Earnings Call Transcript - NHI Q3 2025

Operator, Operator

Greetings, and welcome to NHI's Third Quarter 2025 Earnings Webcast and Conference Call. Please note that this conference is being recorded. I will now turn the conference over to your host, Dana Hambly. Dana, the floor is yours.

Dana Hambly, Host

Thank you, and welcome to the National Health Investors conference call to review results for the third quarter of 2025. On the call today are Eric Mendelsohn, President and CEO; Kevin Pascoe, Chief Investment Officer; John Spaid, Chief Financial Officer; and David Travis, Chief Accounting Officer. The results as well as notice of the accessibility of this call were released after the market closed yesterday in a press release that’s been covered by the financial media. Any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risks or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI’s Form 10-Q for the year ended December 31, 2024, and Form 10-Q for the quarter ended September 30, 2025. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireit.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules which have been furnished on Form 8-K to the SEC. 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.

Eric Mendelsohn, CEO

Thank you. Hello, and thanks for joining us today. We had a solid quarter, highlighted by the transition of 7 properties to our SHOP portfolio which resulted in consolidated SHOP NOI growth of approximately 63% compared to the prior year’s quarter. We also announced our first SHOP acquisition for $74.3 million effective October 1. We've surpassed last year's investment total with more deals expected to close this year, and we're working on a strong active pipeline that should generate similar or higher external investment activity in 2026. We're raising our guidance for the third time this year. Our updated guidance represents over 10% NFFO per share growth at the midpoint, which would be the strongest annual growth since 2014. The momentum at NHI is building. We are well positioned and laser-focused to capitalize on the generational growth in the senior housing industry over the next decade. As I noted last quarter, we have methodically invested in creating a strong foundation across all of our disciplines that will allow us to significantly expand our presence in private pay senior housing, where we see the greatest risk-adjusted returns. We've onboarded 11 properties and 2 new operators to the SHOP platform in just the last few months. Combined, the recent additions should more than double our annualized SHOP NOI from approximately 5% to 10% of total adjusted NOI. Through strong organic growth and continued acquisitions, our current view is that our SHOP NOI should more than double again in 2026 to at least 20%. We've taken corrective measures in the same-store portfolio and are confident that it returns to double-digit growth levels in 2026 as it did in 2024 and through the first half of this year. This portfolio has been an important part of our development as we are starting to ramp up the SHOP platform. As we evaluate new opportunities, we're placing a high priority on operators and assets with solid trailing performance that should lead to more consistent and exceptional multiyear NOI growth. The pipeline activity indicates that acquisitions will be a meaningful component of our growth profile for the next several years. We've announced investments of $303.2 million so far this year and currently have approximately $195 million under signed LOIs, which we expect to close in the next few months. We have a large incremental pipeline of active opportunities entirely focused on senior housing, including a significant number of SHOP deals. The balance sheet continues to be supportive of our ample capital needs. Our net debt to adjusted EBITDA at 3.6x is below the low end of our target range, and we have available liquidity of over $1 billion. We believe this low leverage and strong access to capital creates a real competitive advantage as we're able to move quickly and with limited closing risk. Touching briefly on the NHC rent negotiation, we disclosed last night that NHC has notified us of their intent to renew the master lease for one 5-year term commencing on January 1, 2027. Management and the special committee are currently reviewing the effectiveness and legality of NHC's notice. Before turning the call to Kevin, I'd like to conclude by saying that NHI is in a great position with several levers to pull both internally and externally that we expect to drive exceptional long-term FFO per share growth. The third quarter benefited from some nonrecurring items, but we believe the core remains strong and well positioned to create sustained shareholder value. The industry tailwinds are gusting, our financial health is peak, and we have invested in the people and resources necessary to scale our future growth.

Kevin Pascoe, CIO

Thank you, Eric. The transition of 7 properties to the SHOP portfolio is just over 3 months old, and we are happy with the early results. The third quarter NOI from these assets is above the prior cash rent, and we now expect that the 2025 NOI contribution exceeds our original forecast of approximately $3.7 million. As with any transition, we expect some impact to near-term growth with the introduction of new management and systems, but still expect this portfolio to contribute meaningfully to SHOP NOI in 2026. We also completed our first SHOP acquisition, including 4 properties for $74.3 million on October 1 with Compass Senior Living as the operator. Our relationship with Compass formally began in 2024 through a $9.5 million mortgage loan with purchase options on 2 properties in Oklahoma. In the process of looking for ways to expand the relationship, Compass brought us the opportunity to acquire 2 more properties that they operate in Oregon, which led to our first SHOP acquisition. We expect the first-year NOI yield on these stabilized properties to be 8.2% or 7.5% adjusting for recurring CapEx. As noted in our earnings press release, the balance of our mortgage and other notes receivable declined by $43.8 million compared to the second quarter due primarily to large paydowns on a couple of loans with limited or no opportunity for future ownership. While this may slightly weigh on near-term interest income, we are excited to be able to recycle this capital into investments with greater long-term value, including opportunities similar to the Compass deal I just described. On that note, the pipeline is active as ever with $195 million under LOI with an average yield of approximately 8.4%. This includes a mix of SHOP, triple net, and loan-to-own opportunities all in senior housing. We expect to close these deals in the fourth quarter and first quarter of 2026. Turning to our operating performance, total SHOP NOI increased by 62.6% compared to the third quarter of 2024 due to the transition of 7 properties on August 1. The same-store NOI on the 15 legacy Holiday properties declined by 2.2% year-over-year, which is obviously not an acceptable result for us. Occupancy declined by 110 basis points from the third quarter of 2024 and 160 basis points sequentially. We experienced higher move-outs during the quarter, key personnel changes, 15 units taken out of service, and approximately $0.2 million in nonrecurring costs, all of which negatively impacted the result. We expect the out-of-service units to come back online in approximately 6 months, and we have taken measures to improve the occupancy in operations. But that will take some time, which led us to adjust our same-store NOI growth for this year; we expect NOI growth for this group to return to double-digit levels in 2026. We have and continue to make investments in our asset management platform, understanding that organic NOI is our best and cheapest source of capital. As we grow the SHOP portfolio, we expect the variability in the same-store portfolio will be reduced, particularly as we believe the assets we are adding are higher quality properties with more consistent growth. Across the triple net portfolio, we are generally experiencing the continuation of solid trends with no rent concessions, continued collection of deferred rents in excess of expectations and stable occupancy and EBITDARM coverages. Cash lease revenue increased approximately 12% year-over-year to $70.1 million during the quarter. Excluding approximately $3.9 million in cash rent received in connection with the Discovery lease terminations, cash revenue increased approximately 5.5% primarily due to acquisitions. On October 31, we exercised our purchase option on a CCRC in Columbia, South Carolina for $52.5 million, with an initial yield of 8.25%. This is a high-quality entrance fee community operated by our long-time partner, Senior Living Communities, and we are excited to bring this property into our own portfolio. Bickford continues to generate strong NOI. Bickford's third quarter occupancy increased by 90 basis points from the second quarter to 86.1%. Trailing 12-month EBITDARM coverage through June 30, including deferral repayments, was 1.49x. Bickford repaid $1.3 million in deferred rent during the third quarter and has an outstanding balance of $8.7 million at October 30. Due to their solid performance, we expect that we'll be able to capture more than the quarterly run rate of deferral repayments into the future base rent at the April 2026 reset with the ability to monetize any remaining deferral balances. I'll now turn the call over to John to discuss our financial results and guidance.

John Spaid, CFO

Thank you, Kevin, and hello everyone. I'm pleased to report our third quarter results were above our expectations. I will highlight the significant areas that contributed to our positive quarter, but first, let me begin with our third quarter results. I'll be using average diluted common shares for all our per share results. For the quarter ended September 30, 2025, our net income per share was $0.69, up 6.2% from the prior year. Our NAREIT FFO results per share for the third quarter compared to the prior year period increased 5.8% to $1.09 per share. Our normalized FFO results per share for the third quarter increased 28% to $1.32 per share compared to the prior year third quarter. FAD for the third quarter ended September 30 compared to the prior year period increased 26% to $62.2 million. On August 1, we completed the conversion of 7 assets from lease to shop. Together with the conversion, we recognized within our Real Estate Investments segment cash rent revenues of $4.6 million, noncash rental income related to operations transfer of $1.4 million, and wrote off $12.1 million in straight-line rents. Upon conversion, we then additionally recognized $2 million in additional SHOP NOI from the conversion properties for the 2 months of operations during the quarter. All of these impacts are reflected in net income and NAREIT FFO. Our normalized FFO and FAD results exclude the impact from the noncash rental income related to the operations transfer and straight-line receivable write-off. During the quarter, we also received approximately $52 million in loan receivable payoffs, not in our previous guidance, which resulted in an improvement of $2 million in the credit loss reserve impacting net income, NAREIT FFO, and NFFO but was adjusted out of our FAD. NOI from our 22 property SHOP segment for the quarter ended September 30 increased 62.6% to $4.9 million compared to the prior year period. We expect these results to continue to rapidly grow further as we recognize NOI from our recent SHOP acquisition and continue to make additional SHOP investments in the coming quarters. Our 15 property same-store SHOP portfolio saw NOI decline 2.2% to $3 million from the prior year period. Same-store SHOP revenues and expenses grew 2.1% and 3.3%, respectively, resulting in a 90 basis point margin decline to 21.1% year-over-year. Interest expense for the quarter was down 8% year-over-year, while weighted average common diluted shares were up 8.3% to 47.6 million shares as a result of the company's greater use of equity in lieu of debt to fund new investments over the last year. Sequentially, compared to the second quarter, cash G&A increased 5.4% to $5.3 million, while legal expenses declined by $1 million. During the quarter, we did not close any new investments but did continue to fulfill our existing commitments. In October, we closed on new investments totaling $126.8 million which includes $46.7 million of previously deployed loan receivable capital. At the end of September, we issued $350 million in 5.35% coupon bonds resulting in net proceeds of $340 million after original issue discounts and bank fees. The bonds mature February 1, 2033. During the quarter, we settled approximately 155,000 common shares from our Q1 2025 forward ATM activity and an adjusted forward price of $73.96 per share after fees and forward costs, for proceeds of approximately $11.4 million. At September 30, 2025, we have remaining escrow forward equity proceeds of approximately $90.6 million available to us in exchange for the future delivery of 1.3 million common shares at an average price of $70.47 per share. We ended the quarter with $81.6 million in cash on our balance sheet and $600 million in revolving capacity after paying down the bank term loan of $75 million at the end of the quarter. Subsequent to the third quarter, we extended the maturity of our $125 million term loan for 6 months to June 16, 2026, retired a $50 million private placement loan, and amended our bank credit facilities to remove a 10 basis point credit spread adjustment to our SOFR interest rate. Our balance sheet ended the third quarter in great shape with improvements in our leverage ratios and liquidity. Our net debt to adjusted EBITDA ratio was 3.6x for the quarter, and our available liquidity was approximately $1.1 billion attributable to the cash on our balance sheet, excess revolver, forward equity, and additional ATM capacity. Let me now turn to our dividend and guidance. As we announced last night, our Board of Directors declared a $0.92 per share dividend for shareholders of record December 31, 2025, and payable January 30, 2026. We also adjusted our full year 2025 guidance, which includes increases to all our per share metrics. Our guidance includes the impacts from our SHOP conversion, announced subsequent events, and our other expected results. Compared to 2024, NAREIT FFO guidance at the midpoint is $4.64 or an increase of 2% and normalized FFO at the midpoint is $4.90 or an increase of 10.4%. Compared to our original February full year guidance, we increased normalized FFO guidance $0.27 per share. Our guidance for FAD at the midpoint is $232.6 million, up from our original February guidance of $221.7 million and represents a 13.9% increase in FAD over 2024. Our guidance includes same-store SHOP NOI growth in the range of 7% to 9% over 2024. We are also providing guidance on our conversion plus new investment SHOP NOI for the full year of between $5.8 million and $6 million. Guidance also includes the continued collection of deferred rents and the fulfillment of our existing commitments. Our updated 2025 guidance includes $75 million in additional new unidentified investments and an average yield of 8%, which is an increase in our investment guidance as this is in addition to investments announced subsequent to our third quarter. Our guidance does not include any additional impacts in 2025 for selling additional forward equity, although some settlement is likely to occur prior to our December dividend date. Our actual equity settlements will be dependent upon the volume and timing of additional new investments. Once again, thank you for joining the call today, and that concludes our prepared remarks. So with that, operator, please open the lines for questions.

Juan Sanabria, Analyst

Hoping to dig a little bit deeper into SHOP. You kind of made reference in the release in the opening remarks about some efforts to remediate things. So hoping you could talk a little bit about what that exactly means? And as part of that, I guess, the backstory on why some units were taken offline, I guess, why now and what’s the scope of work there?

Kevin Pascoe, CIO

Sure. One thing I would like to highlight is that when we discuss our same-store portfolio, specifically the Holiday portfolio, which has been recognized as challenging by some of our peers, it hasn't progressed as we would have preferred; it's been a bit more steady. Regarding the remediation, much of it involves reviewing the portfolio to ensure our units are properly priced. We've implemented the tour pass effectively, along with doing the essential groundwork. Currently, we're concentrating on about three or four buildings where occupancy has lagged, which impacted our overall performance. Ensuring we have the appropriate personnel in place has been addressed. The positive takeaway is that our lead volumes remain strong. The focus now is on conversion and ensuring we have the right incentives for our teams on-site. As we navigate through our budget process, we're assessing everything to ensure we have the right incentives, appropriate pricing, relevant programming, and effective resident engagement. All these elements are in progress, indicating that many corrective measures are underway. As mentioned on the call, we're aiming for additional growth from the portfolio next year. Regarding the units taken offline, we encountered an issue with a building in California due to earth movement a couple of years ago. Over time, we discovered problems with the plumbing on the bottom floor. The initial project scope was underestimated in our forecast. Although we were aware of it, it turned out that we needed to take all of the first four units offline. Therefore, we made the difficult decision to complete the project thoroughly instead of attempting to fix it piecemeal, ensuring we get it right the first time.

Juan Sanabria, Analyst

And just to confirm, there's no tangent operators or one change contemplated? I know you've had some movement with Discovery and their remaining operator would SHOP and no longer triple that?

Kevin Pascoe, CIO

So, correct. Discovery, in relation to SHOP, along with Merrill, are our operators and managers for those. We are closely collaborating with them to ensure we have all the right people in place. As responsible stewards of the portfolio, we must always prioritize what is best for it. Currently, we are working with them to review the portfolio, ensuring that we have all the necessary components in order to get back on track in terms of performance.

Juan Sanabria, Analyst

Great. And then just a second question on NHC. Just curious on where we stand. I know the lease was put into default and NHC kind of came back. And then they sent you a renewal notice, but then there was a comment in the prepared remarks about analyzing the legality of that notice. Just curious on, I guess, the technicality of where we stand today and why you said examining that legality of the renewal notice?

Eric Mendelsohn, CEO

Juan, this is Eric. Yes, that wording was artfully crafted. There could be a question about whether or not they're in default. And if they are in default, whether or not they're able to exercise their renewal option. The lease is pretty bare bones as you know, but it does say that if they're in default, they don't have the right to renew. So all of that could be subject to arbitration or litigation or legal interpretation. So that’s what was meant by that comment.

Austin Wurschmidt, Analyst

Just going back to the NHC question there a moment ago. I guess I was curious if the renewal option did prove to be legal, would that still be at the fair market rent? Or would it be at the current rent level? And I guess how else could that change NHI's negotiating position with respect to the adjustment to fair market rent?

Eric Mendelsohn, CEO

Austin, recognizing that NHC and their counsel are listening to this call, I will just say that all of that is on the table. If the renewal is determined not to be valid, then it's a wide-open negotiation that could include third parties. If the arbitration or litigation does hold that the renewal is valid, then the terms of the lease say that the renewal should be at a market rate, which is also a wide-open interpretation. And as you know, we've hired Blueprint Advisors to help us survey the market and get touch points on lease rates and cap rates in the markets where these buildings reside.

Austin Wurschmidt, Analyst

That's helpful. And then Eric or Kevin, the pipeline of investment opportunities sounds very active. But it did appear like when some assets moved into the under LOI bucket and therefore, that investment pipeline was relatively stable. How far along are you in ramping that pipeline that you quote? And I'm just wondering if you guys are spending more time today on larger portfolios that maybe wouldn't go into the pipeline? Or are you more focused on deals that should over time tuck into the quoted investment pipeline as they move forward?

Kevin Pascoe, CIO

Austin, this is Kevin. I guess the way I would say is you definitely touched on an element of what we're looking at in the pipeline. In terms of the full scope of the pipeline, it's well over $1 billion. But we're not going to report to you a number that we don’t think is achievable. So there are some larger portfolios. Anything over $100 million, we're not reporting in our numbers because I think the percentage hit rate on those is going to be a little lower. So we want to make sure it's signed up before we would report that in terms of what we have under LOI or in our pipeline. So I think that’s just a function of what we’re looking at in a mix of the pipeline at the moment. So I would say it’s as robust as it has been, if not more. It's been an extremely busy year here, and it continues to be. So I don’t really have any hesitation on where our pipeline sits right now.

Farrell Granath, Analyst

I had a quick question about the guidance increase. I was wondering if you could explain the difference between the old and the new guidance. Is the term fee included, and was there any additional positive outlook or just increased confidence? Can you go through a few of the specifics?

John Spaid, CFO

Yes. Okay. This is John Spaid. Let me start from the top. In August, we had to make several assumptions regarding the conversion activity we recognized in the third quarter. That activity turned out much better than expected. Additionally, there were a couple of one-time items that also exceeded our expectations. We also recognized better than expected net operating income from the conversion SHOP portfolio, which influenced the raise. Furthermore, we saw a significant amount of loan receivable payoffs during the quarter. Typically, depending on what is being paid off, we would recognize credit loss reserve reversals, which affect all our metrics except for Funds Available for Distribution. This represented a notable change in our forecast. Interest income will also be affected for both the third and fourth quarters since our mortgage investments have declined. However, from those mortgage payoffs, we collected some accrued interest that had not been recognized and also received some exit fees. Finally, we had to adjust the same-store SHOP portfolio guidance, which used to range from 13% to 16%, and is now revised to 7% to 9% for the year. Those are the primary factors.

Farrell Granath, Analyst

I would like to know more about the SHOP portfolio and the acquisition pipeline. Can you share your insights on the competition in the market? You've mentioned the hit rates on larger portfolios and that we've seen an uptick in SHOP activity along with interest in acquiring full portfolios of SHOP. Can you comment on how the competition is affecting pricing? Is it causing others to offer more than what you estimated for the pricing?

Kevin Pascoe, CIO

Sure. This is Kevin. The competition in the marketplace has definitely increased. However, we have strong relationships with our operating partners, which allows us to access properties that are often off-market. The recent closes we've had reflect this, as we receive direct opportunities from our manager or operating partner, along with our loan-to-own program, which has been beneficial for us. While the environment is more competitive, we aim to avoid deals in our pipeline that are attracting many bidders, particularly from our REIT peers. There's also more private equity entering the market. What sets us apart from others is that we do not have financing contingencies, allowing us to secure better pricing compared to the highest bids since sellers know we can close. We will continue to pursue marketed deals but will focus on maintaining strong relationships to acquire assets at better values.

Richard Anderson, Analyst

If we could just kind of close the circle on NHC for now. Can you remind the basics behind the whether or not they're in default? I know it’s been said, but I just want to make sure we got that clear about your point of view on that topic.

Eric Mendelsohn, CEO

Rich, this is Eric. So when we made the announcement that we sent them a notice of default, we said that there were nonmonetary provisions that they were not adhering to. That was certain audit requirements, that was certain reporting requirements, that was certain insurance requirements, and CapEx requirements. We had done an inspection of all the buildings and found maintenance and level of CapEx to be lacking. So we put that in a letter and sent it to them. And then, of course, as I said earlier, under the terms of the lease, if they’re in default, then they’re not able to renew the lease. So that’s kind of where we are. There are provisions that allow for arbitration. There’s a question as to whether or not the lease renewal rate is subject to arbitration, so that’s something that is a question mark that I can’t really address.

Richard Anderson, Analyst

However, the renewal offer from them is for the entire portfolio. There’s no cherry picking.

Eric Mendelsohn, CEO

Correct. Correct. It’s all or nothing.

Kevin Pascoe, CIO

Sure, this is Kevin. I understand your question. I would say we indicated last quarter that we expected the third quarter to be weaker than the second due to what we were observing in the portfolio. So, this wasn’t unexpected for us. We predicted it. The results were lower than we would have liked to see, so we are implementing the corrective measures I previously mentioned. I also believe this is related to operations. As you've noted, we have a small portfolio, and we are focusing on a few buildings that are impacting the results. As we continue to grow and diversify our investments, that will be crucial for us in SHOP.

John Spaid, CFO

This is John again. In my prepared remarks, I mentioned that we generated $4.6 million in cash revenues from the converted properties, which included everything we collected, such as one month’s rent. We also recognized $1.4 million in noncash rent revenues from operations transfer and a $12.1 million straight-line receivable write-off. When we recognize cash rents, it contributes to our FAD while simultaneously converting the SHOP, which allowed us to recognize $2 million of NOI. This results in some duplication. Another significant one-time item to note is that when we have substantial mezzanine loan payoffs, we reverse the credit loss reserves, impacting our metrics, including FFO but not FAD. Additionally, we've noticed reductions in our interest expense due to the changes, including the Fed results. This is another area I should have highlighted more in my remarks, but we are seeing benefits from our variable rate interest expenses. We also secured a bond at a 5.35% coupon rate, which exceeded my expectations for the third quarter. Our forecast has generally anticipated slightly higher interest rates for the year. Does that help?

Omotayo Okusanya, Analyst

I have a quick question regarding the 8-K you released yesterday about losing two Board members by 2026. I understand there has been a lot of change on the Board overall. Can you share how the Board is considering replacements for these two positions? What specific skill sets or backgrounds are you looking for? Are you considering candidates with Senior Housing operating experience? I'm interested in what directions you might take to strengthen the Board with these two opportunities.

Eric Mendelsohn, CEO

Sure, Tayo. This is Eric. Yes, we made that announcement yesterday that 2 Board members will be rolling off. And as you will recall, we had an activist campaign earlier in the year, and we addressed Board refreshment as part of our strategy to address the activists. So here we are. We're conducting a search using Ferguson Search firm. Ferguson has helped us in the past with some Board members, and we're currently interviewing Board members and you're absolutely right. They will have some senior housing and operations exposure and stay tuned for announcements in that regard. Tayo, this is Eric again. You're absolutely right. You'll recall that we kind of backed into the Holiday conversion of SHOP. The history of that portfolio was a lease with Fortress and Holiday was the operator. The Holiday got bought by Atria and Fortress sold its portfolio to Welltower. And the entity that was our tenant to Welltower, and you’ll recall that we had litigation with Welltower as a result of that. And it was a good opportunity for us to turn lemons into lemonade. Our Board had been on the fence about whether or not to engage and shop operations, and this kind of forced the issue. So it was a science experiment. And generally, we’re happy with the way it turned out. Last year's growth on the portfolio was 30%. Last quarter, we had good growth in Holiday of 15%. We’ll be chasing those numbers and working to get those back again. We’ve added new talent to our bench. You look on our web page, you’ll see we have a new SVP of Asset Management. We have new VPs of Asset Management. We’re very highly skewed towards operations now. And we’re very savvy about what it takes to run an operating platform. Recall that both John and I came from Emeritus, a large operator. So I’m comfortable with this new footing that our company is engaged in, and I’m excited about the opportunity to grow the new store. We converted 7 buildings this quarter, and we bought 6 buildings, and we bought 2 more from Compass and we converted a loan for a total of 4. So we are growing SHOP quickly. And I can tell you the majority of our pipeline is SHOP. So we’re committed.

Juan Sanabria, Analyst

Just piggybacking on Tayo's question. Curious if you could provide any high-level thoughts about G&A with the additions of personnel and doubling down on asset management capabilities.

Eric Mendelsohn, CEO

Sure. If you look in our supplemental, we address our G&A as a percentage of assets under management. And I would still posit to you that we're cost-effective and very low compared to our peers. Looking at year-to-date, exclusive of stock comp at 0.56%. So that’s a good metric. John, do you have anything?

John Spaid, CFO

One way to think about it is revenues per employee. Right now, I’m considering a metric of approximately $11 million in revenues per employee. This might be a bit high in terms of G&A as we progress, but it’s the perspective I’m using. In my guidance, I included our expectations for internal growth as we take on more SHOP. To give you a forward number, this year our SHOP revenues have grown by nearly 60%. If you consider what we’ve announced so far, excluding any new unidentified investments, our SHOP revenues year-over-year will likely increase by over 60%, before discussing new investments. So there you go, those are some figures to consider.

Kevin Pascoe, CIO

Sure, Juan, this is Kevin. From a financial health standpoint, we disclosed our coverage ratios. The lease is doing very well. Similar to my comments about SHOP and our managers, we need to continuously evaluate our entire portfolio, including Bickford, to determine if there are properties that should be sold or moved. We will be undergoing that assessment as we approach the reset to ensure that the properties we retain are the most effective for the portfolio. I feel confident about our relationship with them and the coverage we have on our lease regarding their overall health, although they still need to complete some capital planning. We've discussed their need for long-term debt previously to avoid the issues they currently face, which is an ongoing effort. They have made decent progress in moving some of their owned assets to HUD, providing them with long-term fixed capital, but they still need to do more in that area. Overall, they are making progress, but the pace is likely slower than we would have preferred. We will closely monitor their efforts to ensure that the necessary work is completed.

Operator, Operator

As we have no further questions in the queue at this time, I would like to hand the call back over to Mr. Mendelsohn for any closing remarks.

Eric Mendelsohn, CEO

Thank you all for your time and attention today, and we look forward to seeing you at NAREIT.

Operator, Operator

Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.