NHP: Next SHOP-focused REIT; initiate at Sector Perform

Research evidence excerpt

NHP: Next SHOP-focused REIT; initiate at Sector Perform

quely focused P/AFFO NM 23.2x 16.9x 14.3x

on acquiring seniors housing communities in middle markets. They are FFO/Sh, Rpt Q1 Q2 Q3 Q4

specifically targeting class B, smaller buildings that are well positioned Diluted

to accommodate the local market needs. Private stakeholders believe 2025 0.13A 0.22A 0.27A 0.20A 2026 0.27A 0.15E 0.20E 0.20E

these assets can deliver decent returns if bought correctly with realistically 2027 0.23E 0.23E 0.24E 0.24E

underwritten margins and growth expectations. The company though still AFFO/Sh, Diluted

has a few larger communities in primary markets too. 2025 0.02A (0.05)A 0.21A 0.01A

2026 0.25A 0.10E 0.16E 0.17E

Middle market product should deliver more modest long-term growth: 2027 0.23E 0.22E 0.22E 0.21E

We believe these communities can and will likely deliver strong near- The 30-cent dividend is an RBC estimate.

term organic growth largely supported by solid occupancy gains. However, AllPricedvaluesas ofin priorUSD unlesstradingotherwiseday's marketnoted.close, EST (unless otherwise noted).

once the communities hit full occupancy, we believe the long-term growth

outlook will be more limited. Private stakeholders have noted it will likely

be more difficult to push rates in these types of markets due to a shallower

prospective resident pool and results could be more volatile due to smaller

buildings and lower inherent margins.

Capital recycling initiatives should fund strategic shift: Management has

been de-leveraging and funding SHOP investments via MOB sales. The

company has sold $224 million of mostly MOBs in 3Q24-4Q25 and agreed

to sell another $528 million. We expect the company will remain active

selling down this portfolio, completing ~$250 million of dispositions in