National Health Investors, Inc.

Good morning and welcome to the NHI Second Quarter 2026 Earnings Webcast and Conference Call. At this time, all participants have been placed on a listen-only mode and the floor will be open for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Dana Hambly.

The floor is yours. Thank you and welcome to the National Health Investors Second Quarter 2026 Conference Call. On the call today are Eric Mendelsohn, President and CEO, Kevin Pascoe, Chief Investment Officer, Todd Siefert, Chief Financial Officer, and David Travis, Chief Accounting Officer. Yesterday, NHI released its second quarter results in conference call information in a press release after market close. Today's remarks may include forward-looking statements which are subject to risks or uncertainties and are not guarantees of future performance. Investors are urged to carefully review NHI's filings with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2025 and Form 10-Q for the quarter ended June 30, 2026 for discussion of these risks. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireet.com. In addition, today's call may include certain non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release, which has been furnished to the SEC on a Form 8-K. Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release. I'll now turn the call over to our CEO, Eric Mendelsohn.

Good morning and thank you for joining us today. The second quarter represented another important step in executing the strategy we outlined earlier this year. Our operating results were in line with our expectations We completed the sale of the NHC portfolio on July 1st. We further expanded our shop platform, and we continued investing in the people and infrastructure necessary to support our long-term growth. The completion of the NHC transaction marks one of the most significant corporate actions in NHI's history. Beyond increasing our private pay senior housing focus, it substantially strengthens our balance sheet by reducing leverage to well below our long-term target range and provide strong liquidity to pursue future investments. We believe this financial flexibility creates a meaningful competitive advantage as acquisition opportunities accelerate. Our shop portfolio performed in line with our expectations for the quarter and our outlook for the year is unchanged. Same store results improved significantly from the first quarter while the newer acquisitions and transition properties are collectively performing within our original investment assumptions. As shop becomes a larger percentage or NOI, we believe these newer investments will increasingly define the company's organic growth profile. In the past year, we've increased our shop investment by 137% to approximately $850 million. or 24% of the company's total. As the shop portfolio grows from a relatively small platform into a larger contributor, we are deliberately investing ahead of that growth in people, technology and processes to ensure we can continue expanding while maintaining disciplined execution. That includes evolving our leadership structure to support the company's next phase of growth, which is why we're excited to welcome Chris Mango, as our new Chief Operating Officer. Chris brings extensive operating and asset management experience that will further strengthen oversight of our growing shop portfolio. Just as importantly, his addition allows Kevin Pascoe to dedicate even greater attention to expanding operator relationships, sourcing investment opportunities, and driving our acquisition strategy. Discipline capital deployment remains one of our highest priorities. We believe this enhanced organizational structure positions NHI to execute more effectively through strong operating performance while increasing our capacity to source attractive investments. We also completed our planned CFO transition on July 1st with Todd Siefert assuming the role of Chief Financial Officer. Todd inherits a strong balance sheet with significant liquidity that positions us well to support our long-term growth strategy. His seamless transition ensures continuity of the financial discipline and capital allocation instincts that have long been cornerstones of NHI's success. We continue to believe that the industry backdrop provides powerful and sustained tailwinds for our company. Demand is accelerating as the aging population expands while new construction remains historically low. Taken together, we believe NHI enters the second half of the year from a position of strength and our focus remains unchanged. Delivering strong operating performance across our expanding shop portfolio, pursuing disciplined external growth through thoughtful capital allocation, maintaining a conservative balance sheet and creating sustainable long-term value for our stockholders. While there's always more work to be done, the progress we've made this year reinforces our confidence in the company's strategic direction. We believe NHI is exceptionally well positioned to capitalize on one of the most attractive senior housing environments and we're excited about the opportunities ahead. With that, I'll turn the call over to Kevin to discuss our business development and asset management activities. Kevin. Thank you, Eric.

Beginning with business development, NHI has completed $237.2 million of year-to-date investments in private pay senior housing at an average yield of 7.7%, including more than $212 million in shop investments. Our external growth strategy remains focused on private pay senior housing across both shop and triple net structures while maintaining the flexibility to transition selected assets to shop when and where we see greater long-term value creation. We continue to see an active investment environment and believe that our strong reputation as a reliable capital partner, enhanced liquidity, and increased business development resources position NHI favorably to capitalize on our robust pipeline. We currently have approximately 127.3 million under signed letters of intent, primarily in shop, with an estimated initial yield of 6.8% and 6.5% after maintenance CapEx. Beyond the signed LOIs, we are evaluating approximately 420 million of additional deals, excluding several larger portfolio transactions. While the pace of acquisitions can vary from quarter to quarter, our investment discipline does not. We believe the actions we've taken over the past several months have meaningfully increased our capacity to execute as opportunities arise, and we're confident we'll continue to deploy capital where the long-term risk-adjusted returns are most attractive. As a part of our ongoing asset management process, we continually evaluate every property to ensure it supports NHI's long-term strategy. While acquisitions naturally receive the most attention, dispositions are an equally important component of disciplined capital allocation. In addition to the NHC sale, we completed the disposition of seven properties with six operators for net proceeds of $117.4 million in 2026. We noted last quarter that we are evaluating a range of strategic alternatives for our same-store shop portfolio. We have discussed a solution with our board on a subset of same-store properties that we believe could provide a better use of our capital. As the negotiations are ongoing, we will provide more details as plans are finalized. Now turning to our operating performance, total shop NOI increased by 188.5% compared to the second quarter of 2025, driven by the transition and acquisition of 27 properties. Collectively, Shop NOI for the second quarter at $11 million was in line with our forecast. Same-store NOI on the 15 legacy holiday properties, which represents less than 5% of total annualized NOI, declined 6.3% year-over-year to $3.6 million. On a more positive note, when compared to the first quarter of 2026, same-store NOI increased by 18.9%. For the 26 properties that have been in the portfolio since the beginning of this year, NOI increased sequentially by approximately 7.6% from the first quarter of 2026 to the second quarter. Overall, our second quarter shop results were consistent with the outlook we established last quarter, and our full year expectations are unchanged. We remain encouraged by the performance of our newer shop investments, These communities continue to support our outlook for high single to low double-digit NOI growth and reinforce our confidence in the long-term return profile of our acquisition strategy. While much of our attention has understandably focused on shop, our TripleNet portfolio continues to provide a solid foundation for the business. Across our TripleNet portfolio, operating fundamentals remain stable. We continue to experience full contractual rent collections as well as healthy occupancy and rent coverage throughout the portfolio. Cash lease revenue increased approximately 2.8% year-over-year driven by $2.4 million in acquisitions as well as $2.3 million in contributions from percentage rent and annual escalators. This was partially offset by approximately $2.9 million from the transition of seven properties to shop and property dispositions. Even arm coverage improved across our major asset classes For the 12 months ended March 31, 2026, senior housing and SNF coverages were 1.62 and 2.66 respectively. This compares to 1.52 and 2.26 respectively in the comparable prior year periods. Please note that we have removed the NHC assets and other assets held for sale from our EBITDARM coverage calculations. As previously discussed, we reset the Bickford leases to fair market value on April 1st, which increased the base rent to $38.4 million from $35 million previously. In addition to Bickford's base rent, we receive additional rent based on a revenue-driven formula that allows NHI to participate in the operating upside. During the quarter, we received approximately $1.3 million in additional rent, which included partial payments calculated prior to the April rent reset. Going forward, we continue to expect approximately $900,000 of quarterly additional rent under the new agreement. That concludes my remarks, and I'll now turn the call over to Todd to discuss our financial results. Todd?

Thank you, Kevin, and hello, everyone. It's a privilege to be here today and report our second quarter results. I'll first provide details on our second quarter financial results, followed by a brief discussion on our balance sheet and liquidity. For the quarter ended June 30, 2026, our net income per share was $1.15, an increase of 45.6% from the prior year's second quarter. The increase was driven largely by a $22 million gain on the sale of real estate recorded during the quarter related to the disposition of five properties for net proceeds of approximately $98.5 million. Our NAE REIT FFO and normalized FFO results per share for the second quarter compared to the prior year period were flat and decreased 2.5% respectively to $1.19 per share. NAE REIT FFO and normalized FFO for the second quarter of 2026 included $1.1 million in expenses related to the CFO transition and approximately $700,000 of non-cash deferred income tax expenses. FAD for the second quarter compared to the prior year period increased 5.8% to $61.6 million. FAD for the second quarter of 2026 included approximately $500,000 in cash expenses related to the CFO transition. As Kevin noted, our cash rental income increased by 2.8% compared to the prior year's second quarter, and our total shop NOI increased by 188.5%. Interest income from the mortgages and other notes declined by 16.1% due to the reduction in the principal amounts of our notes receivable balance. General and administrative expenses for the second quarter increased 44% to $8.8 million compared to $6.1 million in the second quarter last year. As the company continues to ramp its shop growth strategy in terms of personnel, in addition to one-time expenses related to the CFO transition. Interest expense for the second quarter increased 5.4% year-over-year due to higher average interest rates on the company's debt coupled with a higher balance on our revolving credit facility compared to the prior year period. Turning to our balance sheet and liquidity, our net debt to adjusted EBITDA ratio at June 30th was 4.1 times and well within our leverage policy of 3.5 to 4.5 times. During the quarter, we retired the $125 million term loan due June 2026. We have a $100 million private placement note due in January 2027, which we expect to retire by the end of 2026, and have no other maturities until 2028. Our available liquidity on June 30th was approximately 792.4 million, attributable to 262 million in excess revolver capacity, 500 million available under our recently refreshed ATM and cash on hand. In July, we completed the sale of the NHC portfolio for cash consideration of 560 million and expect to recognize a gain of approximately $541.6 million during the third quarter. Consistent with our capital allocation strategy, approximately $221 million of the proceeds was used to complete previously acquired replacement properties under reverse Section 1031 exchanges. The remaining proceeds of approximately $334 million are being held for future tax-deferred reinvestment under Section 1031. This strategy is intended to preserve capital for reinvestment while deferring a substantial portion of the taxable gain associated with the NHC disposition. At this time, the company's 2026 taxable income and capital gains are not yet determinable. Let me now turn to our dividend. As we announced last night, our board of directors declared a two cent per share increase to our quarterly dividend to 94 cents per share for stockholders of record on September 30th, 2026 and payable November 6th, 2026. I'd like to conclude by thanking everyone here at the company, particularly John Spaid, who made the transition smooth and seamless. I especially want to thank Eric and our board of directors for the opportunity to serve as CFO. I fully believe we have a bright future ahead of us. Once again, thank you for joining our call today. That concludes our prepared remarks. With that, operator, please open the lines for questions.

Certainly. Ladies and gentlemen, the floor is now open for questions. If you wish to join the queue to ask a question at this time, please press star 1 on your telephone keypad. We do ask if listening on speakerphone this morning that you pick up your handset while asking your question to provide optimal sound quality. Once again, please press star 1 on your telephone keypad at this time if you wish to join queue to ask a question. Please hold a moment while we poll for questions. And our first question this morning is coming from John Kilachowski from Wells Fargo. John, your line is live. Please go ahead.

Hi, good morning. Thanks for taking my question. My first one is on the opening remarks. You mentioned some potential plans around the same sort of portfolio. I understand you can't say much about it, but I was hoping you can give us a little bit of color. You said a subset of the portfolio. Is that far less than half? Is it a sizable portion? Could it be greater than half? And then could you give us a timeline on roughly when you think you could update us on this?

Hey, John, this is Eric. Yes, understand your curiosity and the sensitivity around Talking about solutions is these are still operating businesses that have competitors and employees that will feel insecure if they think something's going to happen to their building. So we're very careful to keep our cards close to our chest until we're ready to make an announcement. But you've been around this business long enough to know that the asset management principles are you try and Thank you for joining us. on the asset and if it is lower than we want then we compare it to well gee if we sold something could we pay off some debt and would that be accretive if we sold something and we bought something else with it that had a better return would that be accretive and how about the gap in between so there's a lot of variables in the plan and the timing is really You know, this year. I want to get it done this year.

And then how about on just the management side? You've made a couple exciting, you know, updates to the C-suite here. I'm curious, how will the business look different over the next, you know, six to 12 months given these changes?

Sure. Great question. If you think about it, a year ago, our shop exposure and assets were around 5% or 6%. and now we're close to 25 percent and we've told the street that we'd like to get to 40 or 50 percent and that's probably a three-year plan. Hiring a COO does two things. It gives Kevin an opportunity to put the pedal to the metal on acquisitions and you know I think that We have a good brand and a good opportunity to partner with operators that Kevin can exploit and use to grow our platform and ramp up our acquisitions. We talk about a run rate of 200 to 400 a year. I'd like to see that go to the 500 to 700 a year. And I think with Kevin focused on nothing but acquisitions, he can do that. The other Thank you.

Thank you. Your next question is coming from Austin Werschmitt from KeyBank Capital Markets. Austin, your line is live. Please go ahead.

Thanks. Good morning, everybody. So last quarter, Eric or Kevin, you guys talked about several larger portfolios. You were evaluating over $200 million in outstanding LOIs and was just hoping you could give an update as to where those deals stand. and then just wondering kind of where the primary focus is in terms of these larger portfolios versus more of the singles or doubles that are quoted within that $440 million future pipeline. Thanks.

Hey, Austin. This is Kevin. As I mentioned in my remarks, we still have several portfolios that are in play that are on the larger side. We just don't disclose those because it would amplify the number to probably an unreasonable measure. Pipeline remains active and as I've talked about here with the team is we've got to be able to do it all. The singles and doubles are good relationship builders and add-ons. I think as we're looking at initial deals, generally we're looking at small to mid-sized portfolios to kind of establish a relationship and then use the singles or great bolt-ons to that opportunity. It's just really hard. and, in my opinion, a little inefficient to start with a single. But if it's the right operator, the right building, right geography, we'll do that. So we've got to be able to have a tool for every job. And sometimes that is the radio structure. Sometimes that is the lease structure that we've also talked about. The shop mentality is really the focus still. But again, I think we need to be able to pick people that are doing the right things for seniors. and be able to apply a structure that makes sense for our company with that individual group. So, you know, the answer is we got to do it all.

What's the pricing differential between the larger deals you're evaluating versus the single doubles? And just, you know, how confident are you in the team today that you can redeploy the remaining, you know, 334 million, I think it was, of NHC proceeds? using the 1031 exchange and avoid paying any type of special dividend. Thanks.

Sure. As it relates to the special, I'll have Eric or Todd answer that component. But as I mentioned, the pipeline is very active. I feel very good about our position in the market, what we're looking at. That said, we're also remaining regimented about how we do our underwriting. It's not an asset aggregation strategy for us. It's making sure that we're finding the right opportunities and are building for the future. Eric and Todd, do you want to take the special?

I feel, again, if we're good stewards of capital, we'll do everything we can to avoid the special dividend. It's a headache for certain investors and there's some tax implications to our investors I know they'd rather not deal with so we're going to do everything we can to avoid that special dividend and someone asked about a throwback dividend which is not a reference to nostalgia but it is the ability to borrow on future dividends to get coverage in the present so we have a lot of a lot of

Sorry, just about the pricing differential between the larger deals versus the single doubles, and that's all for me. Thank you.

Yes, sorry, Austin. This is Kevin again. That spread has closed pretty significantly over the last six months. It used to be at least 100 basis points. I'd say it's probably 25 to 50, and the whole market has shifted down over that period of time as well, too. You know, at least 100 basis points. What I think a lot of news clippings used to say, you know, year one, seven, we're seeing some pressure on that number now. And it's probably closer to, you know, six, six and a half on higher quality stuff, if not a little bit lower. And then, you know, you'll see even on your what I would consider maybe these, you know, B type property. they're in the sevens now. So it's a very competitive market that has continued to shrink but also goes back to our underwriting and making sure that we're getting the best risk-adjusted returns for what we're buying.

Thanks, everybody. Appreciate the time.

Thank you. Your next question is coming from Farrell Granup from Bank of America. Farrell, your line is live. Please go ahead.

Thank you and good morning. My question or my first question is on the same store shop guidance. Just given the first two quarter performance and maintaining that one to three percent, can you just bridge what the expectation would be for the second half of the year with maintaining that guidance?

Sorry, make sure I understand the question. Bridge the gap on same store performance. You're just talking about one half to second half?

For the full year, 1% to 3% range for the same-store shop NOI growth relative to the same-store shop NOI, which were more in the negative range or below the midpoint of that guidance in the first half of the year.

Well, I think if you look at the supplemental, you'll see we've had some growth quarter over quarter. We expect to see a similar result throughout the balance of the year. The change to that would be, as Eric alluded to, we have some growth solutions that we're executing on the portfolio and making sure that we're pruning as appropriate. And then there's other, you know, one of the other ones that was been a pressure point here is we have one building where there's a number of units offline. That project is underway, will be expected to be finished by the end of the year, but that by itself puts at least a percentage point of occupancy pressure here. So as you've alluded to here, the second half of the year is back-end loaded. We do expect to see some additional growth. The big focus for us is really making sure that we get occupancy back to where we want it to go. We had some good momentum going in up until the second quarter of last year. We've seen some exacerbated move outs. We're rebuilding the pipeline, but you can also see that we're increasing the rev for quarter over quarter. Making sure that we're getting the quality move-ins, but we just need to get the volume to make sure that we're covering those move-outs. That said, again, we're covering the RAC costs, the resident acquisition costs, and making sure that the NOI is improving quarter over quarter. That's really the focus, and we expect to see more out of the third and fourth quarter.

Great.

And I guess also on that, How are you driving that occupancy growth? Are there different incentives on the individual property levels? Is there an overarching type of policy in order to be pretty much supporting that growth going forward?

The key really is just making sure that we have the right people in place at the building and the management level. We've been working with our operating partners to make sure that that's getting the appropriate focus. I think it is, but something we're going to stay on them about. And then each Building will have a little bit different plan for what they're seeing in their marketplace. But there will be, for example, units that have been online or offline, so to speak, for an extended period of time. You have a concession for something where you get revenue off something that overlooks the dumpster or what have you, just making sure that there is a pricing program for where that unit is in the building and that they can sell it. That's the key that we've been working on with our operating partners, and I think that the plan is in place. It's the execution that we're focused on, and we'll be making sure we got our thumbs on them.

Great. Thank you so much.

Thank you. Your next question is coming from Juan Sanabria from BMO. Juan, your line is live. Please go ahead.

Hi. Good morning. Thanks for the time. Maybe just kind of a two-part question to start. First, I guess, how should we think about the G&A run rate given the investments in the team? And I'm not sure if Chris is on, but if he is, just kind of curious on the strategic focus, day one, and or if he's not on, Eric, how would you think about Chris's KPIs as he takes the helm of COO?

Hey, Juan. Good questions. G&A run rate, well, obviously the CFO transition will not be a regularly recurring expense, so things of that nature will be normalized out in future budgets and guidance. The strategic focus for Chris as the new COO, his first 100 days is to get his arms around the portfolio, to focus on Some issues we have with shop, and that's why he's not here today. He's out visiting buildings. He has worked with some of our asset managers that we have onboarded in the past two years. So in their case, this is say hello to the new boss, the same as the old boss. And they'll be implementing a lot of new systems and new methodologies that Chris Springs with him from his days as an operator.

And Juan, it's Dana. On the cash G&A component, the guidance is unchanged. It's going to be up kind of low teens year over year.

Thanks for that, Dana. And then just on the triple net portfolio, you made an allusion to maybe having further transitions to shop. So just Maybe hoping you could size that or talk about the types of communities or portfolios and maybe if you can comment if that includes Bigfoot or latest trends there.

Sure. Hey, Juan. This is Kevin. I would tell you that our focus is more external when we're doing shop right now. That said, that's not excluding anything that's in the portfolio. There are a couple opportunities. There are a couple operators that we would love to do additional business with, and we're working on that as we speak. A big part of it is what is their bench strength, what is their capability in the back office, making sure that they have the SOX compliance components and a few other pieces in order to get to where we can have that relationship. So that's been a fair amount of the conversation now, making sure that they have The back office and the bench strength. Most of our operators give us all the reporting that we want. It's that next level that we really got to scrutinize if we're going to go to the shop relationship. So there's, as I mentioned, there's a few. Bickford, I think we got to make sure we keep an eye on where their performance is, what are the opportunities. You know, as your point is, I'm assuming based on coverage that there is some value that's locked up in that lease and we would tend to agree. So something we'll continue to evaluate, but we got to make sure that the relationship is a fit, you know, all the way around and it's not purely, you know, we have to take into other considerations, not just the economics.

Thank you, Kevin.

Thank you. Your next question is coming from Rich Anderson with Cantor Fitzgerald. Rich, your line is live. Please go ahead. Thanks.

Good morning. So, Eric, you said through your plan to get to 40 to 50 shop. I have to admit, I would have been expecting three months based on what we're hearing. So, like, you know, to what degree is that sort of setting, you know, a beatable target? It sure seems that way based on all the activity you guys are talking about.

you know what would what would why would it take so long to get from 24 to 40 with everything that's going on today thanks agree rich at part of my internal wiring is to under promise and over deliver so if you were to press me on that I would say yes of course I think we can do better as well and do it faster just as we just as we have gotten to this point faster But the market is tricky, and I can't give you certainty on that. Sure.

Do you think a 50 is the efficient frontier for NHI, or is that like step one in the process and then evaluate if you want to become almost a pure playish type of shop, or will... Will there always be a net lease component? To Kevin's point, you're looking around for triple net assets as well. So I'm wondering what you think of as the optimal level of operating exposure for the company longer term.

Yeah, that's a great question and something that we noodle quite a bit here at the office. Part of the issue is when we get to 50%, we would We would need to have a solid component of our portfolio that is strongly SOX compliant. And if that were the case, we could grow with smaller, less compliant operators who probably don't have the back office sophistication. And that would give us the flexibility to add on to that number. So ask me again when we get there.

Okay, let's try to remember that. And last quarter I asked the question about what would be considered success after the NHC sale and redeploying, and you said I would consider success in six months. Do you have a change to that answer today based, again, on everything that's going on, leverage profile, all the good things that are happening at the company?

No. Slightly different. I would add to that, I would consider it success if we don't pay a special dividend because we're able to reinvest all of the 1031 proceeds. And then, to your point, if we're able to reinvest all that money into shop or senior housing within the same year, I think that would be great. And the total success would be if we were to add enough accretive acquisitions on top of the redeployment to get us to our 5% or better FAD growth. Okay.

Last question for me. And Kevin, you said the emphasis is really on external growth for shop, but you did mention conversions. How do you do that if you've got rent coverage What's to incentivize an operator to move to shop? I'd say very little, but I guess if the lease expires, then different conversation, ball becomes more in your court. Is that the way to think about the shop conversion story for NHI, that it'll be sort of a trickling effect based on lease expirations, or is there a way to get to that opportunity sooner than that? Thanks.

Sure.

Yeah, sure. This is Kevin again. There's absolutely a way to get there sooner. I think the lease expiration is one avenue. But the other way would be if there's an ask, if you will, from the operating partner. It could be that they want to access that value and there might be a payment associated with buying out the lease coverage. It might be that they want to do and expansion or have some other capital needs. And this gives us an opportunity where we're the capital provider rather than layer on more lease payment. Do we go ahead and do a conversion? So it might be that they want off a guarantee. I mean, there are other ways that we can have that conversation. So we just have to evaluate what we're willing to give in order to get that cash flow. But I think when we think about where hotspots are for operating partners, it generally is around CapEx or kind of locked up value, if you will. So there's avenues to get at it, and then it's just a negotiation on what is that valuation or what are we trading in order to have that relationship.

Okay, great stuff. Thanks, guys. Thanks, Rich.

Thank you. Your next question is coming from Omoteo Okufanya from Deutsche Bank. Omoteo, your line is live. Please go ahead.

Yes, good morning, everyone. First of all, I just wanted to say a final all the best to John. I'm pretty sure he's listening to the call and it's definitely been a pleasure working with him all these years. The question I had was around shop. Kevin, could you talk a little bit just around, again, some of the stuff you've bought this quarter, some of the stuff you're kind of targeting in general? kind of what kind of vintage you're looking for, newer, older assets, generally kind of where occupancy is. And I ask that in the vein of what was mentioned earlier around kind of a same-store NOI growth profile of kind of high single digits to low double digits that you're targeting. I'm just looking at that relative to a lot of your peers that kind of are in the kind of low to mid-teens and just trying to size up the two things of why your target is maybe a couple of hundred bips lower versus what some of your peers are currently putting up.

Sure, happy to. I think the one thing to keep in mind here as we think about portfolios construction is making sure that we have a solid base. So if you look at our yields, they are a little bit better than what I would say is kind of the marketed yields. And a lot of, if you're going in at a lower yield, generally you're expecting more growth. What we've been buying is, I would call it light value add, where it's high 80s, low 90s. We expect a couple percentage points of occupancy increase. We expect some, or at least we're underwriting moderate rate increases, and then maybe there's some expense efficiencies. So if you're able to get those, you should be at least on that low end of what I quoted, which is that 8% to 10% type growth year over year. We think that there is an avenue for growth beyond that, but given that they're almost stable, we're not promising a big growth. But what I do think, though, is if you have a solid base, then one of the prior questions were how do you add some of the onesie-twosies. Those are the ones where I think you have a little more flexibility to go out and get some of that additional growth. So how do we have a solid base with an operating partner and make sure we're getting solid growth profile but then add some of those opportunistic investments once you have the relationship where you want it so we can get additional growth over time. So as I think about portfolio construction, that's really been the baseline for us right now is make sure we do it right, we have a solid portfolio, and then we can go grab some of the growth stuff over time.

That makes perfect sense. On the shop side, Again, some quarter-over-quarter improvement in NOI and NOI margins. I've been on a year-over-year basis, so some challenges. But just curious about the quarter-over-quarter change. Is there any of that kind of more seasonality as you kind of are in the summer season? Or was there like some fundamental improvements there that get you encouraged that things are ultimately moving in the right direction with the same stock portfolio? Sure. I would just...

What we focus on internally is lead volumes, tours, closes, making sure that we're covering our outs. As I mentioned earlier, we haven't for the last quarter or two. And some of that is based on some buildings, units that we went offline. Again, that's about a percentage point. But there's some other extenuating circumstances where we've had... An increased number of deaths for a few months that put some pressure on it. So again, it's getting focused on making sure that we're closing those leaves and getting the move-ins. But as you already noted, the NOI is increasing. We're getting quality leads. We're getting better pricing. We've got to supercharge that and make sure we're getting the additional move-ins because you can't cut your way to profitability. Making sure we have the right incentive packages. We're not just giving away units, but getting accretive move-ins. That's a big focus for our operating partners right now. And as you can see, I think they're doing that. We just got to do more of it.

Ty, it's Dan. I think Farrell asked the question earlier. I want to make sure we answer it. You look at our guidance for the year on the same store, it would imply growth in the second half of the year, kind of that 8% to 9% range. Gotcha.

Thank you.

Thank you. And as a reminder, if you wish to join the queue to ask a question at this time, you may press star 1 on your telephone keypad. Once again, as a final reminder, should you wish to join queue for a question, please press star 1 on your keypad at this time. And we have a follow-up question from Juan Sanabria from BMO. Juan, your line is live. Please go ahead.

Hi, thanks for the follow-up time. Just a question on the balance sheet. You've reduced leverage post-NHC. You obviously have some gains to redeploy to avoid tax implications, but curious on how we should think about funding of over and above redeploying the NHC capital with your reduced leverage target and kind of how you think about the sweet spot for leverage if your preference were to be to continue to use equity to delever as some of your peers have done.

Yeah, this is Todd. Thanks, Juan. Yes, I mean, obviously, if the equity is there and we've got accretive deals that we can obviously show to investors of what that growth story looks like, then we would certainly look to access the equity markets. But we do have capacity from a debt capacity perspective and still be well within a range that we put out there for three and a half to four and a half times going forward. So that's kind of how we think about it, at least I think about it.

That's it for me. Thank you.

Thanks, Juan. Thank you. Thank you. And there are no further questions in queue at this time. I would now like to pass the floor back to Eric Mendelsohn for closing remarks.

Thanks, everyone, for joining us early this morning. And we look forward to seeing you at NAREIT or other senior housing conferences. Thank you.

This does conclude today's conference call. You may disconnect at this time and have a wonderful day. Thank you once again for your participation.