Nhi Targets Shop Growth, Improvement In 2026 After Slight Dip In Occupancy 

National Health Investors (NYSE: NHI) is dedicating more resources to its senior housing operating portfolio (SHOP) after average occupancy declined across the portfolio over the past quarter.

The 26-property portfolio in the fourth quarter of 2025 carried an occupancy rate of 86.9%, which is lower than the company’s third-quarter 2025 occupancy rate of 87.9%. In the fourth quarter of 2024, NHI’s SHOP segment registered at 89.4% average occupancy.

NHI grew SHOP NOI margins to 23.8% in the fourth quarter of 2025, representing a gain of 60 basis points compared to the same quarter in 2025 and a decline of 50 basis points from the previous quarter. Total SHOP revenue increased 119.4% over 4Q24, and 45.1% versus 3Q25.

NHI is offloading seven “not strategically important” properties managed by six operating partners under triple-net leases so it can “better reallocate our resources to focus on relationships with much more growth potential,” said President and CEO Eric Mendelsohn.

Meanwhile, the company is reinvesting in its existing SHOP segment to drive better results by dedicating 70% of its new investments to the portfolio throughout 2026, based on early guidance.

“We are targeting SHOP investments at need-driven senior living communities in secondary suburban markets, where we have a better understanding of the local dynamics that most impact operations,” Mendelsohn said during the company’s fourth-quarter 2025 earnings call with investors and analysts.

That said, NHI management believes the company still is in the “early stages” of significant SHOP growth ahead. NHI made its largest SHOP deal to date in February when it acquired nine properties for $105.5 million.

In 2026, NHI is evaluating a $488 million deal pipeline, excluding portfolio acquisition opportunities, with deals worth about $111 million already under signed letters of intent. All told, NHI has invested about $740 million in the portfolio since its creation.

In the fourth quarter of 2025, NHI reported net income of $1.7 million and funds from operations (FFO) of $1.22 per share.

NHI’s stock is priced at $84.01, down 4.2% from the previous close.

NHI owns 215 properties in 33 states managed by 42 operating partners.

Better results in second half of 2026

NHI management explained that its SHOP growing pains stemmed partly from a group of former Holiday Retirement communities, and Chief Investment Officer Kevin Pascoe noted “we’re not the only ones that have had some issues with” properties formerly managed by the operator.

The Holiday SHOP sub-segment was “more of a science experiment that we backed into when Holiday sold to Atria and Welltower,” Mendelsohn said.

“We’ve put a lot of CapEx in those buildings. We’ve changed managers,” he said. “As we compare them to the same Holiday buildings that are at Ventas and Welltower, from what we’re able to surmise, we’re doing as good or better than they are.”

Mendelsohn added that he feels “very positive” about the company’s most recent SHOP additions.

“I would also point out that it’s assisted living and memory care, not just independent living,” he said. “These buildings are performing well from the get go, and we look at them with an eye toward double-digit growth.”

He said he expects the company’s same-store SHOP results will “perk up” in the second and third quarter of this year when a Holiday community adds extra units and the sub-segment starts including results from the REIT’s communities managed by Sinceri Senior Living. The company anticipates same-store SHOP NOI growth ranging between 7% and8% this year.

NHI also is now collaborating with former Holiday leadership. On Feb. 23, the REIT announced it had added former Holiday CEO Lily Donohue to its board of directors.

NHI seeks to grow the percentage of SHOP’s impact on overall revenue. Mendelsohn noted last year the portfolio’s impact on NOI increased to 10% from 5%, and he anticipates this year doubling it again to the 20% range. Given the additional investments and acquisitions NHI is making, he added that number is still “achievable and on track” as it shifts more investments into its operating portfolio.

“I understand we have some catching up to do, but as you can see by our pipeline numbers, it’s easier to find new deals when you’re looking for SHOP and RIDEA, not so much with leases,” he said.

Under its current guidance, NHI is dedicating 70% of its new investments into the SHOP, according to supplemental information.

The REIT’s strategy, due to lower occupancy in the fourth quarter of 2025 compared to the third quarter, is to focus on stabilizing its portfolio and expanding on margin improvement.

NHI’s total portfolio consists of $3.5 billion in investments, 62% of which goes to senior housing triple net and mortgage, 18% going to its SHOP, 16% to skilled nursing triple and mortgage, 2% to specialty hospital and 2% to other investments. NHI sees the benefits of increasing levels of demand approaching the senior living sector, particularly at a time when new development has reached record lows, which can result in greater occupancy rates.

SHOP growth planned

Looking at its opportunities, Mendelsohn said NHI is “pleasantly surprised” by the number of deals it is seeing now that it is “gung ho” on growing its SHOP platform.

“Growth for us is more of an issue of managing it and underwriting it responsibly, rather than trying to find it,” he said.

NHI’s growth focus revolves going into secondary markets, where operators are keeping a close eye on labor opportunities. As such, Indiana is one market being avoided due to a “tough labor market” where communities tend to run higher on agency usage. More people are beginning to move from coastal regions to places such as Tennessee and the greater Midwest due to more affordable housing and lower costs of living.

Pascoe said based on current margins for buildings in secondary markets, the goal is to look at implementing 5% increases on rates while keeping expenses below the 4% mark, resulting in a “very achieveable” 7% to 8% margin growth range.

“There’s some potential for additional growth beyond that on the revenue line in a lot of these,” Pascoe said. “I like our chances here. I think that we’re building a very good portfolio, and we like our operating partners and their ability to pass through those increases, if not more. That’s in line with what we’ve seen with our triple net portfolio as well, so I think we can do as good or better.”

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