NHI Addresses Move-Out Challenges and Legacy Asset Pressures to Propel SHOP Growth and Future Opportunities
National Health Investors (NYSE: NHI) is on a growth trajectory with its senior housing operating portfolio, as highlighted by CEO Eric Mendelsohn. The company is actively exploring move-outs within its legacy assets, which is expected to contribute to future expansion.
In the third quarter, NHI made significant strides by transitioning seven properties into its Senior Housing Operating Portfolio (SHOP) segment. Additionally, the company announced its first SHOP acquisition, a noteworthy $74.3 million deal involving a four-property portfolio from Compass Senior Living.
“We’re working on a strong active pipeline that should generate similar or higher external investment activity in 2026,” Mendelsohn stated, indicating a robust outlook for the company.
Acquisitions are set to play a “meaningful component” in NHI’s growth strategy over the next several years. In 2025 alone, NHI completed $303.2 million in acquisitions, with an additional $195 million under signed letters of intent expected to close in the upcoming months.
These investments are “entirely focused on senior housing,” with Mendelsohn anticipating a “significant number of SHOP deals” in the near future.
During the recent earnings call, leaders addressed a same-store net operating income loss of 2.2% compared to last year, specifically concerning 15 legacy Holiday Retirement properties. This decline was attributed to a 110 basis point drop in occupancy from the third quarter of the previous year.
In this context, NHI experienced “higher move-outs during the quarter,” compounded by personnel changes that resulted in 16 units being taken offline. While these units are not in service, NHI plans to review pricing strategies. Chief Investment Officer Kevin Pascoe noted that the company has “three or four buildings” that have underperformed, impacting overall performance.
“I think some of the good news here is that our lead volumes are still very good,” Pascoe remarked. “It’s a matter of just converting and ensuring we have the right incentives in place for the people on the ground.”
When questioned about the operators of these specific communities, NHI leaders confirmed that both current operators would continue managing the properties. However, Pascoe acknowledged challenges with some legacy Holiday Retirement communities, now managed by Discovery Senior Living and Merrill Gardens, particularly regarding pricing power and the tour process.
In September, NHI issued a formal notice of default to an affiliate of National HealthCare Corporation (NHC) due to non-compliance with non-monetary provisions of the master lease. NHC accounts for 12.2% of NHI’s net operating income, managing 80 skilled nursing facilities with over 10,300 beds.
“The lease is pretty bare bones, as you know, but it does say that if they’re in default, they don’t have the right to renew,” Mendelsohn explained, emphasizing that various outcomes could arise depending on the status of the default.
NHI has engaged Blueprint Advisors to “survey the market” and gather insights on lease rates and cap rates in the areas where these buildings are located. Mendelsohn cited specific “audit requirements, certain reporting requirements, certain insurance requirements, and [capital expenditure] requirements” that led to NHI’s letter. The company also conducted inspections of all NHC-managed buildings and found deficiencies in maintenance and capital expenditures.
In response, NHC has communicated its intent to renew the master lease for one five-year term starting January 2027, pending a review of the situation and the effectiveness of NHC’s notice.
National Health Investors (NYSE: NHI) is on a growth trajectory with its senior housing operating portfolio, as highlighted by CEO Eric Mendelsohn. The company is actively exploring move-outs within its legacy assets, which is expected to contribute to future expansion.
In the third quarter, NHI made significant strides by transitioning seven properties into its Senior Housing Operating Portfolio (SHOP) segment. Additionally, the company announced its first SHOP acquisition, a noteworthy $74.3 million deal involving a four-property portfolio from Compass Senior Living.
“We’re working on a strong active pipeline that should generate similar or higher external investment activity in 2026,” Mendelsohn stated, indicating a robust outlook for the company.
Acquisitions are set to play a “meaningful component” in NHI’s growth strategy over the next several years. In 2025 alone, NHI completed $303.2 million in acquisitions, with an additional $195 million under signed letters of intent expected to close in the upcoming months.
These investments are “entirely focused on senior housing,” with Mendelsohn anticipating a “significant number of SHOP deals” in the near future.
During the recent earnings call, leaders addressed a same-store net operating income loss of 2.2% compared to last year, specifically concerning 15 legacy Holiday Retirement properties. This decline was attributed to a 110 basis point drop in occupancy from the third quarter of the previous year.
In this context, NHI experienced “higher move-outs during the quarter,” compounded by personnel changes that resulted in 16 units being taken offline. While these units are not in service, NHI plans to review pricing strategies. Chief Investment Officer Kevin Pascoe noted that the company has “three or four buildings” that have underperformed, impacting overall performance.
“I think some of the good news here is that our lead volumes are still very good,” Pascoe remarked. “It’s a matter of just converting and ensuring we have the right incentives in place for the people on the ground.”
When questioned about the operators of these specific communities, NHI leaders confirmed that both current operators would continue managing the properties. However, Pascoe acknowledged challenges with some legacy Holiday Retirement communities, now managed by Discovery Senior Living and Merrill Gardens, particularly regarding pricing power and the tour process.
In September, NHI issued a formal notice of default to an affiliate of National HealthCare Corporation (NHC) due to non-compliance with non-monetary provisions of the master lease. NHC accounts for 12.2% of NHI’s net operating income, managing 80 skilled nursing facilities with over 10,300 beds.
“The lease is pretty bare bones, as you know, but it does say that if they’re in default, they don’t have the right to renew,” Mendelsohn explained, emphasizing that various outcomes could arise depending on the status of the default.
NHI has engaged Blueprint Advisors to “survey the market” and gather insights on lease rates and cap rates in the areas where these buildings are located. Mendelsohn cited specific “audit requirements, certain reporting requirements, certain insurance requirements, and [capital expenditure] requirements” that led to NHI’s letter. The company also conducted inspections of all NHC-managed buildings and found deficiencies in maintenance and capital expenditures.
In response, NHC has communicated its intent to renew the master lease for one five-year term starting January 2027, pending a review of the situation and the effectiveness of NHC’s notice.
