National Healthcare Properties NASDAQ: NHP reported second-quarter results marked by continued growth in its senior housing operating portfolio, an expanded acquisition pipeline and lower leverage following its April initial public offering.
Chief Executive Officer Michael Anderson said the company’s strategy remains focused on growing its senior housing operating portfolio, or SHOP, through acquisitions, concentrating capital in senior housing and developing a balance sheet consistent with an investment-grade unsecured issuer.
SHOP Operations Drive NOI Growth
The company’s SHOP segment generated 20.1% year-over-year same-store cash net operating income growth during the second quarter. Same-store average occupancy reached 84.1%, up 140 basis points from the second quarter of 2025, while same-store cash NOI margin expanded 230 basis points to 22.4%.
Chief Financial Officer Drew Babin said growth was driven by occupancy gains, a 5.9% increase in revenue per occupied room, or RevPOR, and margin improvement. Same-store RevPOR reached $6,390 for the quarter, supported by new leasing activity in addition to annual rate escalators that took effect in January across nearly the entire portfolio.
The company said occupancy growth was less than anticipated during the quarter, with the shortfall centered in its assisted living segment. Babin said the company supported an operator’s decision to replace certain property-level executive director and sales leadership positions. Anderson later said the changes affected six communities in the R1 portfolio and largely occurred in the middle of the second quarter.
Management said those properties led occupancy gains in July after the leadership changes. The operator also added regional sales leadership and a divisional sales leader, according to Anderson.
For the third quarter, the company plans to use targeted, short-term concessions at communities with occupancy generally below 85%. Babin said the incentives may temporarily reduce revenue growth in the months they are offered but are intended to increase occupancy and support longer-term NOI growth. Anderson said the company views a one-month concession as worthwhile if it helps secure a longer resident stay and improves margins.
Guidance Raised for SHOP NOI
NHP increased its 2026 SHOP same-store cash NOI growth outlook by 2 percentage points at both ends of its prior range. The company now expects growth of 15% to 18%, representing approximately $51.6 million to $52.9 million.
Babin said the guidance increase primarily reflected second-quarter results, including outperformance in rate growth and margins. Compensation-related expense growth continued to moderate as the portfolio approached fully staffed levels, while property insurance costs are expected to decline beginning in the third quarter.
The company maintained its full-year outlook for its outpatient medical facilities, or OMF, segment. OMF same-store cash NOI decreased 0.4% year over year to $20.2 million in the second quarter, despite a sequential increase in occupancy and a 97% retention rate. Babin attributed the decline to a one-time increase in utility and other non-reimbursable expenses.
Full-year OMF same-store cash NOI guidance remained at growth of 2.5% to 3.5%, or $81.2 million to $82 million, excluding expected OMF dispositions.
Acquisitions Expand Senior Housing Portfolio
NHP acquired two Midwest senior housing communities totaling 211 units for $98 million in late June. In July, it closed on 17 communities with 1,003 units across the Midwest, South, Mid-Atlantic and Pacific Northwest for approximately $182 million.
Thirteen of the July-acquired communities were purchased through a joint venture with Discovery Senior Living in which NHP holds an approximately 98.5% interest. The arrangement also provides NHP with a right of first refusal and purchase option for 13 additional Discovery-managed communities.
Year to date, the company has acquired 19 properties with 1,214 units for approximately $280 million. The acquisitions carried a blended first-year yield of 7.9% and a projected third-year yield of 9.7%, according to Anderson.
The company also has agreements to acquire three Illinois communities with 178 units for $30 million and two Florida communities with 200 units for $90 million. Both transactions are expected to close in the third quarter, subject to customary conditions and regulatory approvals.
On Aug. 4, NHP was named stalking horse bidder for five SHOP communities in a bankruptcy process. The properties have occupancy in the mid- to high-80% range, Anderson said, and the company expects a low- to mid-7% first-year yield and a yield approaching 9% by year three if it completes the acquisition. The transaction remains subject to an auction, though NHP would receive a breakup fee and expense reimbursement exceeding $4.8 million if it does not prevail.
The five-property transaction is not included in NHP’s acquisition guidance. The company continues to expect $375 million to $425 million of acquisitions in 2026, with at least half of the consideration for the auctioned portfolio expected to be funded with NHP operating partnership units or REIT shares if acquired.
Balance Sheet and Portfolio Rotation
Normalized funds from operations totaled approximately $10.9 million, or $0.18 per share, in the second quarter. NFFO rose in absolute dollars from the prior year due to higher NOI and interest income and lower interest expense, partly offset by higher general and administrative costs. Per-share NFFO declined sequentially and year over year because of the additional shares issued in the April IPO.
The company’s net debt-to-annualized further adjusted EBITDA ratio declined to 4.6 times in the second quarter from 8.6 times in the first quarter. NHP also expanded and recast its credit facility to $1.2 billion, including a larger revolver and new term-loan capacity at improved spreads and terms.
NHP used the facility to repay approximately $332 million of Fannie Mae loans at par, eliminating its only 2026 debt maturity. Babin said that, after the planned redemption of preferred stock and expected OMF asset sales, leverage including preferred equity is expected to be in the low- to mid-5 times range by year-end.
The company’s planned divestiture of 86 outpatient medical facilities for approximately $528 million became binding after the buyer’s due diligence period expired in mid-July. Anderson said a portion is expected to close in the third quarter and another portion likely in early fourth quarter, subject in part to the loan-assumption process. NHP also agreed to sell one non-core California SHOP community for approximately $42 million.
Separately, NHP appointed Al Campbell, the former chief financial officer of Mid-America Apartment Communities, as an independent director effective Aug. 10 and said it is seeking another independent director.
About National Healthcare Properties (NASDAQ:NHP)
National Healthcare Properties Inc is a self-managed real estate investment trust focused on acquiring, owning and investing in a diversified portfolio of healthcare real estate, with an emphasis on providing senior housing. National Healthcare Properties Inc is based in NEW YORK.
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