NATIONAL HEALTH INVESTORS INC

Previous wording

Unless the context otherwise requires, references throughout this document to “NHI” or the “Company” include National Health Investors, Inc., and its consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English” guidelines, this Quarterly Report on Form 10-Q has been written in the first person. In this document, the words “we”, “our”, “ours” and “us” refer only to National Health Investors, Inc. and its consolidated subsidiaries and not any other person.

Current wording

Unless the context otherwise requires, references throughout this document to “NHI” or the “Company” include National Health Investors, Inc., and its consolidated subsidiaries. In accordance with the Securities and Exchange Commission’s (“SEC”) “Plain English” guidelines, portions of this Quarterly Report on Form 10-Q have been written in the first person. In this document, the words “we”, “our”, “ours” and “us” refer only to National Health Investors, Inc. and its consolidated subsidiaries and not any other person.

Previous wording

See the notes to the annual audited consolidated financial statements in our most recent Annual Report on Form 10-K for the year ended December 31, 2023, “Business” and “Risk Factors” under Part I, Item 1 and Item 1A, respectively, therein and “Risk Factors” under Part II, Item 1A of this Quarterly Report on Form 10-Q for a further discussion of these and of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent therein. You should carefully consider these risks before making any investment decisions in the Company. These risks and uncertainties are not the only ones facing the Company. There may be additional risks that we do not presently know of and/or that we currently deem immaterial. If any of the risks actually occur, our business, financial condition, results of operations, or cash flows could be materially and adversely affected. In that case, the trading price of our common stock could decline and you may lose part or all of your investment. Given these risks and uncertainties, we can give no assurance that these forward-looking statements will, in fact, occur. We caution readers not to place undue reliance on such forward-looking statements, which speak only as of the dates made. We undertake no obligation to revise or update any of the forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.

Current wording

See the notes to the annual audited consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023, “Business” and “Risk Factors” under Part I, Item 1 and Item 1A, respectively, therein and “Risk Factors” under Part II, Item 1A of this Quarterly Report on Form 10-Q for a further discussion of these risks and of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent therein. You should carefully consider these risks before making any investment decisions in the Company. These risks and uncertainties are not the only ones facing the Company. There may be additional risks that we do not presently know of and/or that we currently deem immaterial. If any of the risks actually occur, our business, financial condition, results of operations, or cash flows could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose part or all of your investment. Given these risks and uncertainties, we can give no assurance that these forward-looking statements will, in fact, occur. We caution readers not to place undue reliance on such forward-looking statements, which speak only as of the dates made. We undertake no obligation to revise or update any of the forward-looking statements to reflect subsequent events or circumstances except to the extent required by applicable law.

Previous wording

National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed REIT specializing in sale leaseback, joint-venture, and mortgage and mezzanine financing of need-driven and discretionary senior housing and medical facility investments. We operate through two reportable business segments: Real Estate Investments and SHOP. Our Real Estate Investments segment consists of real estate investments and leases, mortgages and other notes receivable in independent living facilities (“ILF”), assisted living facilities (“ALF”), entrance-fee communities (“EFC”), senior living campuses (“SLC”), skilled nursing facilities (“SNF”) and a hospital (“HOSP”). We fund our real estate investments primarily through: (1) operating cash flow, (2) debt, including note offerings, bank lines of credit and term debt, both unsecured and secured, and (3) the sale of equity securities. Our SHOP segment is comprised of the operations of 15 ILFs that provide residential living and other services for residents located throughout the United States that are operated on behalf of the Company by independent managers pursuant to the terms of separate management agreements. The third-party managers, or related parties of the managers, own equity interests in the respective ventures.

Current wording

National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed REIT specializing in sale leaseback, joint-venture, and mortgage and mezzanine financing of need-driven and discretionary senior housing and medical facility investments. We operate through two reportable business segments: Real Estate Investments and SHOP. Our Real Estate Investments segment consists of real estate investments and leases, and mortgage and other notes receivable in independent living facilities (“ILFs”), assisted living facilities (“ALFs”), entrance-fee communities (“EFCs”), senior living campuses (“SLCs”), skilled nursing facilities (“SNFs”) and a hospital (“HOSP”). We fund our real estate investments primarily through: (1) operating cash flow, (2) debt, including note offerings, bank lines of credit and term debt, both unsecured and secured, and (3) the sale of equity securities. Our SHOP segment is comprised of the operations of 15 ILFs that provide residential living and other services for residents located throughout the United States that are operated on behalf of the Company by independent managers pursuant to the terms of separate management agreements. The third-party managers, or related parties of the managers, own equity interests in the respective ventures.

Previous wording

As of March 31, 2024, we had investments in real estate and mortgage and other notes receivable involving 180 facilities located in 31 states. These investments involve 97 senior housing properties, 65 SNFs and one HOSP, excluding one property classified as an asset held for sale. These investments consisted of properties with an original aggregate cost of approximately $2.4 billion, rented under primarily triple-net leases to 25 tenants, and $274.3 million aggregate carrying value of mortgages and other notes receivable, excluding an allowance for expected credit losses of $15.5 million, due from 14 borrowers.

Current wording

As of June 30, 2024, we had investments in real estate and mortgage and other notes receivable involving 179 facilities located in 31 states. These real estate investments consisted of 106 senior housing properties, 72 SNFs and one HOSP, excluding two properties classified as assets held for sale. Our Real Estate Investments portfolio as of June 30, 2024 was comprised of properties with an original aggregate cost of approximately $2.5 billion, rented under primarily triple-net leases to 25 tenants, and $256.8 million aggregate carrying value of mortgages and other notes receivable, excluding an allowance for expected credit losses of $15.9 million, due from 16 borrowers.

Previous wording

Our SHOP segment is comprised of two ventures that own the operations of 15 ILFs. These ventures, in which NHI owns a majority interest, own the underlying independent living operations and are structured to comply with REIT requirements that utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes. These properties are operated by third-party property managers that manage our communities in exchange for the receipt of a management fee, and as such, we are not directly exposed to the credit risk of the property managers in the same manner or to the same extent as we are to our triple-net tenants. However, we rely on the property managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our communities efficiently and effectively. We also rely on the property managers to set appropriate resident fees and otherwise operate our communities in compliance with the terms of our management agreements and all applicable laws and regulations. As of March 31, 2024, our SHOP segment consisted of 15 ILFs located in eight states, with a combined 1,732 units.

Current wording

Our SHOP segment is comprised of two ventures that own the underlying independent living operations of 15 ILFs. These ventures, in which NHI owns a majority interest, are structured to comply with REIT requirements that utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes. These properties are operated by third-party property managers that manage our communities in exchange for the receipt of a management fee, and as such, we are not directly exposed to the credit risk of the property managers in the same manner or to the same extent as we are to our triple-net lease tenants. However, we rely on the property managers’ personnel, expertise, technical resources and information systems, proprietary information, good faith and judgment to manage our communities efficiently and effectively. We also rely on the property managers to set appropriate resident fees and otherwise operate our communities in compliance with the terms of our management agreements and all applicable laws and regulations. As of June 30, 2024, our SHOP segment consisted of 15 ILFs located in eight states, with a combined 1,732 units.

Previous wording

The following tables summarize our portfolio, excluding $2.6 million for our corporate office, $5.0 million in assets held for sale and a credit loss reserve of $15.5 million, as of and for the three months ended March 31, 2024 ($ in thousands):

Current wording

The following tables summarize our portfolio, excluding $2.6 million for our corporate office, $5.7 million in assets held for sale and a credit loss reserve of $15.9 million, as of and for the six months ended June 30, 2024 ($ in thousands):

Previous wording

The following table summarizes the geographic concentration of net operating income (“NOI”) of our portfolio, excluding Non-segment/Corporate NOI, for the three months ended March 31, 2024 and 2023 ($ in thousands).

Current wording

The following table summarizes the geographic concentration of net operating income (“NOI”) of our portfolio, excluding Non-segment/Corporate NOI, for the six months ended June 30, 2024 and 2023 ($ in thousands).

Previous wording

For the three months ended March 31, 2024, operators of facilities in our Real Estate Investments portfolio who provided 3% or more individually, and collectively 59% of our total revenues were (parent company, in alphabetical order): Bickford Senior Living (“Bickford”); Discovery Senior Living (“Discovery”); Encore Senior Living; Health Services Management; Life Care Services; NHC; Senior Living Communities (“Senior Living”); and The Ensign Group.

Current wording

For the six months ended June 30, 2024, operators of facilities in our Real Estate Investments portfolio that provided 3% or more individually, and 63% collectively, of our total revenues were (parent company, in alphabetical order): Bickford Senior Living (“Bickford”); Chancellor Health Care; Discovery Senior Living (“Discovery”); Encore Senior Living (“Encore”); Health Services Management; Life Care Services; NHC; Senior Living Communities (“Senior Living”); and The Ensign Group.

Previous wording

As of March 31, 2024, our average effective annualized NOI for the Real Estate Investments reportable segment was $10,051 per bed for SNFs, $14,185 per unit for SLCs, $16,315 per unit for ALFs, $8,379 per unit for ILFs, $20,537 per unit for EFCs and $63,899 per bed for the HOSP. As of March 31, 2024, our average effective annualized NOI per unit for the SHOP reportable segment was $6,793.

Current wording

As of June 30, 2024, our average effective annualized NOI for the Real Estate Investments segment was $9,618 per bed for SNFs, $14,239 per unit for SLCs, $18,845 per unit for ALFs, $8,276 per unit for ILFs, $21,606 per unit for EFCs and $63,899 per bed for the HOSP. As of June 30, 2024, our average effective annualized NOI per unit for the SHOP reportable segment was $6,821.

Previous wording

Substantially all of our revenues and sources of cash flows from operations are rents paid under operating leases for real estate, revenues under resident agreements and interest earned on mortgage and other notes receivable. These revenues represent a primary source of liquidity to fund our distributions to stockholders and depend upon the performance of the operators. Operating difficulties experienced by our operators and managers could have a material adverse effect on their ability to meet their financial and other contractual obligations to us, as well as on our results of operations. We monitor operator performance through periodic reviews of operating results for each facility, covenant compliance and property inspections, among other activities.

Current wording

Substantially all of our revenues and sources of cash flows from operations are rents paid under operating leases for real estate, revenues under resident agreements and interest earned on mortgage and other notes receivable. These revenues represent a primary source of liquidity to fund our distributions to stockholders and depend upon the performance of the operators and managers. Operating difficulties experienced by our operators and managers could have a material adverse effect on their ability to meet their financial and other contractual obligations to us, as well as on our results of operations. We monitor operator performance through periodic reviews of operating results for each facility, covenant compliance and property inspections, among other activities.

Previous wording

One property in our Real Estate Investments portfolio, with an aggregate net real estate balance of $5.0 million, was classified as an asset held for sale on our Condensed Consolidated Balance Sheet as of March 31, 2024. Rental income associated with this property was $0.3 million and $0.5 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Two properties in our Real Estate Investments portfolio, with a net real estate balance of $5.7 million, were classified as assets held for sale on our Condensed Consolidated Balance Sheet as of June 30, 2024. Rental income associated with assets held for sale totaled $0.5 million and $0.9 million for the three and six months ended June 30, 2024, respectively, and $0.4 million and $1.0 million for the three and six months ended June 30, 2023, respectively.

Previous wording

During the three months ended March 31, 2023, we recorded impairment charges of approximately $0.3 million for three properties in our Real Estate Investments segment. The impairment charges are included in “Loan and realty losses” in the Condensed Consolidated Statement of Income.

Current wording

During the three and six months ended June 30, 2024, we recorded impairment charges of approximately $0.7 million on one property reclassified to assets held for sale in the second quarter of 2024 in our Real Estate Investments segment. During the three and six months ended June 30, 2023, we recorded impairment charges of approximately $0.1 million on two properties and approximately $0.5 million on three properties, respectively, in our Real Estate Investments segment. The impairment charges were determined in connection with the preparation of the financial statements for the applicable quarterly period and are included in “Loan and realty losses (gains)” in the Condensed Consolidated Statements of Income.

Previous wording

In March 2024, we executed a purchase and sale agreement with a tenant to acquire its leased SLC for a purchase price of $38.5 million subject to the tenant’s ability to secure financing for the purchase. The purchase and sale agreement expires in December 2024. Until the tenant provides notification that it has obtained financing, the property continues to be classified as held and used and leased pursuant to the existing triple-net lease that generates approximately $2.9 million in annual rent and expires in July 2027. The property had a net investment of $19.6 million as of March 31, 2024.

Current wording

In March 2024, we executed a purchase and sale agreement with a tenant to acquire its leased SLC for a purchase price of $38.5 million subject to the tenant’s ability to secure financing for the purchase. The purchase and sale agreement expires in December 2024. Until the tenant provides notification that it has obtained financing, the property continues to be classified as held and used and leased pursuant to the existing triple-net lease that generates approximately $2.8 million in annual rent and expires in July 2027. The property had a net investment of $19.4 million as of June 30, 2024.

Previous wording

Our leases for real estate properties are typically structured as “triple-net leases” on single-tenant properties having an initial leasehold term of 10 to 15 years with one or more five-year renewal options. As such, there may be reporting periods in which we experience few, if any, lease renewals or expirations. During the three months ended March 31, 2024, we did not have any significant renewing or expiring leases. Most of our existing leases contain annual escalators in rent payments. For financial statement purposes, rental income is generally recognized on a straight-line basis over the term of the lease.

Current wording

Our leases for real estate properties are typically structured as “triple-net leases” on single-tenant properties having an initial leasehold term of 10 to 15 years with one or more five-year renewal options. As such, there may be reporting periods in which we experience few, if any, lease renewals or expirations. During the three and six months ended June 30, 2024, we did not have any significant renewing or expiring leases. Most of our existing leases contain annual escalators in rent payments. For financial statement purposes, rental income is generally recognized on a straight-line basis over the term of the lease.

Previous wording

In the first quarter of 2024, we began negotiations with a tenant to transition its leased SNF located in Wisconsin to a new operator. We wrote off in the first quarter of 2024 the straight-line rent receivable of approximately $0.8 million associated with the existing lease that is expected to be terminated by the third quarter of 2024.

Current wording

In June 2024, we transitioned a leased SNF located in Wisconsin to a new operator. The new lease contains a purchase option to acquire the property at the end of the initial lease term in 2031 or during the renewal period at a fixed minimum internal rate of return on our investment. In the first quarter of 2024, we wrote off to “Rental income” the straight-line rent receivable of approximately $0.8 million associated with the terminated lease.

Previous wording

Certain of our leases contain purchase options allowing tenants to acquire the leased properties. At March 31, 2024, tenants had purchase options on three properties with an aggregate net investment of $58.0 million that will become exercisable between 2027 and 2028. Rental income from these properties with tenant purchase options was $1.8 million for both the three months ended March 31, 2024 and 2023.

Current wording

Certain of our leases contain purchase options allowing tenants to acquire the leased properties at a fixed base price plus a specified share in any appreciation, fixed base price, or a fixed minimum internal rate of return on our investment. At June 30, 2024, tenants had purchase options on four properties with an aggregate net investment of $78.5 million that will become exercisable between 2027 and 2031. Rental income from these properties with tenant purchase options was $2.0 million and $3.8 million for three and six months ended June 30, 2024, respectively. Rental income from these properties with tenant purchase options was $1.8 million and $3.6 million for three and six months ended June 30, 2023, respectively.

Previous wording

The following table contains information regarding concentration in our Real Estate Investments portfolio of tenants or affiliates of tenants, that exceed 10% of total revenues for the three months ended March 31, 2024 and 2023, excluding $2.6 million for our corporate office, a credit loss reserve of $15.5 million and $348.7 million in real estate assets for the SHOP segment ($ in thousands):

Current wording

The following table contains information regarding concentration in our Real Estate Investments portfolio of tenants or affiliates of tenants that exceed 10% of total revenues as of and for the six months ended June 30, 2024 and 2023, excluding $2.6 million for our corporate office, a credit loss reserve of $15.9 million and $351.1 million in real estate assets for the SHOP segment ($ in thousands):

Previous wording

Straight-line rent of $(0.7) million and $(0.3) million and interest income of $0.9 million and $1.0 million were recognized from the Senior Living investments for the three months ended March 31, 2024 and 2023, respectively. Straight-line rent of $0.1 million and $(0.3) million was recognized from NHC for the three months ended March 31, 2024 and 2023, respectively. Interest income of $0.7 million and $0.9 million, respectively, was recognized from the Bickford notes receivable for the three months ended March 31, 2024 and 2023. Reference Note 3 to the condensed consolidated financial statements included in this report.

Current wording

Straight-line rent revenue of $(0.5) million and $(0.6) million and interest income of $1.8 million and $1.9 million were recognized from the Senior Living investments for the six months ended June 30, 2024 and 2023, respectively. Straight-line rent revenue of $0.1 million and $(0.6) million was recognized from NHC for the six months ended June 30, 2024 and 2023, respectively. Interest income of $1.4 million and $1.5 million was recognized from the Bickford notes receivable for the six months ended June 30, 2024 and 2023, respectively. Reference Note 3 to the condensed consolidated financial statements included in this report.

Previous wording

Effective April 1, 2024, the combined rent for the portfolio was reset to $34.5 million per year through April 1, 2026, at which time the rent will be reset and will increase annually thereafter based on the Consumer Price Index (“CPI”). The minimum annual increase will be 2% with a cap on the annual increase of 3%. As part of the lease amendments, we agreed to fund up to $8.0 million of capital improvements on 18 properties. Rental revenue will increase at a lease rate of 8.0% applied to the amount expended.

Current wording

Effective April 1, 2024, the combined rent for the Bickford portfolio was reset to $34.5 million per year with nominal increases through April 1, 2026, at which time the rent will be reset to a fair market value based on the Consumer Price Index (“CPI”). Base rent will escalate annually thereafter based on either a fixed percentage or CPI subject to a floor of 2% and a ceiling of 3%. As part of the lease amendments, we agreed to fund up to $8.0 million of capital improvements on various properties, of which less than $0.1 million was funded as of June 30, 2024. Rental revenue will increase at a lease rate of 8.0% applied to the amount expended.

Previous wording

We have three tenants on cash basis of accounting for their leasing arrangements based on our assessment of each tenant’s ability to satisfy its obligations. Cash rents received for the three months ended March 31, 2024 and 2023 were as follows ($ in thousands):

Current wording

We have three tenants on the cash basis of accounting for revenue recognition for their leasing arrangements based on our assessment of each tenant’s ability to satisfy its obligations. Cash rents received from these tenants for the three and six months ended June 30, 2024 and 2023 were as follows ($ in thousands):

Previous wording

1 Excludes $2.5 million of rental income related to the reduction of pandemic-related rent deferrals recognized in connection with the acquisition of an ALF from Bickford in 2023.

Current wording

1 Excludes $2.5 million of rental income related to the reduction of pandemic-related rent deferrals recognized in connection with the acquisition of an ALF from Bickford in the first quarter of 2023.

Previous wording

Our operators report to us the results of their operations on a periodic basis, which we in turn subject to further analysis as a means of monitoring potential concerns within our portfolio. We have identified EBITDARM (earnings before interest, taxes, depreciation, amortization, rent and management fees) as a primary performance measure for our tenants, based on results they have reported to us. We believe EBITDARM is useful in our most fundamental analyses, as it is a property-level measure of our operators’ success, by eliminating the effects of an operator’s method of acquiring the use of its assets (interest and rent), its non-cash expenses (depreciation and amortization), and expenses that are dependent on its level of success (income taxes), and also excluding the effect of the operator’s payment of its management fees, as typically those fees are contractually subordinate to our lease payment. For operators of our EFCs, our calculation of EBITDARM includes other cash flow adjustments typical of the industry which may include, but are not limited to, net cash flows from entrance fees; amortization of deferred entrance fees; adjustments for tenant rent obligations; and management fee true-ups. The eliminations and adjustments reflect covenants in our leases and provide a comparable basis for assessing our various relationships.

Current wording

Our operators report to us the results of their operations on a periodic basis, which we in turn subject to further analysis as a means of monitoring potential concerns within our portfolio. We have identified EBITDARM (earnings before interest, taxes, depreciation, amortization, rent and management fees) as a primary performance measure for our tenants, based on results they have reported to us. We believe EBITDARM is useful in our most fundamental analyses, as it is a property-level measure of an operator’s success, by eliminating the effects of the operator’s method of acquiring the use of its assets (interest and rent), its non-cash expenses (depreciation and amortization), and expenses that are dependent on its level of success (income taxes), and also excluding the effect of the operator’s payment of its management fees, as typically those fees are contractually subordinate to our lease payment. For operators of our EFCs, our calculation of EBITDARM includes other cash flow adjustments typical of the industry which may include, but are not limited to, net cash flows from entrance fees; amortization of deferred entrance fees; adjustments for tenant rent obligations; and management fee true-ups. The eliminations and adjustments reflect covenants in our leases and provide a comparable basis for assessing our various relationships.

Previous wording

3 Senor Living operates nine discretionary CCRC properties and one need-driven assisted living community.

Current wording

3 Senior Living operates nine discretionary CCRC properties and one need-driven assisted living community. Bickford pro forma coverages at the increased rent, effective April 2024, are 1.45x for T12 and 1.21x for Prior T12.

Previous wording

In addition to inflation risk and increased interest rates, our borrowers and tenants experience periods of significant financial pressures and difficulties similar to those encountered by other healthcare providers. Our Condensed Consolidated Statement of Income for the three months ended March 31, 2023 reflects impairment charges of our long-lived assets of approximately $0.3 million. We reduced the carrying value of any impaired property to estimated fair value, or with respect to the properties classified as held for sale, to estimated fair value less estimated transaction costs. We have no significant intangible assets currently recorded on our Condensed Consolidated Balance Sheet as of March 31, 2024, that would require assessment for impairment.

Current wording

In addition to inflation risk and increased interest rates, our borrowers and tenants experience periods of significant financial pressures and difficulties similar to those encountered by other healthcare providers. Our Condensed Consolidated Statements of Income for the three and six months ended June 30, 2024 reflect impairment charges of our long-lived assets of approximately $0.7 million. We reduced the carrying value of any impaired property to estimated fair value, or with respect to the properties classified as held for sale, to estimated fair value less estimated transaction costs. We have no significant intangible assets currently recorded on our Condensed Consolidated Balance Sheet as of June 30, 2024, that would require assessment for impairment.

Previous wording

We have established a reserve for estimated credit losses of $15.5 million and a liability of $0.3 million for estimated credit losses on unfunded loan commitments as of March 31, 2024. We evaluate the reserves for estimated credit losses on a quarterly basis and make adjustments based on current circumstances as considered necessary.

Current wording

We have established a reserve for estimated credit losses of $15.9 million and a liability of $0.3 million for estimated credit losses on unfunded loan commitments as of June 30, 2024. We evaluate the reserves for estimated credit losses on a quarterly basis and make adjustments based on current circumstances as considered necessary.

Previous wording

•Funds received for reimbursement of property operating expenses totaled $2.7 million for the three months ended March 31, 2024, compared to $2.6 million for the three months ended March 31, 2023, and are reflected as a component of rental income. These property operating expenses are recognized in operating expenses in the line item “Taxes and insurance on leased properties.” The increase in the reimbursement income and corresponding property expenses is due to increased amounts received from tenants and expenses paid on their behalf.

Current wording

•Funds received for reimbursement of property operating expenses totaled $2.8 million for the three months ended June 30, 2024, compared to $3.2 million for the three months ended June 30, 2023, and are reflected as a component of rental income. These property operating expenses are recognized in operating expenses in the line item “Taxes and insurance on leased properties.” The decrease in the reimbursement income and corresponding property expenses is due to decreased amounts received from tenants and expenses paid on their behalf.

Previous wording

•Resident fees and services less senior housing operating expenses increased $1.0 million, or 55%, primarily due to increased revenues from higher occupancy in our SHOP activities in the current period. See Note 5 to the condensed consolidated financial statements included in this report.

Current wording

•Resident fees and services less senior housing operating expenses increased $0.8 million, or 40%, primarily due to increased revenues from higher occupancy in our SHOP segment in the current period. See Note 5 to the condensed consolidated financial statements included in this report.

Previous wording

•Interest income from mortgages and other notes increased $0.6 million, or 11.9%, primarily due to new and existing loan fundings, net of paydowns on loans.

Current wording

•Interest income from mortgages and other notes increased $0.7 million, or 13.0%, primarily due to new and existing loan fundings, net of paydowns on loans.

Previous wording

•Gains on sales of real estate, net decreased $1.3 million. The gain recognized in the first quarter of 2023 was associated with one property disposition. No properties were sold in the first quarter of 2024.

Current wording

•Gains on sales of real estate, net decreased $9.8 million. The gains recognized in the second quarter of 2024 were primarily associated with the disposition of two properties. During the second quarter of 2023, we disposed of three properties that resulted in gains of approximately $11.4 million.

Previous wording

•Rental income recognized from our tenants decreased $3.1 million, or 4.8%, primarily as a result of properties disposed of since March 2023 and a decrease in pandemic-related rent deferral repayments of approximately $0.9 million, partially offset by new investments funded since March 2023 and an increase in NHC’s percentage rent. Included in rental income for the three months ended March 31, 2024 is a write off of a straight-line rent receivable of approximately $0.8 million related to the expected termination of an existing lease and re-tenanting of a SNF. See Note 3 to the condensed consolidated financial statements included in this report.

Current wording

•Rental income recognized from our tenants increased $1.7 million, or 1.3%, primarily as a result of an increase in pandemic-related rent deferral repayments of approximately $3.2 million, an increase in NHC’s percentage rent and new investments funded since June 2023, partially offset by properties disposed of since June 2023. Included in rental income for the six months ended June 30, 2024 is a write-off of a straight-line rent receivable of approximately $0.8 million related to the termination and re-tenanting of a SNF. See Note 3 to the condensed consolidated financial statements included in this report.

Previous wording

•Interest expense increased $0.8 million, or 6.0%, primarily as the result of increased interest rates, offset by reduced borrowings on the unsecured revolving credit facility and partial repayments of term loans;

Current wording

•Interest expense increased $1.5 million, or 5.3%, primarily as the result of increased interest rates and borrowings on the unsecured revolving credit facility, offset by partial repayments on term loans.

Previous wording

•Franchise, excise and other taxes decreased $0.4 million due to refunds in two states.

Current wording

•Franchise, excise and other taxes decreased $0.6 million due to the timing of $0.5 million in refunds received.

Previous wording

•Loan and realty losses (gains) decreased $0.4 million associated with the decrease of the credit loss reserve of $0.7 million offset by real estate impairment charges on three properties of $0.3 million in the first quarter of 2023 in our Real Estate Investments segment as described under the heading “Assets Held for Sale and Long-Lived Assets” in Note 3 to the condensed consolidated financial statements.

Current wording

•Loan and realty losses increased $1.3 million primarily associated with the increase of the credit loss reserve of $0.5 million and real estate impairment charges on one property of $0.7 million in our Real Estate Investments segment as described under the heading “Assets Held for Sale and Impairments of Long-Lived Assets” in Note 3 to the condensed consolidated financial statements. During the six months ended June 30, 2023, we impaired two real estate properties resulting in impairment charges of approximately $0.5 million.

Previous wording

At March 31, 2024, we had $451.5 million available to draw on our revolving credit facility, $11.4 million in unrestricted cash and cash equivalents, and the potential to access $500.0 million through the issuance of common stock under the Company’s at-the-market (“ATM”) equity program. In addition, the Company maintains an effective automatic shelf registration statement through which capital could be raised via the issuance of debt and/or equity securities.

Current wording

At June 30, 2024, we had $455.5 million available to draw on our $700.0 million unsecured revolving credit facility (the “2022 Credit Facility”), $14.8 million in unrestricted cash and cash equivalents, and the potential to access $500.0 million through the issuance of common stock under the Company’s at-the-market (“ATM”) equity program. In addition, the Company maintains an effective automatic shelf registration statement through which capital could be raised through the issuance of debt and/or equity securities.

Previous wording

Our primary sources of cash include rent payments, receipts from residents, principal and interest payments on mortgage and other notes receivable, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our loans and revolving credit facility. Our primary uses of cash include debt service payments (both principal and interest), new investments in real estate and notes receivable, dividend distributions to our stockholders, operating expenses for the SHOP activities and general corporate overhead.

Current wording

Our primary sources of cash include rent payments, receipts from residents, principal and interest payments on mortgage and other notes receivable, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our loans and 2022 Credit Facility. Our primary uses of cash include debt service payments (both principal and interest), new investments in real estate and notes receivable, dividend distributions to our stockholders, operating expenses for the SHOP activities and general corporate overhead.

Previous wording

Operating Activities –Net cash provided by operating activities for the three months ended March 31, 2024 included new investments completed, the SHOP ventures, lease payment collections arising from escalators on existing leases and interest payments on new real estate and note investments completed.

Current wording

Operating Activities –Net cash provided by operating activities for the six months ended June 30, 2024 included new investments completed, the SHOP ventures, lease payment collections arising from escalators on existing leases and interest payments on new real estate and note investments completed.

Previous wording

Investing Activities – Net cash used in investing activities for the three months ended March 31, 2024 was comprised primarily of $19.0 million of investments in mortgage and other notes receivable and renovations and acquisitions of real estate and equipment and the collection of principal on mortgage and other notes receivable of approximately $2.6 million.

Current wording

Investing Activities – Net cash used in investing activities for the six months ended June 30, 2024 was comprised primarily of $43.0 million of investments in mortgage and other notes receivable and renovations and acquisitions of real estate and equipment and the collection of principal on mortgage and other notes receivable of approximately $8.3 million.

Previous wording

Financing Activities – Net cash used in financing activities for the three months ended March 31, 2024 differed from the same period in 2023 primarily as a result of an approximately $24.5 million decrease in net borrowings, and a decrease of $2.0 million in proceeds from noncontrolling interests over the same period in 2023.

Current wording

Financing Activities – Net cash used in financing activities for the six months ended June 30, 2024 differed from the same period in 2023 primarily as a result of an approximately $10.5 million decrease in net borrowings, and a decrease of $2.9 million in proceeds from noncontrolling interests over the same period in 2023.

Previous wording

Unsecured Bank Credit Facility -Our unsecured bank credit facility consists of $700.0 million unsecured revolving credit facility (the “2022 Credit Agreement”) that matures in March 2026, but may be extended at our option, subject to the satisfaction of certain conditions, for two additional six-month periods. Borrowings under the 2022 Credit Agreement bear interest, at our election, at one of the following (i) Term Secured Overnight Financing Rate (“SOFR”) (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40%, (ii) Daily SOFR (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40% or (iii) the base rate plus a margin ranging from 0.00% to 0.40%. In each election, the actual margin is determined according to our credit ratings. The base rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the agent’s prime rate, (ii) the federal funds rate on such day plus 0.50% or (iii) the adjusted Term SOFR for a one-month tenor in effect on such day plus 1.0%.

Current wording

Unsecured Bank Credit Facility -Our 2022 Credit Facility consists of $700.0 million unsecured revolving credit facility that matures in March 2026, but may be extended at our option, subject to the satisfaction of certain conditions, for two additional six-month periods. Borrowings under the 2022 Credit Facility bear interest, at our election, at one of the following (i) Term Secured Overnight Financing Rate (“SOFR”) (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40%, (ii) Daily SOFR (plus a credit spread adjustment) plus a margin ranging from 0.725% to 1.40% or (iii) the base rate plus a margin ranging from 0.00% to 0.40%. In each election, the actual margin is determined according to our credit ratings. The base rate means, for any day, a fluctuating rate per annum equal to the highest of (i) the agent’s prime rate, (ii) the federal funds rate on such day plus 0.50% or (iii) the adjusted Term SOFR for a one-month tenor in effect on such day plus 1.0%.

Previous wording

The 2022 Credit Agreement requires that we calculate specified financial statement metrics and meet or exceed a variety of financial ratios, which are usual and customary in nature. These ratios are calculated quarterly and as of March 31, 2024, were within required limits. The calculation of our leverage ratio involves intermediate determinations of our “total indebtedness” and of our “total asset value,” as defined in the 2022 Credit Agreement.

Current wording

The 2022 Credit Facility requires that we calculate specified financial statement metrics and meet or exceed a variety of financial ratios, which are usual and customary in nature. These ratios are calculated quarterly and as of June 30, 2024, were within required limits. The calculation of our leverage ratio involves intermediate determinations of our “total indebtedness” and of our “total asset value,” as defined in the 2022 Credit Facility.