negatively impact revenues and the amount of distributions to stockholders. Competition for acquisitions may result in increased prices for properties. 28 Ta ble of Contents We may face increased competition for acquisition opportunities from other well-capitalized investors, including publicly traded and privately held REITs, private real estate funds, partnerships and others.
Although inflation has not materially impacted our operations in the recent past, inflation has recently been at a 40-year high and between March 2022 and July 2023, the Federal Reserve raised the federal funds rate in an effort to curb inflation.
Although inflation has not materially impacted our operations in the past, inflation was recently at a 40-year high and between March 2022 and July 2023, the Federal Reserve raised the federal funds rate in an effort to curb inflation.
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.
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.
Because of this distribution requirement, we may not be able to fund, from cash retained from operations, all future capital needs, including capital needed to make investments and to satisfy or refinance maturing commitments. As a result, we rely on external sources of capital, including debt and equity financing.
Because of this distribution requirement, we may not be able to fund, from cash retained from operations, all 32 Ta ble of Contents future capital needs, including capital needed to make investments and to satisfy or refinance maturing commitments. As a result, we rely on external sources of capital, including debt and equity financing.
If we are materially impacted by increasing inflation because, for example, inflationary increases in costs are not sufficiently offset by the contractual rent increases and operating expense reimbursement provisions or escalations in the leases with our tenants, our results of operations could be adversely affected.
If we are materially impacted by increasing inflation because, for example, inflationary increases in costs are not sufficiently offset by the contractual rent increases and operating expense reimbursement provisions or escalations in the leases with our tenants, our 25 Ta ble of Contents results of operations could be adversely affected.
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.
A decrease in occupancy rates 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.
Effective January 31, 2020, we entered into a joint venture with Life Care Services (“LCS”) which consists of two parts, NHI-LCS JV I, LLC (“Timber Ridge PropCo”), which owns the real estate and is owned 80% by NHI and 20% by LCS, and Timber Ridge OpCo, LLC (“Timber Ridge OpCo”) which operates the property and is owned 25% by NHI’s TRS and 75% by LCS.
Effective January 31, 2020, we entered into an investment with Life Care Services (“LCS”) which consists of two parts, NHI-LCS JV I, LLC (“Timber Ridge PropCo”), which owns the real estate and is owned 80% by NHI and 20% by LCS, and Timber Ridge OpCo, LLC (“Timber Ridge OpCo”), which operates the property and is owned 25% by NHI’s TRS and 75% by LCS.
As with other publicly traded companies, the availability of equity capital will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions and other factors, some of which we cannot control, that may change from time to time including: • the extent of investor interest; • the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • the financial performance of us and our tenants, managers and borrowers; • investment and tenant concentrations in our investment portfolio; • concerns about our operators’, tenants’ and borrowers’ financial condition due to uncertainty regarding reimbursement from governmental and other third-party payor programs; • our credit ratings and analyst reports on us and the REIT industry in general, including recommendations, and our ability to meet our guidance estimates or analysts’ estimates; • general economic, global and market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions; • our failure to maintain or increase our dividend, which is dependent, to a large part, on the increase in funds from operations, which in turn depends upon increased revenues from additional investments and rental increases; and • other factors such as governmental regulatory action and changes in REIT tax laws, as well as changes in litigation and regulatory proceedings.
As with other publicly traded companies, the availability of equity capital will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions and other factors, some of which we cannot control, that may change from time to time including: • the extent of investor interest; • the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies; • the financial performance of us and our managers, tenants and borrowers; • investment and tenant concentrations in our investment portfolio; • concerns about our operators’, tenants’ and borrowers’ financial condition due to uncertainty regarding reimbursement from governmental and other third-party payor programs; • our credit ratings and analyst reports on us and the REIT industry in general, including recommendations, and our ability to meet our guidance estimates or analysts’ estimates; • general economic, global and market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions; • our failure to maintain or increase our dividend, which is dependent, to a large part, on the increase in funds from operations, which in turn depends upon increased revenues from additional investments and rental increases; and • other factors such as governmental regulatory action and changes in REIT tax laws, as well as changes in litigation and regulatory proceedings. 29 Ta ble of Contents The market value of the equity securities of a REIT is generally based upon the market’s perception of the REIT’s growth potential and its current and potential future earnings and cash distributions.
Payments from government programs and private payors are subject to statutory and regulatory changes, retroactive rate adjustments, recovery of program overpayments or set-offs, administrative rulings, policy interpretations, payment or other delays by fiscal intermediaries, government funding restrictions (at a program level or with respect to specific facilities) and interruption or delays in payments due to any ongoing governmental investigations and audits at such facilities.
Payments from government programs and private payors are subject to statutory and regulatory changes, retroactive rate adjustments, recovery of program overpayments or set-offs, administrative rulings, policy interpretations, payment or other delays by fiscal intermediaries, government funding restrictions (at a program level or with respect to specific facilities) and interruption or delays in payments due to delays or issues implementing reimbursement-related rules and any ongoing governmental investigations and audits at specific facilities.
Business - Government Regulation.” Regulation of the healthcare industry generally has intensified over time both in the number and type of regulations and in the efforts to enforce those regulations.
Business - Government Regulation.” in this Annual Report. Regulation of the healthcare industry generally has intensified over time both in the number and type of regulations and in the efforts to enforce those regulations.
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.
Our payment of dividends is subject to compliance with restrictions contained in our credit agreements, notes and any preferred 33 Ta ble of Contents stock that our Board of Directors may from time to time designate and authorize for issuance.
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 and make loan payments owed to us.
In addition, CMS may implement or oversee changes affecting reimbursement through new or modified demonstration projects, including those authorized pursuant to Medicaid waivers. 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.
CMS may implement or oversee changes affecting reimbursement, including through new or modified demonstration projects, such as those authorized pursuant to Medicaid waivers. 22 Ta ble of Contents 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.
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 are subject to risks related to our investment with Life Care Services for Timber Ridge, an entrance fee CCRC, associated with Type A benefits offered to the residents of the CCRC and related accounting requirements.
Some of the following risk factors constitute forward-looking statements. Please refer to “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this Annual Report on Form 10-K.
Some of the following risk factors constitute forward-looking statements. Please refer to “Cautionary Statement Regarding Forward-Looking Statements” at the beginning of this Annual Report.
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.
Payment or other tenant defaults, the failure of tenants to meet their other obligations to us 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.
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.
As of December 31, 2024, we had the potential to access $480.0 million through the issuance of common stock under our at-the-market (“ATM”) equity program. In addition, we maintain an effective automatic shelf registration statement through which capital could be raised via the issuance of equity securities.
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.
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, 2024 was $10.3 million.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in significant additional costs. We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances.
In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous at the federal and state levels, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in significant additional costs. 27 Ta ble of Contents We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances.
Our investments in unconsolidated entities could be adversely affected by our lack of sole decision-making authority regarding major decisions, our reliance on the financial condition of other interests, any disputes that may arise between us and other partners, and our exposure to potential losses from the actions of partners.
Our investment in an unconsolidated entity, Timber Ridge OpCo, could be adversely affected by our lack of sole decision-making authority regarding major decisions, our reliance on the financial condition of other interests, any disputes that may arise between us and other partners, and our exposure to potential losses from the actions of partners.
We are exposed to interest rate risk in the potential for a further narrowing of our spread and profitability if interest rates continue to increase in the future. Certain of our debt obligations are floating rate obligations with interest rates that vary with the movement of the Secured Overnight Financing Rate (“SOFR”) or other indexes.
We are exposed to interest rate risk in the potential for a narrowing of our spread and profitability if interest rates increase in the future. Certain of our debt obligations are floating rate obligations with interest rates that vary with the movement of the SOFR or other indexes.
Recently developed properties may take longer than expected to achieve stabilized operating levels, if at all.
Recently developed properties may take longer than expected to achieve stabilized operating levels, if ever.
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.
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.
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.
In September 2024, we repaid $75.0 million of the private placement notes due September 2024 primarily with proceeds from the Credit Facility. We may incur additional debt by borrowing under our Credit Facility, mortgaging properties we own and/or issuing debt securities in a public offering or in a private transaction.
No assurances can be given that we will recognize full value for any property that we are required to sell for liquidity reasons. Should such events occur, our results of operations and cash flows could be adversely affected.
No assurances can be given that we will recognize full value for any property that we are required to sell for liquidity reasons. Should such events occur, our results of operations and cash flows could be adversely affected. Our investments are concentrated in healthcare properties . We acquire, develop, and make investments in healthcare real estate.
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.
W. Andrew Adams retired from our Board of Directors effective December 31, 2024. 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, 2024, NHC owned 1,630,642 shares of our common stock.
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.
Moody's Investors Services (“Moody's”) reaffirmed its Baa3 rating and “Stable” outlook on the Company on November 1, 2024; Fitch Ratings (“Fitch”) reaffirmed its BBB- and “Stable” outlook on the Company on April 5, 2024; and S&P Global Ratings (“S&P Global”) also reaffirmed its BBB- and “Stable” outlook on the Company on October 16, 2024.
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.
As a result, as of January 31, 2025 we had approximately $1.2 billion in outstanding indebtedness and approximately $327.3 million available to draw under the Credit Facility. Our ability to raise reasonably priced capital is not guaranteed.
The Deed and Indenture granted a security interest in the Timber Ridge property to secure the loans made by the early residents of the property. This practice was discontinued at Timber Ridge in 2008, prior to our investment. However, the remaining outstanding “old” loans made by the residents are still secured by a security interest in the Timber Ridge property.
The Deed and Indenture granted a security interest in the Timber Ridge property to secure the loans made 24 Ta ble of Contents by the early residents of the property. This practice was discontinued at Timber Ridge in 2008, prior to our investment.
Our cash held in non-interest bearing and interest-bearing accounts may periodically exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
The funds in our accounts are held in banks or other financial institutions. Our cash held in non-interest bearing and interest-bearing accounts may periodically exceed any applicable Federal Deposit Insurance Corporation (“FDIC”) insurance limits.
Although our lease agreements provide us the right to evict a tenant/operator and demand immediate payment of rent and exercise other remedies, and our mortgage loans provide us the right to terminate any funding obligations, demand immediate repayment of principal and unpaid interest, foreclose on the collateral and exercise other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization.
We are exposed to the risk that our managers, tenants and borrowers may become subject to bankruptcy or insolvency proceedings. 20 Ta ble of Contents Although our lease agreements provide us the right to evict a tenant/operator and demand immediate payment of rent and exercise other remedies, and our mortgage loans provide us the right to terminate any funding obligations, demand immediate repayment of principal and unpaid interest, foreclose on the collateral and exercise other remedies, in the event our counterparty has filed for bankruptcy or reorganization, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization.
In June 2023, we entered into a two-year $200.0 million term loan agreement (the “2025 Term Loan”) bearing interest at a variable rate which is SOFR-based with a margin determined according to our credit ratings plus a 0.10% credit spread adjustment. The Company incurred approximately $2.7 million of deferred financing costs associated with this loan.
In June 2023, we entered into a two -year term loan agreement providing for a $200.0 million term loan (the “2025 Term Loan”) bearing interest at a variable rate which is Secured Overnight Financing Rate (“SOFR”) based with a margin determined according to our credit ratings plus a 0.10% credit spread adjustment.
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.
If our projections prove to be inaccurate due to increased capital costs, lower occupancy 23 Ta ble of Contents rates or other factors, our investment in that property may not generate the cash flow we expected.
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.
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.
We are exposed to risks associated with our investments in unconsolidated entities, including our lack of sole decision-making authority and our reliance on the financial condition of other interests.
We are exposed to risks associated with our investment in Timber Ridge OpCo, including our lack of sole decision-making authority and our reliance on the financial condition of other interests and related healthcare operations of the entity.
The measures that federal, state and local governments, agencies and health authorities implement to address an epidemic, pandemic or other outbreaks of infectious diseases, may be insufficient to offset any downturn in business of our tenants and operators, may increase operating costs for our tenants, managers and borrowers or may otherwise disrupt or affect the operation of our properties.
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. 21 Ta ble of Contents The measures that federal, state and local governments, agencies and health authorities implement to address an epidemic, pandemic, outbreaks of infectious disease or other public health crisis may be insufficient to offset any downturn in business of our tenants and operators, may increase operating costs for our managers, tenants and borrowers or may otherwise disrupt or affect the operation of our properties.
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.
One of our board members is also a member of NHC’s board of directors. This director may have conflicting interests with holders of the Company’s common stock with respect to the NHC properties. During the year ended December 31, 2024, revenue from NHC represented 12% of our total revenue.
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.
Failure by our managers to adequately manage these risks could have a material adverse effect on our business, results of operations and financial condition. 26 Ta ble 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.
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.
In 2024, we recorded impairment charges totaling $0.7 million on one property. In 2023, we recorded impairment charges of $1.6 million on four properties.
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.
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 increased during 2022 and 2023 and, while they have decreased during 2024, they remain above levels prior to 2022.
Since REIT qualification requires us to meet a number of complex requirements, it is possible that we (or our Subsidiary REIT) may fail to fulfill them.
In addition, we currently hold an interest in a Subsidiary REIT (and may in the future own or acquire additional interests in Subsidiary REITs). Since REIT qualification requires us to meet a number of complex requirements, it is possible that we (or our Subsidiary REIT) may fail to fulfill them.
Actual or perceived risks associated with pandemics, 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.
Actual or perceived risks associated with pandemics, epidemics or outbreaks have had and may in the future have a material adverse effect on our operators’ business and results of operations. The business and results of operations of the operators of our properties and the Company are subject to health and economic effects of public health conditions.
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.
Consequently, we might be unable to maintain or increase our current dividends and the market price of our stock may decline.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeHowever, there can be no assurance that our cyber risk insurance coverage will be sufficient in the event of a cyber-attack. 35 Table of Contents
Biggest changeWe also maintain cyber liability insurance to help mitigate potential liabilities resulting from cyber issues. However, there can be no assurance that our cyber risk insurance coverage will be sufficient to cover incurred losses in the event of a cyber-attack. 36 Ta ble of Contents
We have systems in place to assess, identify and manage cybersecurity incidents and we invest in technology and third-party support to identify, mitigate, and quickly respond to cybersecurity incidents. We have maintained a strong focus in consistently reviewing our cybersecurity practices.
We have systems in place to assess, identify and manage cybersecurity incidents and we invest in technology and third-party support to identify, mitigate, and quickly respond to cybersecurity incidents. We have maintained a strong focus on consistently reviewing our cybersecurity practices.
In addition, we contracted with a third-party managed detection and response security company in the fourth quarter of 2023 to commence testing for cyber vulnerabilities on a continual basis.
In addition, we contracted with a third-party managed detection and response security company (“MDR”) in the fourth quarter of 2023 to commence testing for cyber vulnerabilities on a continual basis.
ITEM 1C. CYBERSECURITY Risk Management and Strategy The Board recognizes the importance of maintaining the trust and confidence of our tenants/borrowers/operators and employees to safeguard sensitive information and the integrity of our information systems.
ITEM 1C. CYBERSECURITY Risk Management and Strategy The Board of Directors recognizes the importance of maintaining the trust and confidence of our tenants/borrowers/operators and employees to safeguard sensitive information and the integrity of our information systems.
The ISO has served in various roles in corporate compliance for over 20 years and reports directly to the Company’s CEO. To enhance our cybersecurity capabilities, we actively collaborate with third-party vendors. Notably, we engage a Managed Service Provider (“MSP”) and another service provider who specializes in cybersecurity issues.
The ISO has served in various roles in corporate compliance for over 20 years and reports directly to the Company’s CEO. To enhance our cybersecurity capabilities, we actively collaborate with third-party vendors. Notably, we engage a Managed Service Provider (“MSP”) and an MDR provider who specializes in cybersecurity issues.
Board & Management Responsibilities We have formed an Information Technology Steering Committee comprised of employees from multiple departments within the Company including the Chief Executive Officer (“CEO”); the Chief Financial Officer; the Chief Accounting Officer; the Vice President, Controller; the Vice President, Investor Relations & Finance; and the Vice President of Human Resources and Compliance & Information Security Officer (“ISO”) to more effectively prevent, detect and respond to information security threats.
Board & Management Responsibilities We have formed an Information Technology Steering Committee comprised of employees from multiple departments within the Company including the Chief Executive Officer (“CEO”); the Chief Financial Officer; the Chief Accounting Officer; the Vice President, Controller; the Vice President, Investor Relations & Finance; and the Vice President of Human Resources and Compliance & Information Security Officer (“ISO”) to more effectively prevent, detect and respond to information security 35 Ta ble of Contents threats.
We have engaged the services of various third-party service providers to, among other things, review and evaluate our processes and procedures designed to control access to our information systems, perform penetration testing on our cybersecurity systems on a biannual basis, and provide regular information technology reviews based upon the NSIT Cybersecurity Framework.
We have engaged the services of various third-party service providers to, among other things, review and evaluate our processes and procedures designed to control access to our information systems, perform penetration testing on our cybersecurity systems on a biannual basis, and provide regular information technology reviews based upon the National Institute of Standards and Technology (“NIST”) Cybersecurity Framework.
Our MSP plays a critical role in supporting our IT infrastructure, offering expertise and resources that complement our in-house capabilities. The 34 Table of Contents third party cybersecurity specialist provides advanced cybersecurity solutions, including continuous monitoring and threat detection services, which are integral to our cybersecurity program.
Our MSP plays a critical role in supporting our IT infrastructure, offering expertise and resources that complement our in-house capabilities. The MDR provides advanced cybersecurity solutions, including continuous monitoring and threat detection services, which are integral to our cybersecurity program.
Removed
The Company periodically conducts cybersecurity “tabletop” exercises administered by an independent third party with respect to breach and other problematic information security scenarios. The administrator poses questions to participants and advises on typical responses to similar situations.
Added
In the event of an incident that jeopardizes the confidentiality, integrity, or availability of the information technology systems we use, we utilize a regularly updated information security incident response plan (“IRP”).
Removed
Participants include various executives and other officers of the Company as well as the ISO, other information systems and security personnel, and relevant third-party vendors. To date, no attempted cyber-attack or other attempted intrusion on our information technology networks has resulted in a material adverse impact on our consolidated operations or financial results, or in any penalties or settlements.
Added
The IRP is overseen by the Information Technology Steering Committee and sets forth the processes for containment, review, escalation, recovery from and remediation of any cybersecurity incidents identified by the Company.
Removed
In the event an attack or other intrusion were to be successful, we have a response team of internal and external resources engaged and prepared to respond. We also maintain cyber liability insurance to help mitigate potential liabilities resulting from cyber issues.
Added
Pursuant to our IRP and its escalation protocols, designated personnel are responsible for assessing the severity of the incident and associated threat, containing the threat, remediating the threat, including recovery of data and access to systems, analyzing the reporting obligations associated with the incident, and performing post-incident analysis and program improvements.
Added
The IRP also specifies the approach to reporting findings and keeping senior management and other key stakeholders (including the Audit Committee and the Board of Directors for certain incidents) informed and involved as appropriate and specifies the use of third-party experts for legal advice, consulting and cyber incident response.
Added
The Company periodically conducts cybersecurity “tabletop” exercises administered by an independent third-party in which members of a cross-functional team and relevant third-party vendors engage in simulated cybersecurity incident scenarios. These exercises are intended to provide hand-on training for the participants and assists the Company with assessing its processes and capabilities in addressing cybersecurity threats.
Added
As of December 31, 2024, we have not experienced any material risks from cybersecurity threats, including as a result of any previous cybersecurity incidents or threats, that have materially affected the business strategy, results of operations or financial condition of the Company or are reasonably likely to have such a material effect.

Item 2. Properties

Properties — owned and leased real estate

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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.
Biggest changePROPERTIES OWNED AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2024 ( $ in thousands ) Real Estate Investments SHOP Gross Net Operating Location SHO SNF HOSP ILF Investment Income Alabama 1 2 — — $ 17,260 $ 2,751 Arizona — 1 — — 7,131 908 Arkansas — — — 2 52,823 1,752 California 1 — — 5 127,465 5,019 Colorado 1 — — — 7,600 650 Connecticut 3 — — — 139,451 13,453 Florida 2 10 — — 214,180 24,450 Georgia 3 — — 2 107,032 5,997 Idaho 1 — — — 9,673 355 Illinois 13 — — — 197,251 14,863 Indiana 8 — — — 90,803 5,824 Iowa 7 — — — 40,269 5,287 Kentucky — 1 — — 2,143 1,449 Louisiana 2 — — — 10,241 1,164 Maryland 2 — — — 65,788 3,763 Massachusetts 1 — — — 52,108 3,536 Michigan 5 — — — 44,138 3,678 Minnesota 5 — — — 31,144 2,417 Missouri 1 5 — — 27,695 3,360 Nebraska 3 — — — 28,682 3,248 Nevada 1 — — — 18,136 1,640 New Jersey — — — 1 26,227 824 North Carolina 16 — — — 261,685 14,333 Ohio 6 — — 1 103,912 5,450 Oklahoma 1 — 1 1 99,388 8,435 Oregon 3 3 — — 95,259 6,564 Pennsylvania 2 — — — 29,418 1,206 South Carolina 4 4 — 2 340,841 32,961 Tennessee 3 16 — — 50,984 19,073 Texas — 21 — — 298,599 28,500 Virginia 5 1 — — 68,685 7,124 Washington 3 — — 1 202,999 13,675 Wisconsin 3 1 — — 81,955 5,507 106 65 1 15 2,950,965 249,216 Corporate office 2,583 Non-geographic — 50 Net operating income from properties sold — 8,788 $ 2,953,548 $ 258,054 37 Ta ble of Contents PROPERTIES ASSOCIATED WITH MORTGAGE LOAN INVESTMENTS AS OF AND FOR THE YEAR ENDED DECEMBER 31, 2024 ($ in thousands) Net Interest Location SHO SNF HOSP Investment Income Florida 3 — 1 $ 26,898 $ 729 Illinois 1 — — 14,877 1,168 Indiana 1 — — 6,423 546 Michigan 1 — — 14,700 1,345 Oklahoma 2 — — 9,416 437 South Carolina 1 — — 32,666 2,418 Texas — 5 — 42,465 3,218 Wisconsin 1 — — 28,386 2,327 10 5 1 175,831 12,188 Current year note payoffs — 1,242 Other non-mortgage 93,095 10,281 $ 268,926 $ 23,711 10-YEAR LEASE EXPIRATIONS The following table provides additional information on our leases that 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 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.
Annualized Percentage of Number Number Gross Rent** Annualized Year of Properties of Units/Beds ( $ in thousands ) Gross Rent 2025 3 296 $ 2,432 1.0 % 2026 35 4,807 38,143 15.6 % 2027 2 549 13,736 5.6 % 2028 12 591 11,468 4.7 % 2029 13 1,579 18,136 7.4 % 2030 2 119 520 0.2 % 2031 13 2,506 55,743 22.8 % 2032 2 213 3,357 1.4 % 2033 29 2,007 29,972 12.3 % 2034 14 855 11,003 4.5 % Thereafter 47 4,374 59,548 24.5 % 100.0 % **Annualized Gross Rent refers to the amount of lease revenue that our portfolio would have generated in 2024 if all leases were in effect for the twelve-month calendar year, regardless of the commencement date, maturity date, or renewals.
The above table does not reflect purchase options. See Note 3 to the consolidated financial statements for discussion of purchase options.
The above table does not reflect purchase options. See Note 3 to the consolidated financial statements for discussion of purchase options. The lease that expires in 2026 is the NHC lease, which covers three ILFs and 32 SNFs under a master lease.
Added
These facilities are leased to NHC under the terms of an amended master lease agreement that expires on December 31, 2026. There are two additional five-year renewal options at a fair rental value as negotiated between the parties.
Added
We have engaged Blueprint Healthcare Real Estate Advisors, a national advisory firm focused on skilled nursing and senior housing, to assist with underwriting, diligence, and market analysis with respect to the master lease renewal.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

2 edited+0 added−0 removed3 unchanged
Biggest changeWhile 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.
Biggest changeWhile there may be lawsuits pending against us and certain of the 38 Ta ble of Contents 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.
See Note 9 to the consolidated financial statements for further discussion of the Company’s legal proceedings.
See Note 9 to the consolidated financial statements in this Annual Report for further discussion of the Company’s legal proceedings.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

7 edited+0 added−0 removed6 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 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.
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). 40 Ta ble of Contents 2019 2020 2021 2022 2023 2024 NHI $100.00 $90.97 $80.40 $77.75 $88.93 $116.46 MSCI $100.00 $92.43 $132.23 $99.82 $105.27 $105.27 S&P 500 $100.00 $118.40 $152.39 $124.79 $145.87 $145.87 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.
In order to qualify for the beneficial tax treatment accorded to a REIT, we must make distributions to holders of our common stock equal on an annual basis to at least 90% of our REIT taxable income (excluding net capital gains), as defined in the Internal Revenue Code.
In order to qualify for the beneficial tax treatment accorded to a REIT, we must make distributions to holders of our common stock on an annual basis equal to at least 90% of our REIT taxable income (excluding net capital gains), as defined in the Internal Revenue Code.
One of the provisions ensures that any transfer of shares which would cause NHI to be beneficially owned by fewer than 100 persons or would cause NHI to be “closely-held” under the Internal Revenue Code would be void which, subject to certain exceptions, result in no stockholder being allowed to own, either directly or indirectly pursuant to certain tax attribution rules, more than 9.9% of the Company’s common stock with the exception of prior agreements in 1991 which were confirmed in writing in 2008 with the Company’s founders Dr.
One of the provisions ensures that any transfer of shares which would cause NHI to be beneficially owned by fewer than 100 persons or would cause NHI to be “closely-held” under the Internal Revenue Code would be void which, subject to certain exceptions, result in no stockholder being allowed to own, either directly or indirectly pursuant to certain tax attribution rules, more than 9.9% of the Company’s common stock with the exception of prior agreements entered into in 1991 which were confirmed in writing in 2008 with the Company’s founders Dr.
The following graph demonstrates the performance of the cumulative total return to the stockholders of our common stock during the previous five years in comparison to the cumulative total return on the MSCI US REIT Index and the Standard & Poor’s 500 Stock Index.
The following graph demonstrates the performance of the cumulative total return to the holders of our common stock during the previous five years in comparison to the cumulative total return on the MSCI US REIT Index and the Standard & Poor’s 500 Stock Index.
Cash available for distribution to our stockholders is primarily derived from rental payments received under our leases and from interest payments received on our notes.
Cash available for distribution to our stockholders is primarily derived from rental payments received under our leases and from interest payments received on our mortgage and other notes receivable.
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.
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 19, 2025, there were approximately 618 holders of record of shares and 59,262 beneficial owners of shares.
Issuer Purchases of Equity Securities None. 39 Table of Contents
Issuer Purchases of Equity Securities None. 41 Ta ble of Contents

Item 7. Management's Discussion & Analysis

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

120 edited+50 added−37 removed57 unchanged
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.
Biggest changeRefer to Notes 3 and 4 to the consolidated financial statements included in this Annual Report for more information. 54 Ta ble of Contents Results of Operations The significant items affecting revenues and expenses are described below ( $ in thousands ): Years Ended December 31, Period Change 2024 2023 $ % Revenues: Rental income ALFs leased to Bickford $ 38,779 $ 34,821 $ 3,958 11.4 % ALFs leased to Encore Senior Living 7,133 3,670 3,463 94.4 % ALFs leased to Spring Arbor 2,302 — 2,302 NM Other new and existing leases 187,079 188,859 (1,780) (0.9) % Disposals 10,453 5,924 4,529 76.5 % 245,746 233,274 12,472 5.3 % Straight-line rent adjustments, new and existing leases 3,031 6,961 (3,930) (56.5) % Amortization of lease incentives (2,893) (2,521) (372) 14.8 % Escrow funds received from tenants for property operating expenses 11,165 11,513 (348) (3.0) % Total Rental Income 257,049 249,227 7,822 3.1 % Resident fees and services 54,421 48,809 5,612 11.5 % Interest income from mortgage and other notes receivable Capital Funding Group 6,068 4,459 1,609 36.1 % Carriage Crossing 1,168 — 1,168 NM Encore Senior Living 2,327 4,016 (1,689) (42.1) % Mortgage loan payoffs 1,242 225 1,017 NM Other existing mortgages and notes 12,438 12,748 (310) (2.4) % Total Interest Income from Mortgage and Other Notes Receivable 23,243 21,448 1,795 8.4 % Other income 468 351 117 33.3 % Total Revenue 335,181 319,835 15,346 4.8 % Expenses: Depreciation ALFs leased to Bickford Senior Living 10,959 11,179 (220) (2.0) % ALFs leased to Discovery Senior Living 4,947 5,234 (287) (5.5) % SHOP depreciation 10,157 9,158 999 10.9 % Disposals 1,876 268 1,608 NM Other new and existing assets 43,504 44,134 (630) (1.4) % Total Depreciation 71,443 69,973 1,470 2.1 % Interest 59,903 58,160 1,743 3.0 % Senior housing operating expenses 42,251 39,587 2,664 6.7 % Legal 1,052 507 545 NM Franchise, excise and other taxes 38 449 (411) (91.5) % Taxes and insurance on leased properties 11,165 11,513 (348) (3.0) % Loan and realty losses, net 5,295 1,376 3,919 NM General and administrative 20,736 19,314 1,422 7.4 % 211,883 200,879 11,004 5.5 % Gain on operations transfer, net — 20 (20) (100.0) % Loss on early retirement of debt — (73) 73 (100.0) % Gains from equity method investment 402 555 (153) (27.6) % Gains on sales of real estate 6,678 14,721 (8,043) (54.6) % Gain on forward equity sale agreement, net 6,261 — 6,261 NM Other income — 202 (202) (100.0) % 55 Ta ble of Contents Net income 136,639 134,381 2,258 1.7 % Add: net loss attributable to noncontrolling interests 1,346 1,273 73 5.7 % Net income attributable to stockholders 137,985 135,654 2,331 1.7 % Less: net income attributable to unvested restricted stock awards (118) (57) (61) NM Net income attributable to common stockholders $ 137,867 $ 135,597 $ 2,270 1.7 % NM - not meaningful Financial highlights for the year ended December 31, 2024, compared to 2023, were as follows: • Rental income recognized from our tenants increased $7.8 million, or 3.1%, primarily as a result of an increase in rent received from cash basis tenants of approximately $4.2 million, an increase in NHC’s percentage rent and new investments funded since December 2023, partially offset by properties disposed of since December 2023.
The Guarantors are either owned by, controlled by or are affiliates of the Company.
The Guarantors are either owned, or controlled by, or are affiliates of the Company.
Net Operating Income NOI is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate. We define NOI as total revenues, less tenant reimbursements and property operating expenses. We believe NOI provides investors relevant and useful information as it measures the operating performance of our properties at the property level on an unleveraged basis.
Net Operating Income NOI is a non-GAAP financial measure used to evaluate the operating performance of real estate. We define NOI as total revenues, less tenant reimbursements and property operating expenses. We believe NOI provides investors relevant and useful information as it measures the operating performance of our properties at the property level on an unleveraged basis.
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.
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 consolidated balance sheet.
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.
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 stock.
The calculation of FFO begins with net income attributable to common stockholders (computed in accordance with GAAP), and excludes gains (or losses) from sales of real estate property, impairments of real estate, and real estate depreciation and amortization after adjusting for unconsolidated partnerships and joint ventures, if any.
The calculation of FFO begins with net income attributable to common stockholders (computed in accordance with GAAP) and excludes gains (or losses) from sales of real estate, impairments of real estate, and real estate depreciation and amortization after adjusting for unconsolidated partnerships and joint ventures, if any.
We believe EBITDARM is useful in our most fundamental analyses, as it is a property-level measure of our operators’ success, by eliminating the effects of the operator’s method of acquiring the use of its assets (interest and rent), its non-cash expenses (depreciation and amortization), expenses that are dependent on its level of success (income taxes), and also excluding the effect of the operator’s payment of its management fees, as typically those fees are contractually subordinate to our lease payment.
We believe EBITDARM is useful in our most fundamental analyses, as it is a property-level measure of an operator’s success, by eliminating the effects of the operator’s method of acquiring the use of its assets (interest and rent), its non-cash expenses (depreciation and amortization), and expenses that are dependent on its level of success (income taxes), and also excluding the effect of the operator’s payment of its management fees, as typically those fees are contractually subordinate to our lease payment.
These new ventures, consolidated by the Company, are structured to comply with REIT requirements and utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes.
These ventures, consolidated by the Company, are structured to comply with REIT requirements and utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes.
However, we rely on the managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our communities efficiently and effectively.
However, we rely on the property managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our communities efficiently and effectively.
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.
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, 2024 and thereafter.
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.
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, 2024, that would require assessment for impairment.
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.
During the year ended December 31, 2024, 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.
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.
Discussions of 2022 items and year-to-year comparisons between 2023 and 2022 that are not included in this Annual Report 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, 2023.
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.
We believe that the carrying amounts of our real estate properties are recoverable and that mortgage and other notes receivables, 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.
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).
We classify all of the properties in our Real Estate Investments segment 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).
For operators of our entrance-fee communities, our calculation of EBITDARM includes other cash flow adjustments typical of the industry which may include, but are not limited to, net cash flows from entrance fees; amortization of deferred entrance fees; adjustments for tenant rent obligations, and management fee true-ups.
For operators of our EFCs, our calculation of EBITDARM includes other cash flow adjustments typical of the industry which may include, but are not limited to, net cash flows from entrance fees; amortization of deferred entrance fees; adjustments for tenant rent obligations; and management fee true-ups.
For computational purposes, we exclude mortgages and other notes receivable, development and lease-up properties that have been in operation less than 24 months. For stabilized acquisitions in the portfolio less than 24 months and renewing leases with changes in scheduled rent, we include pro forma cash rent.
For computational purposes, we exclude mortgage and other notes receivable, and development and lease-up properties that have been in operation less than 24 months. For stabilized acquisitions in the portfolio less than 24 months and renewing leases with changes in scheduled rent, we include pro forma cash rent.
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.
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 Credit Facility.
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.
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.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis is based primarily on the consolidated financial statements of National Health Investors, Inc. for the periods presented and should be read together with the notes thereto contained in this Annual Report on Form 10-K. Other important factors are identified in “Item 1.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The following discussion and analysis is based primarily on the consolidated financial statements of National Health Investors, Inc. for the periods presented and should be read together with the notes thereto contained in this Annual Report. Other important factors are identified in “Item 1.
If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Our significant accounting policies are discussed in Note 2 to our consolidated financial statements in this Annual Report on Form 10-K.
If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition. Our significant accounting policies are discussed in Note 2 to our consolidated financial statements in this Annual Report.
The occupancies are for the SNF portfolio only as can be seen in NHC’s public filings. 3 There are no longer any significant paycheck protection program funds included in the coverages above. SLC operates nine discretionary CCRC properties and one need driven assisted living community.
The occupancies are for the SNF portfolio only as can be seen in NHC’s public filings. 3 There are no longer any significant paycheck protection program funds included in any of the coverages above. Senior Living operates nine discretionary CCRC properties and one need-driven assisted living community.
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.
Tenant Concentration As discussed in Note 3 to the consolidated financial statements included in this Annual Report, 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.
These measures do not represent cash generated from operating activities in accordance with GAAP (these measures do not include changes in operating assets and liabilities) and therefore, should not be considered an alternative to net earnings as an indication of performance, or to net cash flow from operating activities as determined by GAAP as a measure of liquidity, and are not necessarily indicative of cash available to fund cash needs.
These measures do not represent cash generated from operating activities in 64 Ta ble of Contents accordance with GAAP (these measures do not include changes in operating assets and liabilities) and therefore, should not be considered an alternative to net earnings as an indication of performance, or to net cash flow from operating activities as determined by GAAP as a measure of liquidity, and are not necessarily indicative of cash available to fund cash needs.
We believe the accounting estimates listed below are the most critical to fully understanding and evaluating our financial results, and require our most difficult, subjective or complex judgments. Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and subsidiaries in which we have a controlling interest.
We believe the accounting estimates listed below are the most critical to fully understanding and evaluating our financial results, and require our most difficult, subjective or complex judgments. 46 Ta ble of Contents Principles of Consolidation The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and subsidiaries in which we have a controlling interest.
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.
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 for more details.
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.
The credit loss liability for unfunded loan commitments was $0.1 million as of December 31, 2024 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.
Typical among our operators is a varying lag in reporting to us the results of their operations. Across our portfolio, however, our operators report their results, typically within either 30 or 45 days and at the latest, within 90 days of month’s end.
Typical among our operators is a varying lag in reporting to us the results of their operations. Across our portfolio, however, our operators report their results, typically within 52 Ta ble of Contents either 30 or 45 days and at the latest, within 90 days of month’s end.
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 be derived, subsequent to the lease, from the ultimate disposition or re-deployment of the asset.
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.
The third-party managers, or related parties of the managers, own equity interests in the respective ventures. Real Estate Investments As of December 31, 2024, we had investments in real estate and mortgage and other notes receivable involving 188 facilities located in 31 states.
The provision for expected credit losses, reflected in “ Loan and realty losses, net” on the Consolidated Statements of Income, totaled $(0.3) million, $10.4 million and $0.9 million for the years ended December 31, 2023, 2022 and 2021, respectively.
The provision for expected credit losses, reflected in “ Loan and realty losses, net” on the Consolidated Statements of Income, totaled $4.64 million, $(0.3) million and $10.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.
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.
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 2022 as discussed in more detail in Note 3 to the consolidated financial statements included in this Annual Report.
In certain instances, our operators may increase their security deposits with us in an amount equal to the coverage shortfall, and, upon subsequent compliance with the required lease coverage ratio, the operator would then be entitled to a full refund.
In certain instances, our operators may increase their security deposits with us in an amount equal to the coverage shortfall, and, upon subsequent compliance with the required lease 53 Ta ble of Contents coverage ratio, the operator would then be entitled to a full refund.
No shares were issued under the ATM equity program during the years ended December 31, 2023 and 2022. Our use of ATM proceeds is to allow us to rebalance our leverage in response to our acquisitions and keeps our options flexible for further expansion.
No shares were sold under the ATM equity program during the year ended December 31, 2023. Our use of ATM proceeds is to allow us to rebalance our leverage in response to our acquisitions and keeps our options flexible for further expansion.
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.
There is a correlation between demand for this type of community and the strength of the housing market. Medical Facilities within our Real Estate Investments segment receive payment primarily from Medicare, Medicaid and health insurance. These properties include SNFs and HOSPs that attract patients who have a need for acute or complex medical attention, preventative medicine, or rehabilitation services.
We evaluate the reserves for estimated credit losses on a quarterly basis and make adjustments based on current circumstances as considered necessary. Our consolidated financial statements for the year ended December 31, 2023 reflect impairment charges of our long-lived assets of approximately $1.6 million.
We evaluate the reserves for estimated credit losses on a quarterly basis and make adjustments based on current circumstances as considered necessary. Our consolidated financial statements for the year ended December 31, 2024 reflect impairment charges of our long-lived assets of approximately $0.7 million.
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.
Our Real Estate Investments segment consists of real estate investments, leases, and mortgage and other notes receivable in ILFs, ALFs, EFCs, SLCs, SNFs and HOSPs. 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.
Total rental income related to the disposed properties was $3.3 million, $0.7 million and $6.1 million for years ended December 31, 2023, 2022 and 2021, respectively.
Total rental income related to the disposed properties was $1.3 million , $2.6 million and $1.0 million for years ended December 31, 2024, 2023 and 2022, respectively.
See Note 4 to our consolidated financial statements for details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees.
See Note 4 to our consolidated financial statements included in this Annual Report for details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees.
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.
The properties are operated by two third-party property managers in exchange for a management fee, and as such, we are not directly exposed to the credit risk of the property managers in the same manner or to the same extent as we are to our triple-net tenants.
We also rely on the managers to set appropriate 41 Table of Contents resident fees and otherwise operate our communities in compliance with the terms of our management agreements and all applicable laws and regulations.
We also rely on the property managers to set appropriate resident fees and otherwise operate our communities in compliance with the terms of our management agreements and all applicable laws 43 Ta ble of Contents and regulations.
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.
When an economic downturn whose duration is expected to span a year or more is encountered, we consider projections about an expected economic recovery before we conclude that evidence of impairment exists.
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.
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, 2024 increased $0.11, or 2.5% over the same period in 2023.
For the year ended December 31, 2023, we recorded $14.7 million in gains primarily from dispositions of real estate assets as described under “ Asset Dispositions ” in Note 3 to the consolidated financial statements included in this Annual Report on Form 10-K.
For the year ended December 31, 2024, we recorded $6.7 million in gains primarily from dispositions of real estate assets as described under “ Asset Dispositions ” in Note 3 to the consolidated financial statements included in this Annual Report.
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.
As of December 31, 2024, the 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 5.75% and 5.95%, respectively. The facility fee for the Credit Facility was 25 bps per annum.
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.
Material Cash Requirements We had approximately $10.8 million in cash and cash equivalents on hand and $327.3 million in availability under the Credit Facility as of January 31, 2025. Our expected material cash requirements for the twelve months ended December 31, 2025 and thereafter consist of long-term debt maturities; interest on long-term debt; and contractually obligated expenditures.
The calculation of our leverage ratio involves intermediate determinations of our “Consolidated Total Indebtedness” and of our “Total Asset Value,” as defined in the 2022 Credit Agreement.
The calculation of our leverage ratio involves intermediate determinations of our “total indebtedness” and of our “total asset value,” as defined in the Credit Facility.
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 Credit Facility 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, 2024, we were within required limits.
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.
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.
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.
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, 2024 SHO 2 May 2035 2027 i $ 6,274 SNF 1 September 2028 2028 ii $ 522 SNF 1 April 2032 2031 iii $ 2,607 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; (ii) a fixed base price; or (iii) a fixed minimum internal rate of return on our investment.
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.
Business” and “Item 1A. Risk Factors” above. This section of this Annual Report generally discusses 2024 and 2023 items and year-to-year comparisons between 2024 and 2023.
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.
Interest Rate Schedule The current SOFR spreads and facility fee for our 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: SOFR Spread Debt Ratings Credit Facility 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% 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. 2031 Senior Notes - 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 (the “2031 Senior Notes”).
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%.
The base rate means, for any day, a fluctuating rate per annum equal to the highest of (x) the agent’s prime rate, (y) the federal funds rate on such day plus 0.50% or (z) the adjusted Term SOFR for 57 Ta ble of Contents a one-month tenor in effect on such day plus 1.0%.
Asset Class Total Funded Remaining Contingencies (Lease Inducements): IntegraCare SHO $ 750 — $ 750 Navion Senior Solutions SHO 4,850 (2,700) 2,150 Discovery SHO 4,000 — 4,000 Ignite Medical Resorts SNF 2,000 — 2,000 $ 11,600 $ (2,700) $ 8,900 We adjust rental income for the amortization of lease inducements paid to our tenants.
Asset Class Total Funded Remaining Contingencies (Lease Inducements): IntegraCare SHO $ 750 $ — $ 750 Navion Senior Solutions SHO 4,850 (2,700) 2,150 Discovery SHO 4,000 — 4,000 Spring Arbor SHO 10,000 — 10,000 $ 19,600 $ (2,700) $ 16,900 We adjust rental income for the amortization of lease inducements paid to our tenants.
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.
Investing Activities – Net cash used in investing activities for the year ended December 31, 2024 was comprised primarily of $218.3 million of investments in mortgage and other notes receivable and renovations and acquisitions of real estate and equipment, offset by the collection of principal on mortgage and other notes receivable of $19.4 million and proceeds from the sales of real estate of approximately $6.2 million.
For each new lease, we discount our estimate of unguaranteed residual value and include this amount along with the stream of lease payments (also discounted) called for in the lease.
Additionally, we consider historical, demographic and market trends in developing our estimates. For each new lease, we discount our estimate of unguaranteed residual value and include this amount along with the stream of lease payments (also discounted) called for in the lease.
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.
We expect to meet our short-term liquidity needs largely through cash generated from operations and borrowings under the Credit Facility (refer to the “ Credit Facility” discussion above) drawdowns on forward sale agreements of our common stock, and sales from real estate investments, although we may choose to seek alternative sources of liquidity.
Amortization of lease inducement payments against revenues was $2.5 million for the year ended December 31, 2023.
Amortization of lease inducement payments against revenues was $2.9 million and $2.5 million for the years ended December 31, 2024 and 2023, respectively.
NHC Properties 75 37 14 5 69 34 3Q22 1.06x 1.03x 1.36x 1.69x 2.42x 2.03x 3Q22 Occupancy 85.4% 86.2% 83.5% 85.6% 77.1% 69.6% 3Q23 1.31x 1.13x 1.41x 1.38x 2.74x 2.11x 3Q23 Occupancy 85.0% 86.8% 83.3% 84.1% 80.6% 72.9% Major Tenants NHC 2 SLC 3 Bickford 3 Properties 35 10 38 3Q22 2.98x 1.22x 1.10x 3Q22 Occupancy 83.2% 82.2% 84.2% 3Q23 3.54x 1.39x 1.52x 3Q23 Occupancy 87.1% 82.1% 82.6% 1 All tables based on trailing 12 months; excludes transitioned properties under cash-flow based leases, loans, mortgages; excludes development and lease up properties in operation less than 24 months; includes proforma cash rent for stabilized acquisitions in the portfolio less than 24 months . 2 NHC Fixed Charge Coverage Ratio and displayed occupancies are on corporate-level.
NHC Properties 87 49 14 5 69 34 3Q23 Coverage 1.26x 1.07x 1.41x 1.38x 2.74x 2.11x 3Q23 Occupancy 84.3% 85.1% 83.3% 84.1% 80.0% 72.9% 3Q24 Coverage 1.41x 1.22x 1.70x 2.01x 3.05x 2.19x 3Q24 Occupancy 85.9% 86.1% 85.1% 87.6% 82.8% 75.9% Customers NHC 2 Senior Living 3 Bickford 3 Properties 35 10 38 3Q23 Coverage 3.54x 1.39x 1.56x 3Q23 Occupancy 86.0% 82.1% 83.0% 3Q24 Coverage 4.13x 1.56x 1.70x 3Q24 Occupancy 88.5% 82.8% 85.6% 1 All tables based on trailing 12 months; excludes transitioned properties under cash-flow based leases, loans, and mortgages; excludes development and lease up properties in operation less than 24 months; and includes proforma cash rent for stabilized acquisitions in the portfolio less than 24 months . 2 NHC Fixed Charge Coverage Ratio and displayed occupancies are on corporate-level.
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.
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.
There were no material changes in the accounting methodology we use to assess impairment charges during the year ended December 31, 2023. During the year ended December 31, 2023, we recorded impairment charges of approximately $1.6 million related to four properties all within the Real Estate Investments segment.
There were no material changes in the accounting methodology we use to assess impairment charges during the year ended December 31, 2024. During the year ended December 31, 2024, we recorded impairment charges of approximately $0.7 million related to one property within the Real Estate Investments 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.
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 were transferred from a triple-net lease to two separate ventures comprising our SHOP segment.
Shares may be repurchased from time-to-time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with the terms of Rule 10b-18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”) and shall be made in accordance with all applicable laws and regulations in effect.
Under the Repurchase Plan, shares could be repurchased from time-to-time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with the terms of Rule 10b-18 of the Exchange Act and repurchases were made in accordance with all applicable laws and regulations in effect.
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).
We calculate our fixed charge coverage ratio as approximately 4.6x for the year ended December 31, 2024 (see our discussion under the heading “ Adjusted EBITDA” including a reconciliation to our net income in this Annual Report).
There were no pandemic-related rent concessions granted during the year ended December 31, 2023. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America.
There were no rent concessions accounted for as variable lease payments granted for the years ended December 31, 2024 or 2023. Critical Accounting Estimates We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America.
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.
The following table reconciles “ Net income ”, the most directly comparable GAAP metric, to Adjusted EBITDA ($ in thousands ): Years ended December 31, 2024 2023 2022 Net income $ 136,639 $ 134,381 $ 65,501 Interest expense 59,903 58,160 44,917 Franchise, excise and other taxes 38 449 844 Depreciation 71,443 69,973 70,880 NHI’s share of EBITDA adjustments for unconsolidated entities 719 2,432 2,976 Gain on forward equity sale agreement, net (6,261) — — Gains on sales of real estate (6,678) (14,721) (28,342) Impairments of real estate 654 1,642 51,555 (Gain) loss on operations transfer, net — (20) 710 Gain on note receivable payoff — — (1,113) Loss on early retirement of debt — 73 151 Non-cash write-off of straight-line rents receivable and lease amortization 1,452 — 36,353 Non-cash rental income — (2,500) (3,000) Note receivable credit loss expense 4,641 (266) 10,356 Adjusted EBITDA $ 262,550 $ 249,603 $ 251,788 Interest expense at contractual rates $ 56,315 $ 55,603 $ 42,487 Principal payments 425 408 389 Fixed Charges $ 56,740 $ 56,011 $ 42,876 Fixed Charge Coverage 4.6x 4.5x 5.9x For all periods presented, Adjusted EBITDA reflects GAAP interest expense, which excludes amounts capitalized during the period.
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.
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 ): 65 Ta ble of Contents Years ended December 31, 2024 2023 2022 Net income attributable to common stockholders $ 137,867 $ 135,597 $ 66,403 Elimination of certain non-cash items in net income: Real estate depreciation 70,449 69,436 70,734 Real estate depreciation related to noncontrolling interests (1,647) (1,585) (1,393) Gains on sales of real estate (6,678) (14,721) (28,342) Impairments of real estate 654 1,642 51,555 NAREIT FFO attributable to common stockholders 200,645 190,369 158,957 Gain 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 Non-cash write-off of straight-line rents receivable 1,452 — 36,353 Gain on forward equity sale agreement, net (6,261) — — Non-cash rental income — (2,500) (3,000) Normalized FFO attributable to common stockholders 195,836 187,922 192,484 Straight-line lease revenue, net (4,483) (6,961) (12,563) Straight-line lease revenue, net, related to noncontrolling interests (19) 58 124 Non-real estate depreciation 994 537 146 Non-real estate depreciation related to noncontrolling interests (140) (49) (16) Amortization of lease incentives 2,893 2,521 446 Amortization of lease incentive related to noncontrolling interests (508) (434) — Amortization of original issue discount 322 322 322 Amortization of debt issuance costs 3,461 2,325 2,155 Adjustments related to equity method investments, net (1,863) (1,647) (863) Note receivable credit loss expense 4,641 (266) 10,356 Equity method investment capital expenditures (293) (210) (420) Equity method investment non-refundable fees received 1,357 1,327 1,206 Gains from equity method investment (402) (555) (569) Non-cash share-based compensation 4,182 4,605 8,613 SHOP recurring capital expenditures (1,948) (1,845) (390) SHOP recurring capital expenditures related to noncontrolling interests 180 191 — Normalized FAD attributable to common stockholders $ 204,210 $ 187,841 $ 201,031 BASIC Weighted average common shares outstanding 43,844,771 43,388,794 44,774,708 NAREIT FFO attributable to common stockholders per share $ 4.58 $ 4.39 $ 3.55 Normalized FFO attributable to common stockholders per share $ 4.47 $ 4.33 $ 4.30 DILUTED Weighted average common shares outstanding 44,102,636 43,389,466 44,794,236 NAREIT FFO attributable to common stockholders per share $ 4.55 $ 4.39 $ 3.55 Normalized FFO attributable to common stockholders per share $ 4.44 $ 4.33 $ 4.30 66 Ta ble 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.
During the year ended December 31, 2023, we recorded aggregate impairments of approximately $1.6 million on four properties in our Real Estate Investments segment, of which $0.5 million related to three properties either sold or classified as assets held for sale.
During the year ended December 31, 2023, we recorded impairment charges of approximately $1.6 million for four properties of which $0.5 million related to three properties either sold or classified as assets held for sale in our Real Estate Investments segm ent. Impairment charges are included in “ Loan and realty losses, net ” in the Consolidated Statements of Income.
Properties 4Q22 1Q23 2Q23 3Q23 4Q23 December 2023 January 2024 Senior Living Same-Store 9 83.5% 83.5% 82.2% 81.9% 83.0% 83.1% 83.3% Senior Living 10 83.2% 82.7% 81.4% 81.0% 82.4% 82.7% 82.8% Bickford Same-Store 1 38 83.6% 81.3% 81.6% 83.8% 84.8% 84.6% 85.3% Bickford 2 39 83.9% 81.6% 82.0% 84.2% 85.2% 85.0% 85.7% SHOP 15 75.8% 75.2% 75.5% 79.0% 83.2% 84.4% 84.7% 1 All prior periods restated for the sale of an ALF in Iowa. 2 Includes Chesapeake, Virginia building which opened in the second quarter of 2022.
Properties 4Q23 1Q24 2Q24 3Q24 4Q24 January 2025 Senior Living Same-Store 9 83.0% 83.4% 83.9% 84.1% 84.8% 85.7% Senior Living 10 82.4% 82.8% 83.1% 83.0% 83.8% 84.7% Bickford Same-Store 1 37 84.7% 85.4% 85.0% 85.8% 86.9% 85.5% Bickford 2 38 85.1% 85.8% 85.4% 86.2% 87.3% 85.9% SHOP 15 83.2% 85.3% 87.0% 88.6% 89.4% 89.6% 1 All prior periods restated for the sale of an ALF in Indiana that occurred in October 2024. 2 Includes the Chesapeake, Virginia building which opened in the second quarter of 2022.
We review our assumptions and adjust these estimates accordingly on a quarterly basis.
Our model utilizes estimates of probability of default and loss given default. We review our assumptions and adjust these estimates accordingly on a quarterly basis.
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%.
Borrowings under the Credit Facility bear interest, at our election, at one of the following (a) Term Secured Overnight Financing Rate (“SOFR”) (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40%, (b) Daily SOFR (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40% or (c) the base rate plus a margin ranging from 0.00% to 0.40%.
Fitch reaffirmed its public issuer credit rating of BBB- and “Stable” outlook on the Company on May 15, 2023 and S&P Global reaffirmed its BBB- rating and “Stable” outlook on the Company on November 14, 2023.
Fitch reaffirmed its public issuer credit rating of BBB- and “Stable” outlook on the Company on April 5, 2024 and S&P Global reaffirmed its BBB- rating and “Stable” outlook on the Company on October 16, 2024.
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.
Financing Activities – Net cash used in financing activities for the year ended December 31, 2024 differs from the same period in 2023 primarily as a result of an increase of approximately $142.4 million in proceeds from equity offering, an approximately $23.2 million increase in net borrowings, and a decrease of $1.8 million in proceeds from noncontrolling interests, offset by an increase in debt issuance cost of $0.7 million and an increase of $0.9 million in equity issuance costs.
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”).
Giving effect to significant acquisitions, financings, disposals and payoffs on an annualized basis, our consolidated net debt to Adjusted EBITDA ratio is approximately 4.1x for the year ended December 31, 2024 ( $ in thousands ): Consolidated Total Debt $ 1,146,041 Less: cash and cash equivalents (24,289) Consolidated Net Debt $ 1,121,752 Adjusted EBITDA $ 262,550 Annualized impact of recent investments, disposals and payoffs 12,962 $ 275,512 Consolidated Net Debt to Adjusted EBITDA 4.1x Supplemental Guarantor Financial Information The Company’s $700.0 million Credit Facility, $200.0 million 2025 Term Loan, unsecured private placement notes with an aggregate principal amount of $150.0 million, and 2031 Senior Notes with an aggregate principal of $400.0 million are fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s subsidiaries, except for certain excluded subsidiaries (“Guarantors”).
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
The following table reconciles NOI to net income, the most directly comparable GAAP metric ( $ in thousands ): 67 Ta ble of Contents Years Ended December 31, NOI Reconciliations: 2024 2023 2022 Net income $ 136,639 $ 134,381 $ 65,501 Gain on forward sale agreement, net (6,261) — — Gains from equity method investment (402) (555) (569) Other income — (202) — Loss on early retirement of debt — 73 151 Gain on note receivable payoff — — (1,113) (Gain) loss on operations transfer, net — (20) 710 Gains on sales of real estate (6,678) (14,721) (28,342) Loan and realty losses, net 5,295 1,376 61,911 General and administrative 20,736 19,314 22,768 Franchise, excise and other taxes 38 449 844 Legal 1,052 507 2,555 Interest 59,903 58,160 44,917 Depreciation 71,443 69,973 70,880 Consolidated NOI $ 281,765 $ 268,735 $ 240,213 NOI by segment: Real Estate Investments $ 269,127 $ 259,162 $ 232,295 SHOP 12,170 9,222 7,603 Non-Segment/Corporate 468 351 315 Total NOI $ 281,765 $ 268,735 $ 240,213 68 Ta ble of Contents
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.
See Note 5 to the consolidated financial statements included in this Annual Report. • Funds received for reimbursement of property operating expenses totaled $11.2 million for the year ended December 31, 2024, and are reflected as a component of rental income.
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.
Equity on our Consolidated Balance Sheet totaled $1.4 billion at December 31, 2024. Share Repurchase Plan - On February 16, 2024, our Board of Directors renewed our stock repurchase plan (the “Repurchase Plan”) pursuant to which we may repurchase up to $160.0 million in shares of our issued and outstanding common stock.
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.
At January 31, 2025, $372.7 million was outstanding under the Credit Facility. In September 2024, we repaid upon maturity the $75.0 million of private placement notes primarily with proceeds from the Credit Facility.
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.
The capital funding commitments in our SHOP segment are principally for improvements to our facilities. We expect our SHOP ventures to incur approximately $10.2 million in capital expenditures during 2025 that we anticipate will be funded partially from the net operating income generated from the ventures and additional capital contributions from the partners.
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.
When we take on new debt or when we modify or replace existing debt, we incur debt issuance costs. 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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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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.
Biggest changeThe following table sets forth certain information with respect to our debt ($ in thousands) : December 31, 2024 December 31, 2023 Balance 1 % of total Rate 2 Balance 1 % of total Rate 2 Fixed rate: Private placement notes - unsecured $ 150,000 13.0 % 4.45 % $ 225,000 19.6 % 4.28 % Senior notes - unsecured 400,000 34.6 % 3.00 % 400,000 34.9 % 3.00 % Fannie Mae term loans - secured, non-recourse 75,815 6.6 % 3.96 % 76,241 6.7 % 3.96 % Variable rate: Bank term loans - unsecured 200,000 17.2 % 5.95 % 200,000 17.4 % 6.69 % Revolving credit facility - unsecured 331,200 28.6 % 5.75 % 245,000 21.4 % 6.49 % $ 1,157,015 100.0 % 4.55 % $ 1,146,241 100.0 % 4.70 % 1 Differs from carrying amount due to unamortized discounts and loan costs. 2 Total is weighted average rate. 69 Ta ble 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, 2024 ( $ in thousands ): Balance Fair Value 1 FV reflecting change in interest rates Fixed rate: -50 bps +50 bps Private placement notes - unsecured $ 150,000 $ 145,055 $ 146,230 $ 143,892 Senior notes - unsecured 400,000 327,984 338,912 320,647 Fannie Mae term loans - secured, non-recourse 75,815 75,300 75,419 75,182 1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.
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.
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 2024.
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.
A 50 basis-point increase in market rates would decrease the estimated fair value of our mortgage and other loans by approximately $2.2 million, while a 50 basis-point decrease in such rates would increase their estimated fair value by approximately $3.0 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. 67 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. 70 Ta ble of Contents
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.
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, 2024, net interest expense would increase or decrease annually by approximately $2.7 million or $0.06 per common share on a diluted basis.
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.
The unused portion ($368.8 million at December 31, 2024) of our 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, 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.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest Rate Risk At December 31, 2024, we were exposed to market risks related to fluctuations in interest rates on approximately $531.2 million of variable-rate indebtedness and on our mortgage and other notes receivable.
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.
At December 31, 2024, the fair value of our mortgage and other notes receivable, discounted for estimated changes in the risk-free rate, was approximately $261.7 million.

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