Q2 2026 National Healthcare Properties Inc Earnings Call

August 6, 2026

Operator 2: Hello, everyone. Thank you for joining us, and welcome to National Healthcare Properties Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Mike Ozuna, Director of Investor Relations. Mike, please go ahead.

Operator: Hello, everyone. Thank you for joining us, and welcome to National Healthcare Properties Q2 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Mike Ozuna, Director of Investor Relations. Mike, please go ahead.

Speaker #1: If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Mike Ozuna, Director of Investor Relations.

Speaker #1: Mike, please go ahead.

Speaker #2: Welcome to the second quarter 2026 webcast for National Healthcare Properties, Inc. All participants will be in listen-only mode. Please note, this event is being recorded.

Michael Ozuna: Welcome to the Q2 2026 webcast for National Healthcare Properties, Inc. All participants will be in listen-only mode. Please note this event is being recorded. Also note that certain statements and assumptions in this webcast presentation, which are not historical facts, will be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain assumptions and risk factors, which would cause the company's actual results to differ materially from the forward-looking statements. The company refers you to its SEC filings, including its most recent Form 10-K for a detailed discussion of the risk factors that could cause these differences and impacts in its business. During today's call, the company will also discuss certain non-GAAP financial measures.

Speaker #2: Also note that certain statements and assumptions in this webcast presentation, which are not historical facts, will be forward-looking and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Speaker #2: These forward-looking statements are subject to certain assumptions and risk factors, which could cause the company's actual results to differ materially from the forward-looking statements.

Speaker #2: The company refers you to its SEC filings, including its most recent Form 10-K, for a detailed discussion of the risk factors that could cause these differences and impacts in its business.

Speaker #2: During today's call, the company will also discuss certain non-GAAP financial measures. These measures should not be considered in isolation or as a substitute for the financial results prepared in accordance with GAAP.

Michael Ozuna: These measures should not be considered in isolation or as a substitution for the financial results prepared in accordance with GAAP. The company will provide a reconciliation of these measures to the most directly comparable GAAP measure as part of its Q2 2026 earnings supplemental on its website at www.nhpreit.com. A question and answer session will follow the prepared remarks. Also, please note that a replay of the webcast will be available on the company's website later today. I would now like to turn the call over to the company's executive management team. Please go ahead, Michael.

Speaker #2: The company will provide a reconciliation of these measures to the most directly comparable GAAP measure as part of its second quarter 2026 earnings supplemental on its website, at www.nhprreit.com.

Speaker #2: A question and answer session will follow the prepared remarks. Also, please note that a replay of the webcast will be available on the company's website later today.

Speaker #2: I would now like to turn the call over to the company's Michael.

Speaker #3: Thank you, Mike. Good afternoon, and welcome to National Healthcare Properties' second quarter 2026 earnings call. I am Michael Anderson, Chief Executive Officer of NHP, and I'm joined today by Drew Babin, our Chief Financial Officer.

Michael Anderson: Thank you, Mike. Good afternoon, and welcome to National Healthcare Properties' second quarter 2026 earnings call. I am Michael Anderson, Chief Executive Officer of NHP, and I am joined today by Drew Babin, our Chief Financial Officer, who will speak to our financial results and outlook in greater detail following my remarks. Last quarter, first earnings call as a publicly traded company, we laid out a straightforward agenda. Grow the SHOP portfolio through disciplined acquisitions with best-in-class operators, concentrate our capital in senior housing, and build a balance sheet consistent with an investment-grade unsecured issuer. Second quarter was one of substantial execution against each of those objectives. Beginning with operations, our SHOP segment delivered same store cash NOI growth of 20.1% year-over-year, marking another quarter of double-digit growth driven by occupancy, rate, and margin.

Speaker #3: We will speak to our financial results and outlook in greater detail following my remarks. Last quarter was our first earnings call as a publicly traded company.

Speaker #3: We laid out a straightforward agenda: grow the SHOP portfolio, make disciplined acquisitions with best-in-class operators, concentrate our capital in senior housing, and build a balance sheet consistent with an investment-grade unsecured issuer.

Speaker #3: Second quarter was one of substantial execution against each of those objectives. Beginning with operations, our SHOP segment delivered same-store cash NOI growth of 20.1% year over year, marking another quarter of double-digit growth driven by occupancy, rate, and margin.

Speaker #3: Same-store average occupancy reached 84.1%, and same-store cash-on-cash margin expanded 230 basis points to 22.4%. Importantly, the composition of that growth is maturing in a way we would expect, with both rate and operating leverage contributing to an increasing share as the portfolio approaches stabilization.

Michael Anderson: Same store average occupancy reached 84.1%, and same store cash NOI margin expanded 230 basis points to 22.4%. Importantly, the composition of that growth is maturing in the way we would expect, with both rate and operating leverage contributing to an increase in share as the portfolio approaches stabilization. Drew will walk through the detail. Our three operating partners, Senior Lifestyle, Discovery Senior Living, and AgeWell Senior Living, now collectively manage our 56 SHOP communities. Each continues to demonstrate the quality of resident care and operational discipline that underpin these results, and we're grateful for their partnership as we continue to scale alongside them. Turning to external growth, the second quarter and the period immediately following it represented the most active stretch of investment activity in the company's history.

Speaker #3: Drew will walk through the details. Our three operating partners—Senior Lifestyle, Discovery Senior Living, and AgeWell Senior Living—now collectively manage our 56 SHOP communities.

Speaker #3: Each continues to demonstrate the quality of resident care and operational discipline that underpin these results, and we're grateful for their partnership as we continue to scale alongside them.

Speaker #3: Turning to external growth, the second quarter and the period immediately following it represented the most active stretch of investment activity in the company's history.

Speaker #3: In late June, we acquired two senior housing communities in the Midwest totaling 211 units for a purchase price of $98 million, which are being managed by one of our trusted operating partners.

Michael Anderson: In late June, we acquired two senior housing communities in the Midwest totaling 211 units for a purchase price of $98 million, which are being managed by one of our trusted operating partners. In July, we closed on 17 communities comprising 1,003 units across the Midwest, South, Mid-Atlantic, and Pacific Northwest for approximately $182 million. Thirteen of these communities were acquired through the joint venture with Discovery Senior Living we announced last quarter, in which we hold an approximately 98.5% interest. As part of that transaction, we retain a right of first refusal and a purchase option on an additional 13 Discovery-managed communities, providing a defined pathway for continued growth with a partner that we know well. Taken together, our 2026 year-to-date acquisitions total 19 properties and 1,214 units for approximately $280 million at a blended year one yield of 7.9% and a projected year three yield of 9.7%.

Speaker #3: In July, we closed on 17 communities comprising 1,003 units across the Midwest, South, Mid-Atlantic, and Pacific Northwest, for approximately $182 million. Thirteen of these communities were acquired through the joint venture with Discovery Senior Living, which we announced last quarter, and in which we hold an approximately 98.5% interest.

Speaker #3: As part of that transaction, we retain a right of first refusal and a purchase option on an additional 13 Discovery-managed communities, providing a defined pathway for continued growth with a partner that we know well.

Speaker #3: Taken together, our 2026 year-to-date acquisitions total 19 properties and 1,214 units for approximately $280 million, at a blended year-one yield of 7.9% and a projected year-three yield of 9.7%.

Speaker #3: That spread between initial and stabilized yield is deliberate. We're underwriting assets where our operating partners and our asset management team can drive measurable improvement, and we're being paid to do that work.

Michael Anderson: That spread between initial and stabilized yield is deliberate. We're underwriting assets where our operating partners and our asset management team can drive measurable improvement, and we're being paid to do that work. We also have a well-defined near-term pipeline. In late June, we entered into a definitive purchase and sale agreement to acquire three communities in Illinois with 178 units for $30 million. In July, we entered into a definitive agreement to acquire two communities in Florida with 200 units for $90 million. Each of these transactions is expected to close in Q3, subject to customary closing conditions and applicable regulatory approvals. In addition to the two previously referenced transactions, on 4 August, we were designated the stalking horse bidder for five SHOP communities through a bankruptcy proceeding. The acquisition of these communities is subject to an auction process.

Speaker #3: We also have a well-defined near-term pipeline, and in late June we entered into a definitive purchase and sale agreement to acquire three communities in Illinois with 178 units for $30 million.

Speaker #3: In July, we entered into a definitive agreement to acquire two communities in Florida with 200 units for $90 million. Each of these transactions is expected to close in the third quarter, subject to customary closing conditions and applicable regulatory approvals.

Speaker #3: In addition to the two previously referenced transactions, on August 4, we were designated the stalking horse bidder for five SHOP communities through a bankruptcy proceeding.

Speaker #3: The acquisition of these communities is subject to an auction process. However, given our stalking horse designation, should we not be successful in acquiring these communities, we will be entitled to a break-up fee and expense reimbursement, collectively in excess of $4.8 million.

Michael Anderson: However, given our stalking horse designation, should we not be successful in acquiring these communities, we will be entitled to a breakup fee and expense reimbursement collectively in excess of $4.8 million. It is important to highlight that a majority of the transaction will be funded with NHP OP units or REIT shares, further deleveraging the balance sheet and adding SHOP communities in which we have strong conviction around near and long-term growth. On the capital recycling side, we continue to advance the strategic rotation we announced in May. Our agreement to divest a portfolio of 86 outpatient medical facilities for a disposition price of approximately $528 million is now hard. The buyer’s due diligence period expired in mid-July. It is only subject to lender consent for the loan assumption and other customary closing conditions.

Speaker #3: It's important to highlight that a majority of the transaction will be funded with NHP OP units or REIT shares, further deleveraging the balance sheet and adding SHOP communities in which we have strong conviction around near- and long-term growth.

Speaker #3: On the capital recycling side, we continue to advance the strategic rotation we announced in May. Our agreement to divest a portfolio of 86 outpatient medical facilities for a disposition price of approximately $528 million is now hard.

Speaker #3: The buyer's due diligence period expired in mid-July. The transaction is now only subject to lender consent for the loan assumption and other customary closing conditions. We continue to explore strategic opportunities related to the remainder of our OMF portfolio as we focus on completing the reorientation into a full SHOP portfolio.

Michael Anderson: We continue to explore strategic opportunities related to the remainder of our OMF portfolio as we focus on completing the reorientation into a full SHOP portfolio. We will provide further updates as these processes advance. In addition, in May, we entered into a definitive purchase and sale agreement to sell one non-core SHOP community in California for approximately $42 million. That sale carries a 1.7% cap rate based on trailing 12-month results and further aligns the portfolio with our strategic focus on markets where we have the greatest opportunities for scale and growth. I would also note two items on governance that speak to the company’s evolution. We announced the appointment of Al Campbell to our board of directors as an independent director effective 10 August.

Speaker #3: We'll provide further updates as these processes advance. In addition, in May, we entered into a definitive purchase and sale agreement to sell one non-core SHOP community in California for approximately $42 million.

Speaker #3: That sale carries a 1.7% cap rate based on trailing 12-month results and further aligns the portfolio with our strategic focus on markets where we have the greatest opportunities for scale and growth.

Speaker #3: I would also note two items on governance that speak to the company's evolution. We announced the appointment of Al Campbell to our Board of Directors as an independent director, effective August 10.

Speaker #3: Al recently retired from his role as Chief Financial Officer of Mid-America Partner Communities, a role he held for 14 years through tremendous growth and performance at Mid-America.

Michael Anderson: Al recently retired from his role as Chief Financial Officer of Mid-America Apartment Communities, a role he held for 14 years through tremendous growth and performance at Mid-America. He brings decades of public company leadership and experience to our board, and we are very pleased to have him joining us. We have also begun another board process to identify a new independent director, further solidifying our commitment to continued enhancement of our company’s governance. I will now hand the call over to Drew Babin, our chief financial officer.

Speaker #3: He brings decades of public company leadership and experience to our board, and we're very pleased to have him joining us. We've also begun another board process to identify a new independent director, further solidifying our commitment to continued enhancement of our company's governance.

Speaker #3: I'll now hand the call over to Drew Babin, our Chief Financial Officer.

Speaker #4: Thank you, Michael. Second quarter normalized FFO was approximately $10.9 million, or $0.18 per share. On an absolute basis, NFFO increased year over year on higher NOI and interest income, as well as lower interest expense, net of higher G&A.

Andrew Babin: Thank you, Michael. Q2 normalized FFO was approximately $10.9 million, or $0.18 per share. On an absolute basis, NFFO increased year over year on higher NOI and interest income, as well as lower interest expense net of higher G&A, primarily in the form of equity-based compensation. The increase in shares resulting from our highly deleveraging April IPO resulted, as expected, in sequential and year-over-year declines in NFFO per share. It is worth mentioning that normalized FFO for Q2 of this year excludes the benefit of $1.2 million, or $0.02 per share, offset to interest expense resulting from derivatives mark-to-market and terminations. Within the SHOP segment, same-store cash from net operating income increased 20.1% on a year-over-year basis, driven by an increase in average occupancy, a meaningful pickup in year-over-year RevPOR growth, and continued improvement in operating margins.

Speaker #4: Primarily in the form of equity-based compensation. The increase in shares resulting from our highly deleveraging April IPO resulted, as expected, in sequential and year-over-year declines in NFFO per share.

Speaker #4: It's worth mentioning that normalized FFO for the second quarter of this year excludes the benefit of $1.2 million, or $0.02 per share, offset by the interest expense resulting from derivatives mark-to-market and terminations.

Speaker #4: Within the SHOP segment, same-store cash net operating income increased 20.1% on a year-over-year basis, driven by an increase in average occupancy and a meaningful pickup in year-over-year RevPOR growth, as well as continued improvement in operating margins.

Speaker #4: Same-store average occupancy reached 84.1% for the quarter, a 140 basis point improvement relative to the second quarter of 2025. As we noted last quarter, the slower rate of year-over-year growth in occupancy is not unexpected given the rapid occupancy growth our portfolio experienced in 2024 and in 2025 on the heels of game-changing operator transitions.

Andrew Babin: Same-store average occupancy reached 84.1% for the quarter, a 140 basis point improvement relative to Q2 2025. As we noted last quarter, decelerating rate of year-over-year growth in occupancy is not unexpected given the rapid occupancy growth our portfolio experienced in 2024 and in 2025 on the heels of game-changing operator transitions. We nevertheless expect continued growth in occupancy with accelerating tailwinds from improving rates and margins. While the SHOP segment performed ahead of our NOI growth expectations in Q2 on rate and margin outperformance, resulting in an increase in our full-year same-store cash NOI growth guidance I will further detail momentarily, occupancy growth contributed less than we anticipated. The lag was centered within the AL segment as we supported an operator's strategic decision to upgrade certain key property-level leadership roles, including at the executive director and sales leadership levels during the quarter.

Speaker #4: We nevertheless expect continued growth in occupancy, with accelerating tailwinds from improving rates and margins. While the SHOP segment performed ahead of our NOI growth expectations in the second quarter, on rate and margin outperformance—resulting in an increase in our full-year same-store cash NOI growth guidance, which I will further detail momentarily—occupancy growth contributed less than we anticipated.

Speaker #4: The lag was centered within the AL segment as we supported an operator's strategic decision to upgrade certain key property-level leadership roles, including at the executive director and sales leadership levels during the quarter.

Speaker #4: We believe that this was the correct long-term decision in the interest of improving long-term NOI potential and note that the same operator led occupancy gains across our portfolio in July, and is still on track to produce NOI in line with our expectations heading into this year.

Andrew Babin: We believe that this was the correct long-term decision in the interest of improving long-term NOI potential, and note that the same operator led occupancy gains across our portfolio in July and is still on track to produce NOI in line with their expectations heading into this year. Same-store RevPOR increased 5.9% year over year to $6,390 as new leasing activity provided a benefit to revenue beyond the roughly 5% average annual escalators that went into effect in January across nearly our entire portfolio. We are confident that our strategic focus on high acuity care and private pay residents, together with our willingness to invest capital in revenue enhancing projects, position us to generate consistent mid single digit RevPOR growth far into the cycle.

Speaker #4: Same-store revenue per occupied room increased 5.9% year over year to $6,390, as new leasing activity provided a benefit to revenue beyond the roughly 5% average annual escalators that went into effect in January across nearly our entire portfolio.

Speaker #4: We're confident that our strategic focus on high-acuity care and private-pay residents, together with our willingness to invest capital in revenue-enhancing projects, has positioned us to generate consistent mid-single-digit RevPAR growth far into the cycle.

Speaker #4: Same-store cash NOI margin expanded by 130 basis points year over year to 22.4%, due to a moderation in the growth of compensation-related expenses as the portfolio approaches fully staffed levels and as growth in other expenses remains relatively benign.

Andrew Babin: Same-store cash NOI margin expanded 230 basis points year over year to 22.4%, a moderation in the growth of compensation related expenses as the portfolio approaches fully staffed levels and as growth in other expenses remains relatively benign. Looking to our outpatient medical facilities, our OMF segment, same-store cash NOI decreased 0.4% year over year to $20.2 million, despite a 30 basis point sequential increase in occupancy and a 97% retention rate due to a one-time increase in utility and other non-reimbursable expenses during the quarter. Segment performance continues to track well within our same-store guidance range for this year. Before I move to full year guidance, it is worth taking a moment to comment on the evolution of our balance sheet.

Speaker #4: Looking to our outpatient medical facilities—our OMF segment—same-store cash NOI decreased 0.4% year over year to $20.2 million, despite a 30 basis point sequential increase in occupancy and a 97% retention rate, due to a one-time increase in utility and other non-reimbursable expenses during the quarter.

Speaker #4: Segment performance continues to track well within our same-store guidance range for this year. Before I move to full-year guidance, it is worth taking a moment to comment on the evolution of our balance sheet.

Speaker #4: Net debt to annualized Further Adjusted EBITDA declined sharply to 4.6 times in the second quarter, versus 8.6 times in the first quarter. As a result of our IPO, as announced yesterday, we recast our credit facility, increasing the overall size from $550 million to $1.2 billion.

Andrew Babin: Net debt to annualized further adjusted EBITDA declined sharply to 4.6 times in Q2 versus 8.6 times in Q1 as a result of our IPO. As announced yesterday, we recast our credit facility, increasing the overall size from $550 million to $1.2 billion. It includes an incremental $150 million term loan, a new $150 million delayed draw term loan, and an increase of $350 million in the size of the revolver, all at improved spreads and term relative to our prior facility. We are appreciative of the banking group that understands not only our current portfolio and capital structure, but the overall strategic vision upon which we continue to execute. We used the facility to repay at par approximately $332 million of Fannie Mae loans, which represented our only debt maturity for this year.

Speaker #4: It includes an incremental $150 million term loan, a new $150 million delayed draw term loan, and an increase of $350 million in the size of the revolver, all at improved spreads and terms relative to our prior facility.

Speaker #4: We're appreciative of the banking group that understands not only our current portfolio and capital structure, but also the overall strategic vision upon which we continue to execute.

Speaker #4: We used the facility to repay at par approximately $332 million of Fannie Mae loans, which represented our only debt maturity for this year. We expect to further utilize the revolving credit facility from time to time to fund acquisitions and the redemption of our Series A and Series B preferred stock, to the extent they occur prior to the closing of announced OMF dispositions.

Andrew Babin: We expect to further utilize the revolving credit facility from time to time to fund acquisitions and the redemption of our Series A and Series B preferred stock to the extent they occur prior to the closing of announced OMF dispositions. It remains our plan to achieve and maintain levels of financial leverage consistent with investment grade on secured issuers, particularly as our portfolio is increasingly oriented towards SHOP. We updated certain elements of our guidance to incorporate Q2 results as well as our expectations for the remainder of the year. We increased our SHOP same-store cash NOI growth guidance by 2% at both the low and high ends to 15% to 18%, or approximately $51.6 to $52.9 million. It is worth noting that Q3 same-store NOI growth is expected to be negatively impacted by short-term incentives targeting communities with occupancy levels generally remaining below 85%.

Speaker #4: It remains our plan to achieve and maintain levels of financial leverage consistent with investment-grade unsecured issuers, particularly as our portfolio is increasingly oriented towards SHOP.

Speaker #4: We updated certain elements of our guidance to incorporate second-quarter results as well as our expectations for the remainder of the year. We increased our SHOP same-store cash NOI growth guidance by 2% at both the low and high ends, to 15% to 18%, or approximately $51.6 to $52.9 million.

Speaker #4: It is worth noting that third-quarter same-store NOI growth is expected to be negatively impacted by short-term incentives targeting communities, with occupancy levels generally remaining below 85%.

Speaker #4: These concessions, which reduce revenue only in the one or two months they generally occur, may delay the typical seasonal ramping of revenue we see in the third quarter into the early fall months.

Andrew Babin: These concessions, which reduce revenue only in the one or two months they generally occur, may delay the typical seasonal ramping of revenue we see in Q3 into the early fall months. We and our operators strongly believe that proactively increasing occupancy at these properties is the right strategy to accelerate their progress to the NOI levels we believe that they can generate. As I mentioned before, RevPOR growth has outperformed our expectations year to date. Compensation related expenses continue to moderate, and in addition, we'll begin to benefit from reduced property insurance premiums beginning in Q3. OMF same-store cash NOI growth guidance of 2.5% to 3.5%, or $81.2 to $82 million, is unchanged and does not account for expected OMF dispositions.

Speaker #4: We and our operators strongly believe that proactively increasing occupancy of these properties is the right strategy to accelerate their progress to the NOI levels we believe they can generate.

Speaker #4: As I mentioned before, REVPAR growth has outperformed our expectations year to date. Compensation-related expenses continue to moderate, and in addition, we'll begin to benefit from reduced property insurance premiums beginning in the third quarter.

Speaker #4: OMF same-store cash NOI growth guidance of 2.5% to 3.5%, or $81.2 to $82 million, is unchanged and does not account for expected OMF dispositions.

Speaker #4: Notably, steady revenue drivers, normalization of utility expenses, and savings on property insurance are expected to contribute positively to growth in the back half of the year.

Andrew Babin: Notably, steady revenue drivers and normalization of utility expenses and savings on property insurance are expected to contribute positively to growth in the back half of the year. While the speed of execution and pricing of our external growth has exceeded our prior expectations, we continue to expect $375 to 425 million of acquisitions in 2026 based on our updated disposition guidance of $570 million and where we would like to see our balance sheet positioned at year-end. Given uncertainty related to the outcome of the auction for the five pipeline properties Michael mentioned earlier, we have chosen not to include these in our acquisition guidance range. Should we acquire the facilities, at least half of the total consideration would be funded with NHP OP units or REIT shares issued to the seller pursuant to the terms of the agreement.

Speaker #4: While the speed of execution and pricing of our external growth has exceeded our prior expectations, we continue to expect $375 to $425 million of acquisitions in 2026, based on our updated disposition guidance of $570 million and where we would like to see our balance sheet positioned at year-end.

Speaker #4: Given the uncertainty related to the outcome of the auction for the pipeline properties Michael mentioned earlier, we have chosen not to include these in our acquisition guidance range.

Speaker #4: Should we acquire the facilities, at least half of the total consideration would be funded with NHP OP units or REIT shares issued to the seller pursuant to the terms of the agreement.

Speaker #4: We are increasing our total G&A and equity compensation guidance by $1 million each, to $27 to $28 million and $6 to $7 million, respectively. This is due to an anticipated increase in non-cash equity compensation related to the ongoing refreshment of our Board of Directors.

Andrew Babin: We're increasing our total G&A and equity compensation guidance by $1 million each to $27 to 28 million and $6 to 7 million respectively due to an anticipated increase in non-cash equity compensation related to the ongoing refreshment of our board of directors. Our decision to proactively address maintenance capital expenditures across our portfolio in 2024 and 2025 in preparation for the IPO continues to result in a lower rate of recurring CapEx spend this year and a greater focus on revenue-enhancing projects at existing and acquisition properties. Our expectation for same-store recurring capital expenditures remains unchanged at $22 to 25 million, as we do generally expect same-store spending to be weighted towards the back half of this year. We plan to update this range as announced portfolio transactions are consummated. Now I'll hand it back to Michael for closing remarks.

Speaker #4: Our decision to proactively address maintenance capital expenditures across our portfolio in 2024 and 2025 in preparation for the IPO continues to result in a lower rate of recurring CapEx spend this year and a greater focus on revenue-enhancing projects at both existing and acquisition properties.

Speaker #4: Our expectation for same-store recurring capital expenditures remains unchanged at $22 to $25 million, as we do generally expect same-store spending to be weighted towards the back half of this year.

Speaker #4: We plan to update this range as announced portfolio transactions are consummated. Now, I'll hand it back to Michael for closing remarks.

Speaker #1: Thanks, Drew. Second quarter was a quarter of execution—turning the strategy and the capital we raised in April into assets, into a materially stronger balance sheet, and into a clear path for the portfolio we intend to earn.

Michael Anderson: Thanks, Drew. Q2 was a quarter of execution, turning the strategy and the capital we raised in April into assets, into a materially stronger balance sheet, and into a clear path for the portfolio we intend to own. Our SHOP segment delivered another quarter of 20% plus same-store growth, and the drivers of that growth are broadening from occupancy recovery to rate and margin. Transactions team, led by Tyler Bronner, closed or placed under contract approximately $400 million of senior housing since the start of Q2 at yields that we believe are highly accretive to our cost of capital. Our leverage now stands at 4.6x. Our only 2026 maturity has been retired. Credit facility has been recast and upsized to $1.2 billion at improved pricing, and we've announced the full redemption of our preferred stock.

Speaker #1: Our shop segment delivered another quarter of 20%+ same-store growth, and the drivers of that growth are broadening from occupancy recovery to rate and margin.

Speaker #1: The transactions team, led by Tyler Bronner, closed or placed under contract approximately $400 million of senior housing since the start of the second quarter, at yields that we believe are highly accretive to our cost of capital.

Speaker #1: Our leverage now stands at 4.6 times. Our only 2026 maturity has been retired, the credit facility has been recast and upsized to $1.2 billion at improved pricing, and we've announced the full redemption of our preferred stock.

Speaker #1: The announced OMF disposition, when completed, will provide additional balance sheet flexibility to accelerate our growth strategy into a senior housing-focused portfolio. We’re executing on the plan we described to investors in April, and we’re doing so ahead of the pace we previously discussed.

Michael Anderson: The announced OMF disposition, when completed, will provide additional balance sheet flexibility to accelerate our growth strategy into senior housing-focused portfolio. We're executing on the plan we described to investors in April, and we're doing so ahead of the pace we previously discussed. Importantly, we remain disciplined in our approach with the right team and infrastructure in place to support our growth. We look forward to updating our shareholders on continued progress in the quarters ahead. With that, I'll turn the call back to the operator for the question and answer session.

Speaker #1: Importantly, we remain disciplined in our approach, with the right team and infrastructure in place to support our growth. We look forward to updating our shareholders on continued progress in the quarters ahead.

Speaker #1: With that, I'll turn the call back to the operator for the question-and-answer session.

Speaker #2: We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand.

Operator 2: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Kilichowski with Wells Fargo. Your line is open. Please go ahead.

Operator: We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Kilichowski with Wells Fargo. Your line is open. Please go ahead.

Speaker #2: To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality.

Speaker #2: If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of John Kilichowsky with Wells Fargo.

Speaker #2: Your line is open. Please go ahead.

John Kilichowski: Hi. Good afternoon. Thanks for taking my question. My first one, Drew, just the press that were taken out post quarter end, I know there's not an AFFO guidance, so it doesn't necessarily impact that, but could you talk about how that impacts your guidance or sort of the pro forma leverage and balance sheet outlook for the rest of the year? Especially could you give us some color around maybe after the OMF sale and reaching the midpoint of guidance on the, excuse me, on the acquisition side?

Speaker #4: Good afternoon. Thanks for taking my question. My first one, Drew: just the prep that we're taking out post-quarter end. I know there's not an AFFO guidance, so it doesn't necessarily impact that, but could you talk about how that impacts your guidance, or sort of the pro forma leverage and balance sheet outlook for the rest of the year? Especially, could you give us some color around maybe after the OMF sale and reaching the midpoint of guidance on the—excuse me—on the acquisition side?

Speaker #3: Yeah. Hi, John. So, back at NARE, we put a slide in our deck that kind of laid out, just based on the OMF disposition, the IPO, and credit facility paydown, as well as our acquisition guidance, kind of where leverage would end up for the end of the year.

Andrew Babin: Hi, John. Back in May, we put a slide in our deck that kind of laid out just based on the OMF disposition, the IPO, and credit facility paydown, as well as our acquisition guidance, kind of where leverage would end up for the end of the year. Including preferred, it was call it low to mid fives. Since then, we announced the non-core SHOP disposition, that probably helps that a little bit. Really with the preferred redemption, we're saving on costs. Obviously, the interest expense on our line of credit is lower than the preferred dividend rate, there'll be that savings. It really has the effect of just kind of converging our with and without preferred leverage ratios, kind of both to the low fives.

Speaker #3: And including preferred, it was, call it, low to mid-fives. Since then, we announced the non-core SHOP disposition, so that probably helps that a little bit.

Speaker #3: Really, with the preferred redemption, we're saving on costs. Obviously, the interest expense on our line of credit is lower than the preferred dividend rate.

Speaker #3: So there’ll be that savings, but it really has the effect of just kind of converging our with and without preferred leverage ratios—kind of both to the low fives.

Speaker #3: Which is a place where we would like to be kind of going into next year, and potentially a further rotation towards SHOP.

Andrew Babin: Which is a place where we would like to be kind of going into next year and potentially a further rotation towards SHOP.

Speaker #4: Okay, thank you. And then the deal that you're talking about in the auction—it sounded like you were saying that sits outside of guidance currently.

John Kilichowski: Okay. Thank you. The deal that you're talking about in the auction, it sounded like you were saying that sits outside of guidance currently. That would be, if that deal were to close, that would be above and beyond the 400 midpoint?

Speaker #4: So, if that deal were to close, that would be above and beyond the $400 million midpoint?

Speaker #3: That's correct. And as we've said before, the restraint on our guidance kind of stopping at $400 million, or in that range for acquisitions, is really leverage.

Andrew Babin: That's correct.

John Kilichowski: Okay.

Andrew Babin: As we've said before, the restraint on our guidance, kind of stopping at $400 million or that range for acquisitions is really leverage, and wanting our leverage to be kind of in a comfortable range at year-end. As Michael mentioned in his remarks, the pipeline's very robust. We're hesitant to up our guidance until funding is spoken for. With this deal, the funding is already kind of baked into it if we do win the auction in the form of OP and REIT units.

Speaker #3: And wanting our leverage to be kind of in a comfortable range at year-end. As Michael mentioned in his remarks, the pipeline's very robust, but we're hesitant to up our guidance until funding is spoken for.

Speaker #3: But with this deal, the funding is already kind of baked into it if we do win the auction, in the form of OP and REIT units.

John Kilichowski: Very helpful. Thank you.

Speaker #4: Very helpful. Thank you.

John Kilichowski: Very helpful. Thank you.

Speaker #3: Thanks, John.

Andrew Babin: Thanks, John.

Speaker #2: Your next question comes from the line of Ronald Camden with Morgan Stanley. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Ronald Kamdem with Morgan Stanley. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Ronald Kamdem with Morgan Stanley. Your line is open. Please go ahead.

Speaker #5: Hey, great. Thanks so much for the time. Just starting with the same-store and why, and the guide raise and so forth, I think you talked through some operator transitions and so forth.

Ronald Kamdem: Hey, great. Thanks so much for the time. Just starting with the same store NOI and the guide raise and so forth. I think you talked through some operator transitions and so forth. Just curious as you're taking a step back, if you could just comment on what you think sort of the upside, what's driving the upside, and what sort of further could go from here. Thanks.

Speaker #5: Just curious, as you're taking a step back, if you could just comment on what you think sort of the upside what's driving the upside and what sort of further could go from here.

Speaker #5: Thanks.

Speaker #3: Hi, Ron. So to get started, I mean, the second quarter kind of outperformance relative to our guidance range is really the main reason why we increased it.

Andrew Babin: Hi, Ron. To get started, I mean, the Q2 kind of outperformance relative to our guidance range is really the main reason why we increased it. As we said in the prepared remarks. In the Q2, occupancy didn't come along as much as we thought it would. As we also mentioned in the Q3, we're really targeting properties at lower levels of occupancy and selectively applying concessions there, really to try to get occupancy to a better place. We believe that's the right long-term decision for NOI. Subject to those things, we'll keep the guidance range updated. We have seen expenses, especially on the compensation side, continue to moderate, which helps as well. Obviously we'll watch these things as the year goes on and update guidance as we go.

Speaker #3: As we said in the prepared remarks, in the second quarter, occupancy didn't come along as much as we thought it would. And as we also mentioned, in the third quarter we're really targeting properties at lower levels of occupancy and selectively applying concessions there, really to try to get occupancy to a better place.

Speaker #3: We believe that's the right long-term decision for NOI. So, subject to those things, we'll keep the guidance range updated. We have seen expenses, especially on the compensation side, continue to moderate, which helps as well.

Speaker #3: But obviously, we'll watch these things as the year goes on and update guidance as we go.

Speaker #5: Great. And then if I could just ask my quick follow-up. I think it's interesting you were talking about sort of funding. Maybe can you just give us an update on the OMF sale?

Ronald Kamdem: Great. If I could just. My quick follow-up, I think interesting you were talking about sort of funding. Maybe could you just give us an update on the OMF sale? I know that the release had said Q3 or Q4 close, if any more visibility there. Beyond this sort of first tranche, just what's the thinking on the next tranche on OMF sales to fund this robust acquisition pipeline? Thanks.

Speaker #5: I know that the release is at Q3 or Q4 close. Is there any more visibility there? And then beyond this sort of first tranche, just what's the thinking on the next tranche of OMF sales to fund this robust acquisition pipeline?

Speaker #5: Thanks.

Speaker #4: Sure. Hey Ron, it's Michael. Yeah, so as we mentioned, the deal went hard in mid-July, and we expect that a portion of that will close in the third quarter.

Michael Anderson: Sure. Hey, Ron, it's Michael. Yeah, as we mentioned, deal went hard in mid-July, and we expect that a portion of that will close in the Q3. Another portion likely early Q4, I think too early to tell, just given the loan assumption process around that. As we think about the remaining portion of the OMF portfolio, there's certainly been no shortage of interest and inbounds on that portfolio. I think you see it across OMF transactions more broadly speaking. As we think about monetizing that side of the portfolio, it's really thinking about that relative to the acquisition pipeline and as Drew mentioned, robust pipeline right now, and so it's certainly front of mind for us.

Speaker #4: Another portion is likely early fourth quarter, but I think it's too early to tell, just given the loan assumption process around that. And then, as we think about the remaining portion of the OMF portfolio, there’s certainly been no shortage of interest and inbounds on that portfolio.

Speaker #4: I think you see it across OMF transactions, broadly speaking. So, as we think about monetizing that side of the portfolio, it's really thinking about that relative to the acquisition pipeline.

Speaker #4: And as Drew mentioned, we have a robust pipeline right now. And so it's certainly front of mind for us.

Speaker #5: Thank you.

Ronald Kamdem: Thank you.

Speaker #4: Thanks.

Michael Anderson: Thanks.

Speaker #2: Your next question comes from the line of Julian Bluen with Goldman Sachs. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Julien Blouin with Goldman Sachs. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Julien Blouin with Goldman Sachs. Your line is open. Please go ahead.

Speaker #5: Yeah. Thank you for taking my question. I appreciate the color on the drag on occupancy at some of those properties where there's leadership turnover. I guess, can you give us a sense of how we should think about occupancy growth over the back half of the year?

Julien Blouin: Thank you for taking my question. I appreciate the color on the drag on occupancy at some of those properties where there's leadership turnover. I guess, can you give us a sense of how we should think about occupancy growth over the back half of the year? It sounds like you've already seen some occupancy pick up at some of those affected properties so far in Q3. Am I understanding that right, that that improvement is not baked into your current guidance? Your current guidance update only reflects the Q2 outperformance?

Speaker #5: And it sounds like you've already seen some occupancy pick up at some of those affected properties so far in the third quarter. Am I understanding that right—that that improvement is not baked into your current guidance? Your current guidance update only reflects the second quarter outperformance?

Speaker #3: Yeah, I'll get that started, Julian. I think you're right in that the guidance increase has more to do with the second quarter's actual performance.

Andrew Babin: I'll get that started, Julien. I think you're right in that the guidance increase has more to do with the Q2 actual performance. I think with the moving parts contributing to same-store NOI growth, obviously revenue can be driven in two different ways. I think as concessions are applied to the extent occupancy improves, certainly Q3, you may see it come out of RevPAR to some degree temporarily. Certainly the expense moderations continue. Again, as we monitor these different moving parts, we'll update guidance. To your point, the increase in guidance had a lot more to do with the Q2. Again, we'll update it as we execute over the rest of the year.

Speaker #3: I think, with the moving parts contributing to same-store NOI growth, obviously revenue can be driven in two different ways. And I think, as concessions are applied, to the extent occupancy improves just in the third quarter, you may see it come out of rep port to some degree.

Speaker #3: Temporarily, and certainly the expense moderations continue. So again, as we monitor these different moving parts, we'll update guidance. But to your point, the increase in guidance had a lot more to do with the second quarter.

Speaker #3: And again, we'll update it as we execute over the rest of the year.

Speaker #4: Yeah. And Julian, just to add on to that, as Drew mentioned in his remarks, those communities where we made some strategic changes in the second quarter—we saw the benefit of that starting in July.

Michael Anderson: Yeah. Julien, just to add on that, as Drew mentioned in his remarks, those communities where we made some strategic changes in Q2, we saw the benefit of that starting in July. Those communities actually led the occupancy gains in July for us. So I think as we've traditionally seen Q2, Q3 be the strongest seasons for leasing, I think we're expecting that Q3 and into Q4 will actually be strong for us given the impact of those executive leadership changes. As Drew mentioned, we're really focused on communities that have sub 85% occupancy. It's a limited number within the portfolio. On the other end of the spectrum, we've got communities within the portfolio that are highly occupied, and over the last several months, we've been dynamically changing street rates with 3% to 5% increases over in-place street rates mid-year.

Speaker #4: Those communities actually led the occupancy gains in July for us. And so, I think as we've traditionally seen Q2 and Q3 be the strongest seasons for leasing, we're expecting that Q3 and into Q4 will actually be strong for us, given the impact of those executive leadership changes.

Speaker #4: And then, as Drew mentioned, we're really focused on communities that have sub-85% occupancy. It's a limited number within the portfolio. On the other end of the spectrum, we've got communities within the portfolio that are highly occupied.

Speaker #4: And over the last several months, we've been dynamically changing street rates, with 3% to 5% increases over in-place street rates mid-year. So, I think we're seeing a lot of strong demand across the board.

Michael Anderson: I think we're seeing a lot of strong demand across the board, and I think that the strategic changes made by the operators will certainly benefit us in H2.

Speaker #4: And I think that the strategic changes made by the operators will certainly benefit us in the back half of the year.

Speaker #5: Okay, great. That's helpful. And then, I believe you recently tied down Tyler Bronner as EVP of Investments. One, is that correct? And then, how should we think about additional hires and sort of filling out that investments team from here, as you hopefully start to approach the kind of cost of capital that could allow you to be even more active on the acquisition front?

Julien Blouin: Okay, great. That's helpful. I believe you recently tied down Tyler Bronner as EVP of Investments. Well, one, is that correct? How should we think about additional hires and sort of filling out that investments team from here as you hopefully start to approach the kind of cost of capital that could allow you to be even more active on the acquisition front?

Speaker #4: Yes, we did bring Tyler on full time. He is EVP of Investments and joined us in July. We're happy to have him on board, and he's certainly been a valuable member of the team even before joining us as a full-time employee.

Michael Anderson: Yeah, we did bring Tyler on full time. He is EVP of Investments, joined us in July. We're happy to have him on board and certainly been a valuable member of the team even before joining us as a full-time employee. I think Tyler, together with some other individuals on the team that have been in kind of the medical healthcare space for decades, have a lot of strong relationships with brokers, with owner-operators, with operating partners. We continue to see a lot of deal flow from our existing operators, but also from the incoming operators. I think you should expect to see some additional operators in the mix beginning this month with a three-pack that we're closing in Illinois. We'll be bringing Priority Life as the operator on that deal, and similarly, they would be the operator on the five-pack that's subject to the auction.

Speaker #4: I think Tyler, together with some other individuals on the team who have been in the medical healthcare space for decades, have a lot of strong relationships with brokers, owner-operators, and operating partners.

Speaker #4: And so we continue to see a lot of deal flow from our existing operators, but also from the incoming operators. I think you should expect to see some additional operators in the mix, beginning this month with a three-pack that we're closing in Illinois.

Speaker #4: We'll be bringing Priority Life as the operator on that deal. Similarly, they would be the operator on the five-pack that's subject to the auction.

Speaker #4: And so they've been a good source of flow since we've begun those conversations. Lindsay and the team have been in pretty deep conversations with a number of other operators that I think will ultimately be added to the roster.

Michael Anderson: They've been a good source of flow since we've begun those conversations, and Lindsay and the team have been in pretty deep conversations with a number of other operators that I think will ultimately be added to the roster.

Speaker #5: Okay, great. Thank you so much, team.

Julien Blouin: Okay, great. Thank you so much, team.

Speaker #4: Thanks.

Michael Anderson: Thanks.

Speaker #2: Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Juan Sanabria with BMO Capital Markets. Your line is open. Please go ahead.

Speaker #6: Hi, this is Robin Handeland, sitting in for Juan. I was just curious about a potential acquisition going through the auction. What's the expected yield here?

Robin Haneland: Hi, this is Robin Haneland sitting in for Juan. I was just curious on the potential acquisitions going through the auction. What's the expected yield here, and what's the status of the operations of the facilities and where's occupancy at?

Speaker #6: And what's the status of IT operations at the facilities? And where is occupancy at?

Speaker #4: Yeah. Hey, Robin. It's Michael. This portfolio is sitting somewhere mid- to high-80s occupancy. Really struggled over the last few years, but I think with some new operators, they've turned it around.

Michael Anderson: Hey, Robin. It's Michael. This portfolio is sitting somewhere mid to high 80s occupancy. Really struggled over the last few years. I think with some new operators, they've turned it around, and I think there's a lot of upside still yet to be realized there. That's a kind of low to mid seven year one, then kind of touching a nine year three. We see a lot of quick growth in those. They also tend to be newer vintage communities, I think we're optimistic about the outcome. Certainly put a lot of work and diligence into those five assets and think they would be a nice addition to the portfolio.

Speaker #4: And I think there's a lot of upside still yet to be realized there. That's a kind of low to mid 7% in year one, and then kind of touching 9% in year three.

Speaker #4: So we see a lot of quick growth in those. They also tend to be newer vintage communities. And so I think we're optimistic about the outcome.

Speaker #4: Certainly put a lot of work and diligence into those five assets, and I think they would be a nice addition to the portfolio.

Speaker #3: It's Drew here. I think it's safe to say that the yields in the first year, but also in year three, will not be materially different than the blended numbers that we've talked about and reported.

Andrew Babin: It's Drew here. I think it's safe to say that the yields kind of in the first year, also year three, will not be materially different than the blended numbers that we've talked about and reported.

Speaker #4: Agreed.

Michael Anderson: Agreed.

Speaker #6: Got it. And on Discovery Rover, where do we stand on that? I was kind of curious what the latest thoughts are.

Robin Haneland: Got it. On Discovery ROFR, where do we stand on that? I'm just kind of curious what the later falls are.

Speaker #4: Yeah, we continue to receive monthly financial updates from them on those 13. Not at a place that we're ready to execute on today, but given the fixed purchase price in the option, that price per unit is very similar to the 13 that we closed on.

Michael Anderson: We continue to receive monthly financial updates from them on those 13. Not at a place that we're ready to execute on today, given the fixed purchase price and the option, that price per unit is very similar to the 13 that we closed on. It's a very attractive basis for us, we'd like to see some continued improvement in the occupancy and margin from them.

Speaker #4: And so, it's a very attractive basis for us, but we'd like to see some continued improvement in the occupancy and margin.

Speaker #6: Thank you.

Robin Haneland: Thank you.

Speaker #2: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Michael Carroll with RBC Capital Markets. Your line is open. Please go ahead.

Speaker #7: Yeah, thanks. I wanted to circle back on the specific operator that has elected to make some leadership changes at the ED level and the sales level.

Michael Carroll: Yeah, thanks. I wanted to circle back on the specific operator that has elected to make some leadership changes at the ED level and the sales level. How widespread were these changes? It sounds like it was pretty widespread since you're calling it out here as the reasoning that could have impacted the Q2 results. How many communities did it impact, and what's the reason for them electing to make this upgrade?

Speaker #7: I mean, how widespread were these changes? I know it sounds like it was pretty widespread, since you're calling it out here as the reasoning that could have impacted Q2 results.

Speaker #7: So, how many communities did it impact? And what's the reason for them electing to make this upgrade?

Speaker #4: Yeah. I think it was a I think it was six communities within the Aravind portfolio. We've spoken pretty extensively about the tremendous growth that we saw once that operator transition took place.

Michael Anderson: Yeah, I think it was six communities within the Arvin portfolio. We've spoken pretty extensively about the tremendous growth that we saw once that operator transition took place. As we looked at the long-term growth potential in that portfolio with our operating partner there, I think we all came to the conclusion that there needed to be some new blood to really take performance to the next level. We started to see that pretty quickly. That portfolio led the way in occupancy gains in July for us. I think it was a good team to start with, but even better now, and ultimately the right decision for us.

Speaker #4: But as we looked at the long-term growth potential in that portfolio with our operating partner there, I think we all came to the conclusion that there needed to be some new blood to really take performance to the next level.

Speaker #4: And so we started to see that pretty quickly. That portfolio led the way in occupancy gains in July for us. And so I think it was a good team to start with.

Speaker #4: But even better now, and ultimately, the right decision for us.

Speaker #7: And then I think you said earlier that you plan on adding new sales, expanding the sales teams at those communities. Is that more at a community level or a portfolio-wide level within Artem?

Michael Carroll: I think you said earlier that you plan on adding new sales, like expanding the sales teams at those communities. Is that more at a community level, a portfolio-wide level within Ardent? I guess, how should we think about that?

Speaker #7: I guess, how should we think about that?

Speaker #4: Yeah, so that was part of the conversations that we had in Q2 with the operator. As a result, they've added some additional regional sales leadership.

Michael Anderson: Yeah. That was part of the conversations that we had in Q2 with the operator. As a result, they've added some additional regional sales leadership and actually hired a divisional sales leader. Which is, as we think about kind of the most senior salesperson within that brand. Certainly an enhancement to the community level leadership, but also some additional commitment from our operating partner around more senior personnel in that portfolio.

Speaker #4: And then actually hired a divisional sales leader, which is, as we think about, kind of the most senior salesperson within that brand. So certainly an enhancement to the community-level leadership, but also some additional commitment from our operating partner around more senior personnel in that portfolio.

Speaker #7: Okay, great. And then, just if I can squeeze one last one in: When did those transitions actually occur? So I guess it sounds like it was an impact in Q2, but given your comments on July, it's no longer an impact going forward and maybe more of a benefit.

Michael Carroll: Okay, great. Just if I can sneak one last one in. When did those transitions actually occur? I guess it sounds like it was an impact in Q2, but given your comments on July, it's no longer an impact going forward and may be more of a benefit.

Speaker #4: Yeah. Those were mostly kind of mid-Q2 changes, and so we're starting to see the benefit of those. And certainly, they were the leader in the clubhouse in our July results.

Michael Anderson: Yeah, those were mostly kind of mid-Q2 changes, we're starting to see the benefit of those, certainly they were the leader in the clubhouse in our July results.

Speaker #3: And it's Drew here. I'll say, too, that in the third quarter, the properties that we're targeting are concessions. It's not that same operator, or it's not just that same operator.

Andrew Babin: It's Drew here. I will say, too, that in Q3, the properties that we're targeting with the concessions, it's not that same operator, or it's not just that same operator. It's kind of across the board, just looking at our portfolio and identifying properties where we can kind of raise the floor as far as where our portfolio as a whole sits, and get those properties to a better place where rate can be driven a little better and the expenses flow through begins to improve. It's not necessarily the same situation. Q3 is a bit of a separate effort than what we saw in Q2.

Speaker #3: It's kind of across the board. We're just looking at our portfolio and identifying properties where we can raise the floor, as far as where our portfolio as a whole sits.

Speaker #3: And get those properties to a better place, where rate can be driven a little better and the expense flow-through begins to improve. So it's not necessarily the same situation.

Speaker #3: The third quarter is a bit of a separate effort than what we saw in the second quarter.

Speaker #7: Okay, great. Thanks. I appreciate it.

Michael Carroll: Okay, great. Thanks, I appreciate it.

Speaker #3: Thanks, Mike.

Andrew Babin: Thanks, Mike.

Speaker #2: Your next question comes from the line of Austin Werschmidt with KeyBank Capital Markets. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Your line is open. Please go ahead.

Speaker #5: Yeah, thank you. Just sticking with the shop theme here—last quarter, you talked about the spot occupancy being north of 85% at quarter-end. And clearly, there were some impacts to the portfolio, as well as some industry factors, maybe, that have led to less sequential improvement in occupancy.

Austin Wurschmidt: Yeah, thank you. Just sticking with the SHOP theme here. Last quarter you talked about the spot occupancy north of 85% at quarter end, and clearly there were some impacts to the portfolio as well as some industry factors maybe that have led to less sequential improvement in occupancy than might have been anticipated. If you break out the six assets, is there a significant NOI growth differential between the remainder of the pool and those six assets specifically?

Speaker #5: That might have been anticipated. If you break out the six assets, is there a significant NOI growth differential between the remainder of the pool and those six assets specifically?

Speaker #3: Yeah, I think the main reason why you saw the occupancy—if you look back, I don't think we disclosed the same story, but if you look back in our past supplementals, we break out occupancy by that type.

Andrew Babin: Yeah. I think the main reason why you saw the disruption in occupancy, if you look back, I don't think we disclosed the same store, but if you look back in our past supplementals, we break out occupancy by that type. The sequential increases we had in occupancy between Q1 and Q2 last year were, call it 300, 350 basis points for AL and memory care. Obviously it's hard to kind of repeat that type of sequential gain. What we did see is better RevPOR growth. To Michael's point earlier, with street rates, we're beginning to see that pick up, which is obviously what you want to see when occupancy is higher. We're seeing margins continue to improve.

Speaker #3: And the sequential increases we had in occupancy between Q1 and Q2 last year were, call it, 300 to 350 basis points for AL and memory care.

Speaker #3: So, obviously, it's hard to kind of repeat that type of sequential gain. But what we did see is better RevPAR growth. And to Michael's point earlier, with street rates, we see that pick up, which is obviously what you want to see when occupancy is higher.

Speaker #3: We're seeing margins continue to improve, and so, again, I think the occupancy piece is just one part of the puzzle—one that has lagged a little bit seasonally compared to what we normally see.

Andrew Babin: Again, I think the occupancy piece is just one piece of the puzzle, and one that has lagged a little bit seasonally versus what we normally see. Very little change in our forecast as far as where we think things are going to end up into Q4. Just a slight lag in getting there on the occupancy side.

Speaker #3: But there is very little change in our forecast as far as where we think things are going to end up in the fourth quarter—just a slight lag in getting there on the occupancy side.

Speaker #5: Yeah, that's helpful. And I know kind of concessions played in. I think some burned off maybe from the first quarter to the second quarter, which may have helped drive that acceleration.

Austin Wurschmidt: Yeah. That's helpful. I know concessions played in. I think some burned off maybe from Q1, Q2, which may have helped drive that acceleration. How do we think about the year-over-year RevPOR growth now into Q3, given the usage of concessions and that presumably helping lift occupancy towards H2 of the year, as you've talked about?

Speaker #5: So, how do we think about the year-over-year RevPOR growth now into the third quarter, given the usage of concessions and that presumably kind of helping lift occupancy towards the back half of the year, as you've talked about?

Speaker #3: Yeah, I think there will be a tension between the better rate growth that we're seeing on higher-occupied properties with better street rates and the concessions that I mentioned at some properties.

Andrew Babin: Yeah. I think there will be a tension between better rate growth that we are seeing on higher occupied properties with better street rates, and the concessions that I mentioned at some properties. It is TBD which will win out. If we see a little bit of deceleration in RevPOR, in the interest of gaining occupancy at some of these lower occupancy properties, again, we think that is the right thing to do to maximize NOI.

Speaker #3: It's TBD, kind of, which will win out. But if we see a little bit of deceleration in RevPAR, in the interest of gaining occupancy at some of these lower occupancy properties, again, we think that's the right thing to do to maximize NOI.

Speaker #5: And then, just last one. Is the usage of concessions, or is there a competing product within this market, or has it just been a little bit slower to see the occupancy improvement than some of the broader industry has?

Austin Wurschmidt: Just last one. Is the usage of concessions, is there competing product within this market, or has it just been a little bit slower to see the occupancy improvement that some of the broader industry has? What is sort of the biggest driver for using concessions given what is otherwise a pretty good fundamental backdrop? Thanks.

Speaker #5: What's the biggest driver behind using concessions, given what's otherwise a pretty good fundamental backdrop? Thanks.

Speaker #4: Yeah. It's not really a competing product issue. I think it's mostly strategic personnel changes. And having turned rooms, wanting to fill those rooms, our view is that in the long term, using a one-month concession to lock in a 24-month stay and increase margin and increase NOI is the right thing.

Michael Anderson: Yeah. It is not really a competing product issue. I think it is mostly strategic personnel changes, and having turned rooms, wanting to fill those rooms. Our view is that in the long term, using a 1-month concession to lock in a 24-month stay and increase margin, increase NOI is the right thing. It is a pretty limited number of properties that sit at sub 85% for us, and being able to bring those properties north of 85% where we start to see that margin flow through really enhance is kind of the strategy around that. I think that we will see that play out, but we think ultimately that is the right play on that.

Speaker #4: And so, bringing some of those sub—it's a pretty limited number of properties that sit at sub-85% for us. And being able to bring those properties north of 85%, where we start to see that margin flow-through really enhance, is kind of the strategy around that.

Speaker #4: And I think that we'll see that play out, but we think ultimately that's the right play on that. And then as we mentioned, around 9 or 10 of our communities, we've been seeing 3% to 5% in-place kind of dynamic changes, even above new rates that were reset in January.

Michael Anderson: As we mentioned, around nine or 10 of our communities, we have been seeing 3% to 5% in place, kind of dynamic changes, even above new rates that were reset in January. We are seeing where we have highly occupied properties. We are seeing a lot of pricing power in those markets, and ultimately that is the direction that we would like to see the entire portfolio move.

Speaker #4: So, we're seeing that where we have highly occupied properties, we're seeing a lot of pricing power in those markets. Ultimately, that's the direction we'd like to see the entire portfolio move.

Speaker #5: Helpful. Appreciate it. Yeah, the added detail.

Austin Wurschmidt: Helpful. Appreciate the added detail.

Speaker #3: Thank you.

Andrew Babin: Thank you.

Speaker #4: Thanks.

Michael Anderson: Thanks.

Speaker #2: Your next question comes from the line of Rob Stevenson with Huntington. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Rob Stevenson with Huntington. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Rob Stevenson with Huntington. Your line is open. Please go ahead.

Speaker #7: Good afternoon, guys. Just one for me. How much CapEx are you expecting to put into the $400 million of second and third quarter announced and completed acquisitions at this point, given a preliminary run-through?

Rob Stevenson: Good afternoon, guys. Just one for me. How much CapEx are you expecting to put into the $400 million of Q2 and Q3 announced and completed acquisitions at this point, given a preliminary run through?

Speaker #3: Yeah. Here, Rob, that's true. So, on the Discovery deal, we talked a bit before where there's about $6 million or so of CapEx going into that one.

Andrew Babin: Yeah. Hey, Rob Stevenson. It's Drew Babin. On the Discovery deal, we talked a bit before where there's about $6 million or so of CapEx going into that one. On other properties, I think that in the aggregate, maybe a similar amount. I think we're not excited about buying things that need true deferred maintenance. I think most of what we're buying, we're most excited about revenue enhancing type opportunities that are there. I wouldn't say it's that material or that much in excess of the $6 million we have on Discovery. Maybe in the aggregate, it's another $5 to 10 million.

Speaker #3: On other properties, I think that in the aggregate, maybe a similar amount. I think we're not excited about buying things that need true deferred maintenance.

Speaker #3: I think most of what we’re buying, when we’re most excited about revenue-enhancing type opportunities, that are there. But I wouldn’t say it’s that material or that much, kind of in excess of the $6 million we have on discovery.

Speaker #3: Maybe in the aggregate, it's million.

Speaker #7: Okay, that's helpful. And then, I guess when you're looking at the stuff that hasn't been specifically announced, as well as what's in the pipeline, what type of mix are you looking at there between the various buckets?

Rob Stevenson: Okay, that's helpful. Then, I guess, when you're looking at the stuff that hasn't been specifically announced, as well as what's in the pipeline, what type of mix are you looking at there between the various buckets? I assume the vast majority of it's assisted, is there more independent living in this stuff, or is it basically almost all assisted living and memory care?

Speaker #7: Is it—I assume it's the vast majority of it that's assisted, but is there more independent living in this stuff, or is it basically almost all assisted living and memory care?

Speaker #3: Yeah, I think it's going to be pretty similar to what we currently own. We're not stand-alone IL buyers; it's not really where we focus.

Andrew Babin: Yeah. I think it's going to be pretty similar to what we currently own. We're not standalone IL buyers. It's not really where we focus. We also like to maintain a very high percentage of private pay beds, where our pipeline really looks a lot like our current portfolio. I think AL will continue to be kind of the main thread through our pipeline. To the extent we have IL, it's more of a feeder within the same properties, and memory care is a valuable business and an important business that mixes in as well. You shouldn't see too much of a change in the composition of our portfolio as we grow.

Speaker #3: And we also like to maintain a very high percentage of private pay beds, where our pipeline really looks a lot like our current portfolio.

Speaker #3: So, I think AL will continue to be kind of the main thread through our pipeline, to the extent we have IL. It's more of a feeder within the same properties, and memory care is a valuable and important business that mixes in as well.

Speaker #3: But you shouldn't see too much of a change in the composition of our portfolio as we grow.

Speaker #7: Okay. Thanks, guys.

Rob Stevenson: Okay. Thanks, guys.

Speaker #3: Thank you.

Andrew Babin: Thank you.

Speaker #2: Your next question comes from the line of Wesley Goloday with Baird. Your line is open. Please go ahead.

Operator 2: Your next question comes from the line of Wesley Golladay with Baird. Your line is open. Please go ahead.

Operator: Your next question comes from the line of Wesley Golladay with Baird. Your line is open. Please go ahead.

Speaker #6: Hey, good afternoon, everyone. Just a quick question on the back half of the year, on the compensation front. How does it look versus what you originally planned for the year with all these changes you made?

Wesley Golladay: Hey, good afternoon, everyone. Just a quick question on the back half of the year on the compensation front. How does it look versus what you originally planned for the year with all these changes you made?

Speaker #3: Yeah. So, we upped the stock comp portion of it a bit—obviously, adding on the board through some shares there. And any time a director exits, as we had that situation earlier this year, there can be accelerated vesting.

Andrew Babin: Yeah. We upped the stock comp portion of it a bit. Obviously, adding Al to the board. There's some shares there. Anytime a director exits, as we had that situation earlier this year, there can be accelerated vesting. There's been some impact there. As Michael mentioned earlier, we're continuing on recruiting additional board members. To the extent we have new board members joining us throughout the year, there could be additional grants. Really that's kind of the only adjustment there. I'll make one more comment that total G&A guidance does not really contemplate any changes as a result of kind of remixing our business. To the extent directionally we move out of the OMF segment, there could be some potential savings there. We feel better quantifying that once some of these transactions have closed.

Speaker #3: And so there's been some impact there. But as Michael mentioned earlier, we're continuing to recruit additional board members. And to the extent we have new board members joining throughout the year, there could be additional grants.

Speaker #3: So really, that's kind of the only adjustment there. I'll make one more comment: total G&A guidance does not really contemplate any changes as a result of kind of remixing our business.

Speaker #3: And so, to the extent that we are directionally moving out of the OMF segment, there could be some potential savings there. But we feel better quantifying that once some of these transactions have closed.

Speaker #3: And as our portfolio reconstitution further materializes, we'll update it as the year goes on.

Andrew Babin: As our portfolio reconstitution kind of further materializes, we'll update it as the year goes on.

Speaker #6: I appreciate all that. I was actually looking for, on the shop side, being that you made some changes on the staffing there versus your expectations.

Wesley Golladay: I appreciate all that. I was actually looking for on the SHOP side, being that you made some changes on the staffing there versus your expectations. I do appreciate the G&A answer as well. That was helpful.

Speaker #6: But I do appreciate the G&A answer as well. That was helpful.

Speaker #3: Oh, sure. Yeah. So we already contemplated the additions to the shop team in guidance last quarter. There's really no change related to that.

Andrew Babin: For sure. Yeah. We already contemplated the additions to the SHOP team in guidance last quarter. There's really no change related to that.

Speaker #6: Okay. Thank you very much.

Wesley Golladay: Okay. Thank you very much.

Speaker #4: Yeah, I think that was good. I was saying no meaningful changes in terms of shop comp expense as a result of some of the strategic changes that we made in the second quarter at those communities.

Michael Anderson: No, I'd say no meaningful changes in terms of soft comp expense as a result of some of the strategic changes that we made in Q2 at those communities.

Speaker #6: Okay. Thank you.

Wesley Golladay: Okay. Thank you.

Speaker #3: Thanks, Wes.

Andrew Babin: Thanks, Louis.

Speaker #4: Thanks.

Michael Anderson: Thanks.

Speaker #2: We've reached the end of the Q&A session. I will now turn the call back to Michael Anderson for closing remarks.

Operator 1: We've reached the end of the Q&A session. I will now turn the call back to Michael Anderson for closing remarks.

Operator: We've reached the end of the Q&A session. I will now turn the call back to Michael Anderson for closing remarks.

Speaker #4: Thank you. Thank you all for joining us this afternoon. We're excited about the results from this quarter and about the direction we see for the second half of the year.

Michael Anderson: Thank you. Thank you all for joining us this afternoon. We are excited about the results from this quarter, excited about the direction that we see the H2 of the year continuing towards, and we really look forward to sharing additional updates as we have them over the course of the year and appreciate the time this afternoon. Thanks.

Speaker #4: We really look forward to sharing additional updates as we have them over the course of the year. I appreciate your time this afternoon.

Speaker #4: Thanks.

Speaker #2: This concludes today's call. Thank you for attending. You may now disconnect.

Operator 1: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Access the National Healthcare Properties, Inc. IR website for more information. This line will now disconnect.

Operator: This concludes today's call. Thank you for attending. You may now disconnect. This event has now concluded. Access the National Healthcare Properties, Inc. IR website for more information. This line will now disconnect.

Q2 2026 National Healthcare Properties Inc Earnings Call

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