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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 2022
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____________to_____________
Commission File Number 001-10822
National Health Investors Inc
(Exact name of registrant as specified in its charter)
Maryland 62-1470956
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
222 Robert Rose Drive 
MurfreesboroTennessee37129
(Address of principal executive offices) (Zip Code)
(615)890-9100
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each ClassTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par valueNHINew York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act

    
Large Accelerated FilerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of shares of common stock held by non-affiliates on June 30, 2022 (based on the closing price of these shares on the New York Stock Exchange) was approximately $2,581,065,000. There were 43,388,742 shares of the registrant’s common stock outstanding as of February 13, 2023.

DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive proxy statement for its 2023 annual meeting of stockholders are incorporated by reference into Part III, Items 10, 11, 12, 13, and 14 of this Annual Report on Form 10-K.
1


Table of Contents
Page

2

Table of Contents
PART I.

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 “Plain English” guidelines, this Annual Report on Form 10-K 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.

Cautionary Statement Regarding Forward Looking Statements

This Annual Report on Form 10-K and other materials we have filed or may file with the Securities and Exchange Commission, as well as information included in oral statements made, or to be made, by our senior management contain certain “forward-looking” statements as that term is defined by the Private Securities Litigation Reform Act of 1995. All statements regarding our expected future financial position, results of operations, cash flows, funds from operations, continued performance improvements, ability to service and refinance our debt obligations, ability to finance growth opportunities, and similar statements including, without limitation, those containing words such as “may”, “will”, “should,” “believes”, “anticipates”, “expects”, “intends”, “estimates”, “plans”, “likely” and other similar expressions are forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of factors including, but not limited to, the following:

*    Actual or perceived risks associated with public health epidemics or outbreaks, such as the Coronavirus (“COVID-19”) pandemic, have had and may in the future have a material adverse effect on our operators’ business and results of operations;

*    We depend on the operating success of our tenants, managers and borrowers and if their financial condition or business prospects deteriorate, our financial condition and results of operations could be adversely affected;

*    We are exposed to the risk that our managers, tenants and borrowers may become subject to bankruptcy or insolvency proceedings;

*    Certain tenants in our portfolio account for a significant percentage of the rent we expect to generate from our portfolio, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders;

*    Two members of our Board of Directors are also members of the board of directors of National HealthCare Corporation, and their interests may differ from those of our stockholders;

*    We are exposed to risks related to governmental regulation and payors, principally Medicare and Medicaid, and the effect of changes to laws, regulations and reimbursement rates on our tenants’ and borrowers’ business;

*    We are exposed to the risk that the cash flows of our tenants, managers and borrowers may be adversely affected by increased liability claims and liability insurance costs;

*    We are exposed to the risk that we may not be fully indemnified by our tenants, managers and borrowers against future litigation;

*    We depend on the success of property development and construction activities, which may fail to achieve the operating results we expect;

*    We are exposed to the risk that the illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties;

*    We are exposed to risks associated with our investments in unconsolidated entities, including our lack of sole decision-making authority and our reliance on the financial condition of other interests;

*    We are subject to risks associated with our joint venture investment with Life Care Services for Timber Ridge, an entrance fee continuing care retirement community, associated with Type A benefits offered to the residents of the joint venture's entrance fee community and related accounting requirements;
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*    We are subject to additional risks related to healthcare operations associated with our investments in unconsolidated entities, which could have a material adverse effect on our results of operations;

*    COVID-19 has had and may continue to have an adverse effect on our overall business and financial performance;

*    We are exposed to operational risks with respect to our senior housing operating portfolio structured communities;

*    Breaches of, disruptions to, or other unauthorized interference with the privacy and security of Company information could cause us to incur substantial costs and reputational damage, and could become subject to litigation and enforcement actions;

*    We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances;

*    We are subject to risks of damage from catastrophic weather and other natural or man-made disasters and the physical effects of climate change;

*    We depend on the success of our future acquisitions and investments;

*    We depend on our ability to reinvest cash in real estate investments in a timely manner and on acceptable terms;

*    Competition for acquisitions may result in increased prices for properties;

*    We depend on our ability to retain our management team and other personnel and attract suitable replacements should any such personnel leave;

*    We are exposed to the risk that our assets may be subject to impairment charges;

*    Our ability to raise capital through equity sales is dependent, in part, on the market price of our common stock, and our failure to meet market expectations with respect to our business, or other factors we do not control, could negatively impact such market price and availability of equity capital;

*    We may need to refinance existing debt or incur additional debt in the future, which may not be available on terms acceptable to us;

*    We have covenants related to our indebtedness which impose certain operational limitations and a breach of those covenants could materially adversely affect our financial condition and results of operations;

*    Downgrades in our credit ratings could have a material adverse effect on our cost and availability of capital;

*    We depend on revenues derived mainly from fixed rate investments in real estate assets, while a portion of our debt used to finance those investments bears interest at variable rates;

*    We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future investments necessary to grow our business or meet maturing commitments;

*    Changes in interest rates may adversely affect our cash flows;

*    We depend on the ability to continue to qualify for taxation as a real estate investment trust (“REIT”) for U.S. federal income tax purposes;

*    There are no assurances of our ability to pay dividends in the future;

*    Complying with REIT requirements may cause us to forego otherwise attractive acquisition opportunities or liquidate otherwise attractive investments, which could materially hinder our performance;

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* Our ownership of and relationship with any taxable REIT subsidiaries that we have formed or will form will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax;

*    Legislative, regulatory, or administrative changes could adversely affect us or our security holders;

*    We have ownership limits in our charter with respect to our common stock and other classes of capital stock which may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders; and

*    We are subject to certain provisions of Maryland law and our charter and bylaws that could hinder, delay or prevent a change in control transaction, even if the transaction involves a premium price for our common stock or our stockholders believe such transaction to be otherwise in their best interests.

See the notes to the annual audited consolidated financial statements, and “Item 1. Business” and “Item 1A. Risk Factors” herein for a further discussion of these and of other factors that could cause our future results to differ materially from any forward-looking statements. 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 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. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Given these risks and uncertainties, we can give no assurance that these forward-looking statements will, in fact, occur and, therefore, caution investors not to place undue reliance on them.

ITEM 1. BUSINESS

General

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 segments: Real Estate Investments and Senior Housing Operating Portfolio (“SHOP”).

Our Real Estate Investments segment consists of real estate investments and lease, mortgage and other notes receivables in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities and a hospital.

As of December 31, 2022, we had investments of approximately $2.4 billion in 160 health care real estate properties located in 32 states and leased pursuant primarily to triple-net leases to 24 tenants consisting of 94 senior housing properties, 65 skilled nursing facilities and one hospital, excluding 13 properties classified as assets held for sale. Our portfolio of 17 mortgages along with other notes receivable totaled $248.5 million, excluding an allowance for expected credit losses of $15.3 million, as of December 31, 2022.

Our SHOP segment is comprised of two ventures that own the operations of independent living facilities. As of December 31, 2022, we had investments of approximately $338.1 million in 15 properties with a combined 1,732 units located in eight states that are operated on behalf of the Company by two independent managers pursuant to the terms of separate management agreements that commenced April 1, 2022. The third-party managers, or related parties of the managers, own equity interests in the respective ventures.

We fund our real estate investments primarily through: (1) operating cash flow, (2) debt offerings, including bank lines of credit and term debt, both unsecured and secured, and (3) the sale of equity securities. Our investments in real estate and mortgage loans are secured by real estate located within the United States. Information about revenues from our tenants, resident fees, and borrowers, our net income, cash flows and balance sheet can be found in Item 8 of this Annual Report on Form 10-K.




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Sources of Revenues

Our revenues are derived primarily from rental income, mortgage and other notes receivable interest income and resident fees and services. During 2022, rental income was $217.7 million (78.3%), interest income from mortgages and other notes receivable was $24.7 million (8.9%) and SHOP revenue was $35.8 million (12.9%) of total revenue of $278.2 million, a decrease of 6.9% from 2021. Our revenues depend on the operating success of our tenants, borrowers and managers whose source and amount of revenues are determined by (i) the licensed beds or other capacity of the facility, (ii) their occupancy rate, (iii) the extent to which the services provided at each facility are utilized by the residents and patients, (iv) the mix of private pay, Medicare and Medicaid patients, and (v) the rates paid by private payors and by the Medicare and Medicaid programs.

Classification of Properties in our Portfolio

We operate our business through two reportable segments: Real Estate Investments and SHOP. We classify all of the properties in our Real Estate Investments portfolio as either senior housing or medical properties. Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing properties as either need-driven (assisted living facilities and senior living campuses) or discretionary (independent living facilities and entrance-fee communities). Our SHOP is comprised of 15 independent living facilities located throughout the United States.

Real Estate Investments

Senior Housing. As of December 31, 2022, our portfolio included 94 senior housing properties (“SHO”) leased to operators and mortgage loans secured by nine SHOs. The SHOs in our portfolio are either need-driven or discretionary for end users and consist of assisted living facilities, senior living campuses, independent living facilities, and entrance-fee communities, which are more fully described below.

Need-Driven Senior Housing

Assisted Living Facilities. As of December 31, 2022, our portfolio included 66 assisted living facilities (“ALF”) leased to operators and mortgage loans secured by eight ALFs. ALFs are free-standing facilities that provide basic room and board functions for elderly residents. As residents typically receive assistance with activities of daily living such as bathing, grooming, administering medication and memory care services, we consider these facilities to be need-driven senior housing. On-site staff personnel are available to assist in minor medical needs on an as-needed basis. Operators of ALFs are typically paid from private sources without assistance from government. ALFs may be licensed and regulated in some states, but generally do not require the issuance of a Certificate of Need (“CON”) as is often required for skilled nursing facilities (“SNF”).

Senior Living Campuses. As of December 31, 2022, our portfolio included 10 senior living campuses (“SLC”) leased to operators. SLCs contain one or more buildings that include skilled nursing beds combined with an independent or assisted living facility that provides basic room and board functions for elderly residents. They may also provide assistance to residents with activities of daily living such as bathing, grooming and administering medication. On-site staff personnel are available to assist with minor medical needs on an as-needed basis. As the decision to transition to a SLC is typically more than a lifestyle choice and is usually driven by the need to receive some moderate level of care, we consider this facility type to be need-driven. Operators of SLCs are typically paid from private sources and from government programs such as Medicare and Medicaid for skilled nursing residents. SLCs may be licensed and regulated as nursing homes in some states and may also require a CON.

Discretionary Senior Housing

Independent Living Facilities. As of December 31, 2022, our portfolio included seven independent living facilities (“ILF”) leased to operators. ILFs offer specially designed residential units for active senior adults and provide various ancillary services for their residents including restaurants, activity rooms and social areas. Services provided by ILF operators are generally paid from private sources without assistance from government payors. ILFs are generally, but not always, unlicensed facilities and do not require the issuance of a CON as required for SNFs. As ILFs typically do not provide assistance with activities of daily living, we consider the decision to transition to an ILF to be discretionary.

Entrance-Fee Communities. As of December 31, 2022, our portfolio included 11 entrance-fee communities (“EFC”) leased to operators and mortgage loans secured by one EFC. EFCs, frequently referred to as continuing care retirement communities (“CCRC”), typically include a combination of detached cottages, an ILF, an ALF and a SNF on one campus. These communities appeal to residents because there is no need to relocate when health and medical needs
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change. EFCs are classified as either Type A, B, or C depending upon the amount of healthcare benefits included in the entrance fee. “Type A” EFCs, or “Lifecare” communities, such as Timber Ridge, held by us since January 31, 2020 in a joint venture, include substantially all future healthcare costs in the payment of an entrance fee and thereafter payment of a set service fee paid monthly. The entrance fee is divided into a refundable and non-refundable portion depending upon the resident’s chosen contract program. The service fee is determined at the time of move-in into an independent living (“IL”) unit and is subject to certain inflation-based adjustments regardless of the resident’s future care needs. A resident must move into an IL unit initially and not require care at the time of move-in. Thereafter the resident’s care requirements from assisted living to memory care to skilled nursing are provided for. Communities providing a modified healthcare contract offering access to skilled nursing care but only paying for a maximum number of days are referred to as “Type B” EFCs. Finally, “Type C” EFCs, the classification applicable to ten communities in our lease portfolio and one community securing a mortgage loan, are fee-for-service communities which do not provide any healthcare benefits and correspondingly have the lowest entrance fees. However, monthly fees may be higher to reflect the current healthcare components delivered to each resident. EFC licensure is state-specific, but generally skilled nursing beds included in our EFC portfolio are subject to state licensure and regulation. Certain services may also require a CON. As the decision to transition to an EFC is typically made as a lifestyle choice and not as the result of a pressing medical concern, we consider the decision to transition to an EFC to be discretionary. Accordingly, the predominant source of revenue for operators of EFCs is from private payor sources.

Medical. As of December 31, 2022, our portfolio included 66 medical facilities leased to operators and mortgage loans secured by eight medical facilities. The medical facilities within our portfolio consist of SNFs and a hospital, which are more fully described below.

Skilled Nursing Facilities. As of December 31, 2022, our portfolio included 65 SNFs leased to operators and mortgage loans secured by eight SNFs. SNFs provide some combination of skilled and intermediate nursing and rehabilitative care, including speech, physical and occupational therapy. The operators of the SNFs receive payment from a combination of private pay sources and government payors such as Medicaid and Medicare. SNFs are required to obtain state licenses and are highly regulated at the federal, state and local level. Operators in 11 of the 13 states in which we own SNFs must obtain a CON from the state before opening or expanding such facilities. Some SNFs also include assisted living beds. As the decision to utilize the services of a SNF is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility.

Hospitals. As of December 31, 2022, our portfolio included one hospital (“HOSP”) leased to an operator. Hospitals provide a wide range of inpatient and outpatient services, including acute psychiatric, behavioral and rehabilitation services, and are subject to extensive federal, state and local legislation and regulation. Hospitals undergo periodic inspections regarding standards of medical care, equipment and hygiene as a condition of licensure. Services provided by hospitals are generally paid for by a combination of private pay sources and government payors. As the decision to utilize the services of a hospital is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility.

Medical Office Building. As of December 31, 2022, our portfolio included no medical office buildings (“MOB”). We have a $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a fund that invests in medical real estate, including MOBs. Historically, our investment strategy has included owning and leasing MOBs whose tenants are primarily physicians and other medical practitioners. As the decision to utilize the services of an MOB is typically made as the result of a pressing medical concern, we consider this to be a need-driven medical facility. The MOB differs from conventional office buildings due to the special requirements of the tenants.

Senior Housing Operating Portfolio

As of December 31, 2022, our portfolio included 15 ILFs with 1,732 units located throughout the United States which we consider to be discretionary senior housing as discussed in more detail above.

Nature of Investments

Our investments are typically structured as acquisitions of properties through purchase-leaseback transactions, acquisitions of properties from other real estate investors, loans, or operations through structures allowed by the REIT Investment Diversification Empowerment Act of 2007 (“RIDEA”). We have provided construction loans for certain facilities for which we were already committed to provide long-term financing or for which the operator agreed to enter into a purchase option and lease with us upon completion of construction or after the facility is stabilized. The annual interest rates we receive on our
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mortgage, construction and mezzanine loans ranged between 7.0% and 9.5% during 2022. We believe our lease and loan terms are competitive within our peer group. Typical characteristics of these transactions are as follows:

Leases. Our leases for the properties in our Real Estate Investments segment generally have an initial leasehold term of 10 to 15 years with one or more five-year tenant renewal options. The leases are “triple-net leases” under which the tenant is responsible for the payment of all taxes, utilities, insurance premiums, repairs and other charges relating to the operation of the properties, including required levels of capital expenditures each year. The tenant is obligated at its expense to keep all improvements, fixtures and other components of the properties covered by “all risk” insurance in an amount equal to at least the full replacement cost thereof, and to maintain specified minimum personal injury and property damage insurance, protecting us as well as the tenant. The leases also require the tenant to indemnify and hold us harmless from all claims resulting from the use, occupancy and related activities of each property by the tenant, and to indemnify us against all costs related to any release, discovery, clean-up and removal of hazardous substances or materials, or other environmental responsibility with respect to each facility.

Most of our existing leases contain annual escalators in rent payments. For financial statement purposes, rental income is recognized on a straight-line basis over the term of the lease where the lease contains fixed escalators. Certain of our tenants hold purchase options allowing them to acquire properties they currently lease from NHI. When present, tenant purchase options generally give the tenant an option to purchase the underlying property for consideration not less than our net investment basis.

Some of the obligations under the leases are guaranteed by the parent corporation of the tenant, if any, or affiliates or individual principals of the tenant. In some leases, third parties or affiliated entities will also guarantee some portion of the lease obligations. Some obligations are backed further by other collateral such as security deposits, trade receivables, equipment, furnishings and other personal property.

We monitor our triple-net tenant credit quality and identify any material changes by performing the following activities:

Obtaining financial statements on a monthly, quarterly and annual basis to assess the operational trends of our tenants and the financial position and capability of those tenants
Calculating the operating cash flow for each of our tenants
Calculating the lease service coverage ratio and other ratios pertinent to our tenants
Obtaining property-level occupancy rates for our tenants
Verifying the payment of real estate taxes by our tenants
Obtaining certificates of insurance for each tenant
Obtaining reviewed or audited financial statements of our tenant corporate guarantors on an annual basis, if applicable
Conducting a periodic inspection of our properties to ascertain proper maintenance, repair and upkeep
Monitoring those tenants with indications of continuing and material deteriorating credit quality through discussions with our executive management and Board of Directors

Mortgage loans. We have mortgage loans with original maturities generally five years or greater, with varying amortization schedules from interest-only to fully amortizing. Most of the loans are at a fixed interest rate; however, some interest rates increase based on a fixed schedule. In most cases, the owner of the facility is committed to make minimum annual capital expenditures for the purpose of maintaining or upgrading their respective facility. Additionally, most of our loans are collateralized by first or second mortgage liens and corporate or personal guarantees. As of December 31, 2022, we have eight mortgage loans bearing interest ranging from 7.0% to 8.25% per annum.

Mezzanine loans. Frequently in situations calling for temporary financing or when our borrowers’ in-place lending arrangements prohibit the extension of mortgage security, we typically extend credit based on corporate and/or personal guarantees. These mezzanine loans sometimes combine with an NHI purchase option covering the subject property. As of December 31, 2022, we have five mezzanine loans with interest rates we receive that range from approximately 8.0% to 9.5% per annum.

Construction loans. From time to time, we also provide construction loans that become mortgage loans upon the completion of the construction of the subject facility. We may also obtain a purchase option to acquire the facility at a future date and lease the facility back to the borrower. During the term of the construction loan, funds are usually advanced pursuant to draw requests made by the borrower in accordance with the terms and conditions of the loan. Interest is typically assessed on these loans at rates equivalent to the eventual mortgage rate upon conversion. In addition to the security of the lien against the property, we will generally require additional security and collateral in the form of either payment and performance completion bonds or completion guarantees by the borrower’s parent, affiliates of the borrower or one or more of the individuals who
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control the borrower. As of December 31, 2022, we have five construction loans bearing interest ranging from 7.5% to 9.0% per annum.

Other notes receivable. We have provided a revolving line of credit to a borrower involved in the senior housing industry who has provided personal and business guarantees as security that bears interest at a fixed rate of 8.0% per annum, as of December 31, 2022.

RIDEA Transactions. Our arrangement with an affiliate of Life Care Services, which we completed in January 2020 and is structured to be compliant with the provisions of RIDEA, permits NHI to receive rent payments through a triple-net lease between a property company owned 75% by NHI and an operating company owned 25% by a taxable REIT subsidiary (“TRS”) of NHI and gives NHI the opportunity to capture additional value on the improving performance of the operating company through distributions to the TRS. Accordingly, the TRS holds our 25% equity interest in an unconsolidated operating company, and provides an organizational structure that allows the TRS to engage in a broad range of activities and share in revenues that would otherwise be non-qualifying income under the REIT gross income tests. The TRS is subject to state and federal income taxes.

Senior Housing Operating Portfolio. Effective April 1, 2022, 15 senior housing ILFs previously part of the legacy Holiday Retirement (“Holiday”) properties were transferred from a triple-net lease to two separate ventures comprising our SHOP, which represents a new reportable segment. 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 two 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 December 31, 2022, our SHOP consisted of 15 ILFs with a combined 1,732 units located in eight states.

Operator Composition

For the year ended December 31, 2022, approximately 25% of our Real Estate Investments portfolio revenue was from publicly owned operators, 50% was from regional operators, 11% was from privately owned national chains and 3% was from smaller operators. Tenants in our Real Estate Investments portfolio which individually provided more than 3% and collectively 59% of our total revenues were (parent companies, in alphabetical order): Discovery Senior Living (“Discovery”); Encore Senior Living; Health Services Management; Holiday; Life Care Services; National HealthCare Corporation (“NHC”); Senior Living Communities (“Senior Living”); and The Ensign Group. We make reference to the parent companies whenever we describe our business with these tenants, their subsidiaries and/or affiliates regardless of the specific subsidiary entity indicated on the lease or loan documents.

Tenant Concentration

The following table contains information regarding tenant concentration in our Real Estate Investments portfolio, excluding $2.6 million for our corporate office, $338.1 million for the SHOP segment, and a credit loss reserve of $15.3 million, based on the percentage of revenues for the years ended December 31, 2022, 2021 and 2020 related to tenants or affiliates of tenants, that exceed 10% of total revenue ($ in thousands):
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As of December 31, 2022
Revenues1
AssetGross RealNotesYear Ended December 31,
Class
Estate2
Receivable202220212020
Senior LivingEFC$573,631 $48,547 $51,183 18%$50,726 17%$50,734 15%
NHCSNF133,770 — 36,893 13%37,735 12%37,820 11%
Bickford3
ALF414,870 32,727 N/AN/A34,599 12%49,451 15%
Holiday3
ILF— — N/AN/AN/AN/A40,705 12%
All others, netVarious1,329,461 167,205 144,534 52%164,017 55%144,448 44%
Escrow funds received from tenants
   for property operating expensesVarious— — 9,788 4%11,638 4%9,653 3%
$2,451,732 $248,479 242,398 298,715 332,811 
Resident fees and services4
35,796 13%— —%— —%
$278,194 $298,715 $332,811 


1 Includes interest income on notes receivable and rental income from properties classified as held for sale.
2 Amounts include any properties classified as held for sale.
3 Revenues included in All others, net for years when less than 10%.
4 There is no tenant concentration in resident fees and services because these agreements are with individual residents.

At December 31, 2022, the two states in which we had an investment concentration of 10% or more were South Carolina (12.1%) and Texas (10.7%). At December 31, 2021, the two states in which we had an investment concentration of 10% or more were also South Carolina (11.6%) and Texas (10.3%).

Senior Living - As of December 31, 2022, we leased ten retirement communities totaling 2,200 units to Senior Living pursuant to triple-net lease agreements maturing through December 2029. Straight-line rent of $0.4 million, $2.5 million and $4.3 million and interest revenue of $3.7 million, $3.2 million and $3.0 million were recognized from Senior Living for the years ended December 31, 2022, 2021 and 2020, respectively.

We provided a $20.0 million revolving line of credit in 2014 whose borrowings are to be used primarily to finance construction projects within the Senior Living portfolio, including building additional units, and general working capital needs. During the year ended December 31, 2022, the revolving line of credit was amended to reset the interest rate to 8.0% per annum effective in November 2022 and reduce the availability to $15.0 million on January 1, 2025. The revolving line of credit matures in December 2029 at the time of lease maturity. At December 31, 2022, the balance outstanding under the facility was $15.8 million.

In June 2019, we provided a mortgage loan of $32.7 million to Senior Living for the acquisition of a 248-unit continuing care retirement community in Columbia, South Carolina. The financing is for a term of five years with two one-year extensions and carries an interest rate of 7.25%, per annum. Additionally, the loan conveys to NHI a purchase option at a stated minimum price of $38.3 million, subject to adjustment for market conditions.

NHC - The facilities leased to NHC, a publicly held company, are under a master lease and consist of three independent living facilities and 32 skilled nursing facilities (four of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC). Effective September 1, 2022, we amended the master lease dated October 17, 1991, concurrently with the sale of a portfolio of seven skilled nursing facilities. The properties sold were leased to NHC pursuant to a master lease agreement dated August 30, 2013 with an original maturity date of August 31, 2028 that was terminated upon completion of the sale. The amendment increased the annual base rent due each year through the expiration of the master lease on December 31, 2026. There are two additional five-year renewal options at a fair rental value as negotiated between the parties.

The annual base rent prior to the amendment was $30.8 million and was increased to $34.3 million for the year ended December 31, 2022, with credit given for rent paid in 2022 related to the sold portfolio. In addition to the base rent, NHC will continue to pay any additional rent and percentage rent as required by the master lease. Under the terms of the amended lease, rent escalates by 4% of the increase, if any, in each facility’s annual revenue over a 2007 base year. We refer to this additional rent component as “percentage rent.” Total percentage rent of $3.1 million, $3.5 million, and $3.7 million was recognized for
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the years ended December 31, 2022, 2021 and 2020, respectively. No material straight-line rent was recognized for the years ended December 31, 2022, 2021 and 2020.

Two of our board members, including our chairman, are also members of NHC’s board of directors. As of December 31, 2022, NHC owned 1,630,642 shares (approximately 4%) of our common stock.

Other Operators

Bickford - As of December 31, 2022, we leased 36 facilities, excluding three facilities classified as assets held for sale, under four leases to Bickford. Revenues from Bickford reflect the impact of pandemic-related rent concessions accounted for as variable lease payments of approximately $5.5 million, $18.3 million and $5.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

During the year ended December 31, 2022, we wrote off approximately $18.1 million of straight-line rents receivable and $7.1 million of lease incentives, which were included in “Other assets, net” on the Consolidated Balance Sheet, as a reduction to rental income upon converting Bickford to the cash basis of accounting. These write-offs were the result of a change in our evaluation of collectability of future rent payments due under Bickford’s four master lease agreements based upon information we obtained from Bickford in the second quarter of 2022 regarding its financial condition that raised substantial doubt as to its ability to continue as a going concern. Cash rent received from Bickford for the year ended December 31, 2022 was $27.6 million.

In November 2022, we acquired a 60-unit ALF located in Virginia Beach, Virginia, from Bickford. The acquisition price was $17.2 million, including $0.2 million in closing costs and the cancellation of an outstanding construction note receivable of $14.0 million including interest. The acquisition price also included a reduction of $3.0 million in Bickford’s outstanding pandemic-related rent deferrals that were recognized in rental income in the fourth quarter of 2022 based on the fair value of the real estate assets received. We added the facility to an existing master lease with Bickford for a term of 10.5 years at an initial rate of 8.0%, with annual Consumer Price Index (“CPI”) escalators subject to a floor and ceiling.

Other than the asset acquisition described above and the three properties sold that are included in the asset dispositions table in Note 3, Investment Activity to our consolidated financial statements under “2022 Asset Dispositions we completed various restructuring activities in the Bickford leased property portfolio during the first half of 2022. In March 2022, we transferred one ALF located in Pennsylvania from the Bickford portfolio to a new operator that is leased pursuant to a ten-year triple-net lease and wrote off approximately $0.7 million in a straight-line rent receivable, reducing rental income. Effective April 1, 2022, we restructured and amended three of Bickford’s master lease agreements covering 28 properties and reached agreement on the repayment terms of its outstanding pandemic-related deferrals. Significant terms of these agreements are as follows:

Extended the maturity dates of the modified leases to 2033 and 2035. The remaining master lease agreement covering 11 properties with an original maturity in 2023 was previously extended to 2028.

Reduced the combined rent for the portfolio to approximately $28.3 million (excluding the ALF in Virginia Beach acquired in the fourth quarter of 2022) per year through April 1, 2024, subject to a nominal annual increase, at which time the rent will be reset to a fair market value, but not less than 8.0% of our initial gross investment.

Required monthly payments beginning October 2022 through December 2024 based on a percentage of Bickford’s monthly revenues exceeding an established threshold to be applied to the outstanding pandemic-related deferrals granted to Bickford. The deferrals may be reduced by up to $6.0 million upon Bickford achieving certain performance targets and the sale or transition of certain properties to new operators of which $3.0 million was earned in the fourth quarter of 2022.

Bickford Construction Loans - As of December 31, 2022, we had two fully funded construction loans to Bickford totaling $28.9 million and bear interest at 9.0% per annum. The construction loans are secured by first mortgage liens on substantially all real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the property. Usual and customary covenants extend to the agreements, including the borrower’s obligation for payment of insurance and taxes. NHI has a fair market value purchase option on the properties at stabilization of the underlying operations. In February 2023, we exercised our option to acquire one of these properties for a purchase price of $17.3 million.

We also have a mortgage note of $4.0 million issued by Bickford. The note, due February 2025, bears interest at 7.0% per annum, and began amortizing on a twenty-five-year basis in January 2021.

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Holiday Portfolio Transition - On April 1, 2022, we completed the restructuring of our legacy Holiday portfolio comprised of 26 ILFs as of the beginning of 2021. Below is a summary of the pertinent restructuring activities:
On July 30, 2021, Welltower Inc. (“Welltower”) completed the acquisition of a portfolio of legacy Holiday properties from Fortress Investment Group and entered into a new agreement with Atria Senior Living to assume operations of the Holiday portfolio. These transactions resulted in a Welltower-controlled subsidiary becoming the tenant under our existing master lease for the NHI-owned Holiday real estate assets. Rental income from our Holiday portfolio was $23.5 million in 2021 prior to the change in tenant ownership. Rental income was $40.7 million for the year ended December 31, 2020.

In the third quarter of 2021, we sold nine of these properties for net proceeds of $119.7 million.

We received no rent from the Welltower-controlled affiliate due under the master lease after the change in tenant ownership occurred in late July 2021. Accordingly, we placed the tenant on cash basis and filed suit against Welltower and certain of its subsidiaries for default under the master lease. Reference Note 9 to the consolidated financial statements for further discussion of the litigation and its settlement in 2022.

During the first quarter of 2022, we applied the remaining approximately $8.8 million legacy Holiday lease deposit to past due rents.

On April 1, 2022, we received $6.9 million upon settlement and dismissal of the Welltower litigation. Concurrently with the settlement and dismissal, we transitioned 15 of the legacy Holiday ILFs into two separate partnership ventures that own the underlying independent living operations, forming our new SHOP segment. Reference Notes 5 and 9 to the consolidated financial statements for more discussion.
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On April 1, 2022, we disposed of one property classified in assets held for sale for net proceeds of $3.0 million and transitioned one assisted living community in Florida to our existing real estate partnership with Discovery. The transitioned property was added to the partnership’s in-place master lease.

Commitments and Contingencies

In the normal course of business, we enter into a variety of commitments, typically consisting of funding of revolving credit arrangements, construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account, and commitments for the funding of construction for expansion or renovation to our existing properties under lease. In our leasing operations, we offer to our tenants and to sellers of newly acquired properties a variety of inducements which originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded.

As of December 31, 2022, we had working capital, construction and mezzanine loan commitments to six operators for $159.6 million, of which we had funded $103.3 million toward these commitments. As of December 31, 2022, $26.6 million of the funding obligation is payable within 12 months with the remaining commitment due between three to five years.

As of December 31, 2022, we had $33.5 million of development commitments for construction and renovation for ten properties, of which we had funded $25.7 million toward these commitments, with the remaining amount expected to be payable within 12 months. In addition to these commitments, we had approximately $1.8 million in various other commitments not yet funded as of December 31, 2022.

As of December 31, 2022, we had $28.6 million of contingent lease inducement commitments in seven lease agreements which are generally based on the performance of facility operations and may or may not be met by the tenant. At December 31, 2022, we had funded $2.7 million toward these commitments. In February 2023, Timber Ridge OpCo formally requested payout of its $10.0 million lease inducement based upon the achievement of all performance conditions.

Competition and Market Conditions

We compete primarily with other REITs, private equity funds, banks and insurance companies in the acquisition, leasing and financing of healthcare real estate.

Operators of our facilities compete on a local and regional basis with operators of facilities that provide comparable services. Operators compete for residents and/or patients and staff based on quality of care, reputation, location and physical
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appearance of facilities, services offered, family preference, physicians, staff and price. Competition is with other operators as well as companies managing multiple facilities, some of which are substantially larger and have greater resources than the operators of our facilities. Some of these facilities are operated for profit, while others are owned by governmental agencies or tax exempt not-for-profit entities.

Our senior housing properties generally rely on private-pay residents who may be negatively impacted in an economic downturn. In addition, the success of these properties is often impacted by the existence of comparable, competing facilities in a local market.

Environmental Matters

We believe that integrating environmental and sustainability initiatives into our strategic business objectives will contribute to our long-term success and to the success of our tenants by enhancing the quality of life of the residents of the facilities. Listed below are some of the highlights of our efforts to promote environmental sustainability at our properties and with our tenants.

We provide our triple-net lease operators capital improvement allowances for the redevelopment, expansions and renovations at our properties which may include energy efficient improvements like LED lighting and low emission carpeting, recycled materials and solar power;
We provide our development partners with capital to build new state-of-the-art properties with energy efficient components and design features;
We obtain Phase I environmental and Phase II reports if warranted as part of our due diligence procedures when acquiring properties and attempt to avoid buying real estate with known environmental contamination;
We strive for efficiency and sustainability in our corporate headquarters, participate in a recycling program, and encourage our employees to reduce, reuse and recycle waste. Our document retention practices strive to reduce paper usage and encourage electronic file sharing; and

We are also subject to environmental risks and regulations in our business. See – Government Regulation – Environmental Regulationsbelow;Item 1A. Risk Factors – Risks Related to our Business and Operations - We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances” and “– We are subject to risks of damage from catastrophic weather and other natural or man-made disasters and the physical effects of climate change” for a description of the risks and regulations associated with environmental matters.

Human Capital

We employ individuals who possess a broad range of experiences, background and skills. We believe that to continue to deliver long-term value to our stockholders, we must provide and maintain a work environment that attracts, develops, and retains top talent and affords our employees an engaging work experience that allows for career development and opportunities. Along with a competitive compensation program including incentive bonuses and a stock option plan, NHI provides a 401(k) plan with a safe harbor contribution, paid employee health insurance coverage and tuition reimbursement.

As of December 31, 2022, we had 25 full-time employees, an increase of six over the total at December 31, 2021, and two part-time employees. Of those employees, 24 are located in the Murfreesboro, Tennessee office, with one employee in each of Colorado, Florida, and Texas. The tenure of our current employees includes 11 who have been with the Company for over five years (but less than ten years), and six who have been with the Company over ten years (but less than 20 years). Two of our employees have been with the Company over 20 years. None of our employees are subject to a collective bargaining agreement. We empower our employees and reinforce our corporate culture through onboarding, training, and social and team-building events. We actively support charitable organizations within our community that promote health education and social well-being, and we encourage our employees to personally volunteer with organizations that are meaningful to them. We consider our employee relations to be good.

In response to the COVID-19 pandemic, we initiated a number of safety protocols to ensure employee safety, including encouraging employees to work from home, enhanced cleaning and disinfecting procedures and implementing clear protocols and procedures for monitoring and reporting close contact and illness. In 2022, we continued to monitor local conditions and to follow Center for Disease Control and Prevention (“CDC”) guidelines regarding isolation and quarantine protocols.

Certain essential services such as internal audit, tax compliance, information technology and legal services are outsourced to third-party professional firms.

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Government Regulation

Overview. Our tenants and borrowers that operate SNFs, nursing homes, hospitals, SLCs, ALFs and EFCs are typically subject to extensive and complex federal, state and local healthcare laws and regulations, including those relating to Medicare and Medicaid reimbursement, fraud and abuse, relationships with referral sources and referral recipients, licensure and certification, building codes, privacy and security of health information and other personal data, CON, appropriateness and classification of care, qualifications of medical and support personnel, distribution, maintenance and dispensing of pharmaceuticals, communications with patients and consumers, and the operation of healthcare facilities. In addition, many of our tenants and borrowers that operate ILFs may be subject to state licensing, and all of our properties are subject to environmental regulations related to real estate. We expect that the healthcare industry, in general, will continue to face increased regulation and pressure in these and other areas. These laws and regulations are wide-ranging, vary across jurisdictions, and are administered by several government agencies. Further, these laws and regulations are subject to change, enforcement practices may evolve, and it is difficult to predict the impact of new laws and regulations. Our tenants may find it increasingly difficult and costly to operate within this complex and evolving regulatory environment. Noncompliance with applicable laws and regulations may result in the imposition of civil and criminal penalties that could adversely affect the operations and financial condition of tenants, managers or borrowers, which in turn may adversely affect us. The following is a brief discussion of certain laws and regulations applicable to certain of our tenants, managers and borrowers and, in certain cases, to us.

Licensure and Certification. Various licenses, certifications and permits are required to operate SNFs, ALFs, EFCs, hospitals and, to a lesser degree, ILFs, to dispense narcotics, to handle radioactive materials and to operate equipment, among other regulated actions. Licensure, certification and enrollment with government programs may be conditioned on requirements related to, among other things, the quality of medical care provided, qualifications of the operator’s administrative personnel and clinical staff, adequacy of the physical plant and equipment, capital and other expenditures, record keeping, dietary services, infection prevention and control, and patient rights. The Centers for Medicare & Medicaid Services (“CMS”) has issued additional requirements for certain healthcare facilities in response to the COVID-19 pandemic, including requirements to test SNF staff and residents for COVID-19 under certain circumstances and to report COVID-19 data to the CDC. Licensed facilities are generally subject to periodic inspections by regulators to determine compliance with applicable licensure and certification standards. Further, some states have established requirements for facility spending, for example requiring nursing homes to spend a certain percentage of revenue on direct care for residents. Sanctions for failure to comply with these laws and regulations include (but are not limited to) loss of licensure and ability to participate in the Medicare, Medicaid, and other government healthcare programs, suspension of or non-payment for new admissions, fines, as well as potential criminal penalties. The failure of any tenant, manager or borrower to comply with such laws and regulations could affect its ability to operate its facility or facilities and could adversely affect any such tenant’s or borrower’s ability to make lease or debt payments to us. In addition, if we have to replace a tenant, we may experience difficulties in finding a replacement because our ability to replace the tenant may be affected by federal and state laws governing changes in control and ownership.

The healthcare facilities in which we invest may be subject to state CON or similar laws, which require government approval prior to the construction or establishment of new facilities, the expansion of existing facilities, the addition of beds to existing facilities, the addition of services or certain capital expenditures. CON requirements are not uniform throughout the United States and are subject to change. We cannot predict the impact of regulatory changes with respect to CONs on the operations of our tenants, managers and borrowers.

Medicare and Medicaid Reimbursement. A significant portion of the revenue of our SNF tenants and borrowers is derived from government-funded reimbursement programs, primarily Medicare and Medicaid. The Medicare and Medicaid programs are highly regulated and subject to frequent and substantial changes resulting from legislation, regulations and administrative and judicial interpretations of existing law.

Medicare is a federal health insurance program for persons age 65 and over, some disabled persons, and persons with end-stage renal disease. Medicare generally covers SNF services for beneficiaries who require skilled nursing or therapy services after a qualifying hospital stay. Medicare Part A generally pays a per diem rate for each beneficiary. The reimbursement rates are set forth under a prospective payment system (“PPS”), an acuity-based classification system that uses nursing and therapy indexes, adjusted by additional factors such as geographic differences in wage rates, to calculate per diem rates for each Medicare beneficiary. The Medicare Part A payment rates cover most services to be provided to a beneficiary for a limited benefit period, including room and board, skilled nursing care, therapy, and medications. CMS updates Medicare payment rates annually. For fiscal year 2023, which started October 1, 2022, CMS estimates that payments to SNFs under the SNF PPS will increase by $904.0 million, or 2.7%, compared to fiscal year 2022.

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CMS has implemented policies intended to shift Medicare to value-based payment methodologies that tie reimbursement to quality of care rather than quantity. For example, effective October 1, 2019, CMS implemented the Patient Driven Payment Model (“PDPM”). This payment methodology classifies beneficiaries into payment groups based on clinical factors using diagnosis codes rather than by volume of services. In addition, under the SNF Quality Reporting Program, CMS requires SNFs to report certain quality data, and SNFs that fail to do so are subject to payment reductions. Under the SNF Value-Based Purchasing Program, CMS reduces SNF Medicare payments by 2 percentage points, and redistributes the majority of these funds as incentive payments based on SNF quality measure performance. As a result of the COVID-19 pandemic, CMS is continuing to implement a measure suppression policy for the SNF Value-Based Purchasing Program through federal fiscal year 2023, which is intended to mitigate the effect that performance measures impacted by COVID-19 would otherwise have on performance scores and incentive payments.

From time to time, the U.S. Department of Health and Human Services (“HHS”) revises the reimbursement systems used to reimburse healthcare providers. For example, the Improving Medicare Post-Acute Care Transformation Act of 2014 (“IMPACT Act”) requires HHS, in conjunction with the Medicare Payment Advisory Commission, to work toward a unified payment system for post-acute care services provided by SNFs, inpatient rehabilitation facilities, home health agencies, and long-term care hospitals. A unified post-acute care payment system would pay post-acute care providers, including SNFs, under a single framework according to a patient’s characteristics, rather than based on the post-acute care setting where the patient receives treatment. As required under the statute, CMS issued a report presenting a prototype for a unified post-acute care payment model in July 2022. CMS noted in its report the need for additional analyses and acknowledged that the universal implementation of a unified post-acute care payment system would require congressional action. The Medicare Payment Advisory Commission is required to submit a proposal by June 2023.

Medicaid is a medical assistance program for eligible needy persons that is funded jointly by federal and state governments. Medicaid programs are operated by state agencies under plans approved by the federal government. Reimbursement methodologies, eligibility requirements and covered services vary from state to state. In many instances, revenues from Medicaid programs are insufficient to cover the actual costs incurred in providing care to patients, particularly in nursing facilities. Outside of the government response to the COVID-19 pandemic, budgetary pressures have, in recent years, resulted in decreased spending, or decreased spending growth, for Medicaid programs in many states. Changes in federal policy and funding may be an additional source of uncertainty. For example, under early COVID-related legislation, states that maintain continuous Medicaid enrollment are eligible for a temporary increase in federal funds for state Medicaid expenditures. The continuous coverage requirement was originally established to run for the duration of the COVID-19 public health emergency (“PHE”) but, under recent legislation, the continuous coverage requirement will now expire as of April 1, 2023, and the increase in federal funding will be phased out through calendar year 2023. Budgetary pressures are expected to continue in the future, and many states are actively seeking ways to reduce Medicaid spending, including for nursing home and assisted living care, by methods such as capitated payments, reductions in reimbursement rates, and increased enrollment in managed Medicaid plans. Some states and managed care plans are pursuing alternatives to institutional care, such as home-based and community services. Several of the states in which we have investments have actively sought to reduce or slow the increase of Medicaid spending for care in nursing homes and other settings.

In addition to reimbursement pressures and changes in governmental healthcare programs, healthcare facilities are experiencing increasing pressure from private payors attempting to control healthcare costs. In some cases, private payors rely on governmental reimbursement systems to determine reimbursement rates. Changes to Medicare and Medicaid that reduce payments under these programs may negatively impact payments from private payors. We cannot make any assessment as to the ultimate timing or the effect that any future reforms may have on our tenants’, managers’ and borrowers’ costs of doing business and on the amount of reimbursement by government and other third-party payors. There can be no assurance that future payment rates for either government or private payors will be sufficient to cover potential cost increases in providing services to patients. Any changes in government or private payor reimbursement policies that reduce payments to levels that are insufficient to cover the cost of providing patient care could adversely affect the operating revenues of managers, tenants and borrowers in our properties that rely on such payments, and thereby adversely affect their ability to make their lease or debt payments to us.

Federal Response to COVID-19 Pandemic. In response to the COVID-19 pandemic, the federal government passed legislation and promulgated regulations implementing a series of economic stimulus and relief measures. In total, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Paycheck Protection Program and Health Care Enhancement Act, the Consolidated Appropriations Act, 2021 and the American Rescue Plan Act of 2021 (“ARPA”) authorize $186 billion in funding to be distributed to healthcare providers through the Public Health and Social Services Emergency Fund (“Provider Relief Fund”). These funds are intended to reimburse eligible providers for healthcare-related expenses or lost revenues attributable to COVID-19. Recipients are not required to repay Provider Relief Fund payments as long as they attest to and comply with certain terms and conditions, including reporting requirements, limitations on balance billing, and not using
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Provider Relief Fund payments to reimburse expenses or losses that other sources have or are obligated to reimburse. A number of our tenants and borrowers have received grants under the CARES Act and related legislation.

The CARES Act and related legislation include other provisions offering financial relief. For example, Congress temporarily suspended Medicare sequestration payment adjustments, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, (“BCA”). The sequestration adjustment was phased back in with a 1% reduction beginning April 1, 2022, and returned to 2% on July 1, 2022. The BCA sequestration has been extended through the first six months of 2032. As a result of the ARPA’s impact on the federal budget deficit, an additional Medicare payment reduction of up to 4% was required to take effect in January 2022. However, Congress has delayed implementation of this reduction until 2025.

In addition to offering economic relief to individuals and businesses, the federal legislation included provisions intended to ease legal and regulatory burdens on healthcare providers. Many of the legislative and regulatory measures allowing for flexibility in delivery of care and various financial supports for healthcare providers are available only for the duration of the PHE declared by the HHS in response to the COVID-19 pandemic. The current HHS declaration expires April 11, 2023, however, the current administration has announced that it intends to terminate the PHE declaration on May 11, 2023.

During the COVID-19 PHE, federal and state governments and local health authorities have imposed measures intended to limit the spread of COVID-19 and to mitigate the burden on the healthcare system. For example, a CMS regulation requires COVID-19 vaccinations for workers in certain Medicare- and Medicaid-certified providers and suppliers, including hospitals and long-term care facilities such as SNFs. Our managers, borrowers and tenants have been and may continue to be impacted by the health and economic effects of COVID-19.

Fraud and Abuse. Participants in the healthcare industry are subject to various complex federal and state civil and criminal laws and regulations governing a wide array of healthcare provider referrals, relationships and arrangements. These laws include: (i) federal and state false claims acts, which generally prohibit providers from filing false claims or making false statements to receive payment from Medicare, Medicaid or other federal or state healthcare programs; (ii) federal and state anti-kickback and fee-splitting statutes, including the federal Anti-Kickback Statute, which prohibits the payment or receipt of any consideration in exchange for referral of Medicare and Medicaid patients; (iii) federal and state physician self-referral laws, including the federal prohibition commonly referred to as the Stark Law, which generally prohibit referrals by physicians to entities for designated health services (which include hospital inpatient and outpatient services and some of the services provided in SNFs) with which the physician or an immediate family member has a financial relationship; and (iv) the federal Civil Monetary Penalties Law, which requires a lower burden of proof than other fraud and abuse laws. These laws and regulations subject violators to severe penalties, including exclusion from the Medicare and Medicaid programs, denial of Medicare and Medicaid payments, punitive sanctions, fines and even prison sentences. They are enforced by a variety of federal, state and local agencies, and can also be enforced by private litigants through, among other things, federal and state false claims acts, which allow private litigants to bring qui tam or “whistleblower” actions. In recent years, both federal and state governments have significantly increased investigation and enforcement activity to detect and punish wrongdoers.

It is anticipated that the trend toward increased investigation and enforcement activity will continue. In the event that any manager, tenant or borrower were to be found in violation of any of these laws and regulations, that manager’s, tenant’s or borrower’s ability to operate the facility could be jeopardized, which could adversely affect any such tenant’s or borrower’s ability to make lease or debt payments to us and could thereby adversely affect us.

Privacy and Security. Privacy and security regulations issued pursuant to the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) restrict the use and disclosure of individually identifiable health information (“protected health information”), provide for individual rights, require safeguards for protected health information and require notification of breaches of unsecure protected health information. Entities subject to HIPAA include health plans, healthcare clearinghouses, and most healthcare providers (including some of our managers, tenants and borrowers). Business associates of these entities who create, receive, maintain or transmit protected health information are also subject to certain HIPAA provisions. Violations of HIPAA may result in substantial civil and/or criminal fines and penalties.

The costs to the business or, for an operator of a healthcare property, associated with developing and maintaining programs and systems to comply with data privacy and security laws, defending against privacy and security related claims or enforcement actions and paying any assessed fines can be substantial. Moreover, such costs could have a material adverse effect on the ability of an operator to meet its obligations to us.

There are several other laws and legislative and regulatory initiatives at the federal and state levels addressing privacy and security of personal data that may not be preempted by HIPAA. Federal and state data privacy and security laws and regulations
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and related requirements continue to evolve, and changes may affect compliance obligations, business operations and/or transactions that depend on data. In particular, the California Consumer Privacy Act (the “CCPA”) requires subject companies that process information on California residents to, among other things, provide new disclosures and options to consumers about data collection, use and sharing practices. Further, the CCPA has been subject to revision and amendments, including significant modifications made by the California Privacy Rights Act, under which the majority of requirements took effect on January 1, 2023. Colorado, Connecticut, Utah and Virginia recently enacted similar laws that take effect in 2023, and other states are considering expanding or passing privacy laws in the near term.

Many of these privacy laws and regulations and related interpretations are subject to uncertain application, interpretation or enforcement standards that could result in claims against us and/or our tenants, borrowers, and operators, extensive changes to our business practices, systems and operational processes, including our data processing and security systems, penalties, increased operating costs or other impacts on our businesses. Many of the recently enacted laws often provide for civil penalties for violations, as well as a private right of action in certain jurisdictions for data breaches and non-compliance with such laws that may increase data breach litigation and/or our susceptibility to fines or penalties from a regulator. Further, while we are using internal and external resources to monitor compliance with these laws, and continue to modify our data processing practices and policies in order to comply with evolving privacy laws, relevant regulatory authorities could disagree with our interpretation of these laws and determine that our data processing practices, or those of our borrowers and/or operators fail to address all the requirements of certain new laws, which could subject us to penalties and/or litigation. In addition, there is no assurance that our security controls over personal data, the training of employees and vendors on data privacy and data security, and the policies, procedures and practices we implemented or may implement in the future will prevent the improper disclosure of personal data.

Improper use or disclosure of personal data in violation of HIPAA and/or of other personal data protection laws could harm our reputation and cause loss of consumer confidence, either of which could have a material effect on our financial position. New privacy and security laws further could require substantial further investment in resources to comply with regulatory changes as privacy and security laws proliferate in divergent ways or impose additional obligations.

The Federal Trade Commission also has been pursuing privacy as an enforcement priority, including unfair or deceptive practices relating to privacy policies, consumer data collection and processing consent, and digital advertising practices. In addition, healthcare providers and industry participants are subject to a growing number of requirements intended to promote the interoperability and exchange of patient information. Noncompliance may result in penalties or other disincentives.

Americans with Disabilities Act. Our properties generally must comply with the Americans with Disabilities Act (the “ADA”) and any similar state or local laws to the extent that such properties are public accommodations as defined in those statutes. The ADA may require removal of barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. While under our triple-net lease structure, our tenants would generally be responsible for additional costs that may be required to make our facilities ADA-compliant, should barriers to access by persons with disabilities be discovered, we may be indirectly responsible for additional costs that may be required to make facilities ADA-compliant. Noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants. Our commitment to make readily achievable accommodations pursuant to the ADA is ongoing, and we continue to assess our properties and make modifications as appropriate in this respect.

Environmental Regulations. As an owner of real property, we are subject to various federal, state and local laws and regulations regarding environmental, health and safety matters. These laws and regulations address, among other things, asbestos, polychlorinated biphenyls, fuel, oil management, wastewater discharges, air emissions, radioactive materials, medical wastes, and hazardous wastes, and in certain cases, the costs of complying with these laws and regulations and the penalties for non-compliance can be substantial. We may be held primarily or jointly and severally liable for costs relating to the investigation and clean-up of any property that we own from which there is or has been an actual or threatened release of a regulated material and any other affected properties, regardless of whether we knew of or caused the release. Such costs typically are not limited by law or regulation and could exceed the property’s value. In addition, we may be liable for certain other costs, such as governmental fines and injuries to persons, property or natural resources, as a result of any such actual or threatened release. Under the terms of our triple-net leases, we generally have a right to indemnification by our tenants, for any contamination caused by them. However, we cannot assure you that our tenants will have the financial capability or willingness to satisfy their respective indemnification obligations to us, and any such inability or unwillingness to do so may require us to satisfy the underlying environmental claims.


Tax Regulation

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We have elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and since our formation, have filed our U.S. federal income tax return as a REIT. We believe that we have met the requirements for qualification as a REIT since our initial REIT election in 1991, and we expect to qualify as such for each of our taxable years. Our qualification and taxation as a REIT depends upon our ability to meet on a continuing basis, through actual annual operating results, the various qualification tests and organizational requirements imposed under the Internal Revenue Code, including qualification tests based on NHI’s assets, income, distributions and stock ownership. Provided we qualify for taxation as a REIT, we generally will not be required to pay U.S. federal corporate income taxes on our REIT taxable income (computed without regard to the dividends-paid deduction or our net capital gain or loss) that is currently distributed to our stockholders. This treatment substantially eliminates the “double taxation” that ordinarily results from investment in a C corporation. We will, however, be required to pay U.S. federal income tax in certain circumstances.

The sections of the Internal Revenue Code relating to qualification and operation as a REIT, and the U.S. federal income taxation of a REIT and its stockholders, are highly technical and complex. Some of the requirements depend upon actual operating results, distribution levels, diversity of stock ownership, asset composition, source of income and record keeping. Accordingly, while we intend to continue to qualify to be taxed as a REIT, the actual results of our operations for any particular year might not satisfy these requirements for qualification and taxation as a REIT. Accordingly, no assurance can be given that the actual results of our operation for any particular taxable year will satisfy such requirements. Further, the anticipated U.S. federal income tax treatment may be changed, perhaps retroactively, by legislative, administrative or judicial action at any time.

To qualify as a REIT, we must elect to be treated as a REIT, and we must meet various (a) organizational requirements, (b) gross income tests, (c) asset tests, and (d) annual dividend requirements.

Organizational Requirements. The Internal Revenue Code defines a REIT as a corporation, trust or association:

(1) that is managed by one or more trustees or directors;

(2) the beneficial ownership of which is evidenced by transferable shares, or by transferable certificates of beneficial interest;

(3) that would otherwise be taxable as a domestic corporation, but for Sections 856 through 859 of the Internal Revenue Code;

(4) that is neither a financial institution nor an insurance company to which certain provisions of the Internal Revenue Code apply;

(5) the beneficial ownership of which is held by 100 or more persons;

(6) during the last half of each taxable year, not more than 50% in value of the outstanding stock of which is owned, directly or constructively, by five or fewer individuals, as defined in the Internal Revenue Code to also include certain entities; and

(7) which meets certain other tests regarding the nature of its income and assets.

We believe that we have been organized and have operated in a manner that has allowed us, and will continue to allow us, to satisfy conditions (1) through (7) inclusive, during the relevant time periods, and we intend to continue to be organized and operate in this manner. However, qualification and taxation as a REIT depend upon our ability to meet the various qualification tests imposed under the Internal Revenue Code, including through actual operating results, asset composition, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that we will be organized or will be able to operate in a manner so as to qualify or remain qualified as a REIT.

Income Test. We must satisfy two gross income tests annually to maintain our qualification as a REIT.

First, at least 75% of our gross income for each taxable year (excluding gross income from prohibited transactions) must consist of defined types of income that we derive, directly or indirectly, from investments relating to real property or mortgages on real property or qualified temporary investment income. Qualifying income for purposes of that 75% gross income test generally includes:

rents from real property;
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interest on debt secured by mortgages on real property, or on interests in real property (including interest on an obligation secured by a mortgage on both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair market value of all the property securing the obligation);
dividends or other distributions on, and gain from the sale of, shares in other REITs;
gain from the sale of real estate assets; and
income derived from the temporary investment of new capital that is attributable to the issuance of our shares of beneficial interest or a public offering of our debt with a maturity date of at least five years and that we receive during the one-year period beginning on the date on which we received such new capital.

Second, in general, at least 95% of our gross income for each taxable year (excluding gross income from prohibited transactions) must consist of income that is qualifying income for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities or any combination of these.

Asset Test. To maintain our qualification as a REIT, we also must satisfy the following asset tests at the end of each quarter of each taxable year:

First, at least 75% of the value of our total assets must consist of: (a) cash or cash items, including certain receivables, (b) government securities, (c) real estate assets, including interests in real property, leaseholds and options to acquire real property and leaseholds, (d) interests in mortgages on real property (including an interest in an obligation secured by a mortgage on both real property and personal property if the fair market value of the personal property does not exceed 15% of the total fair market value of all the property securing the obligation) or on interests in real property, (e) stock in other REITs, (f) debt instruments issued by publicly offered REITs (i.e., REITs which are required to file annual and periodic reports with the SEC under the Securities Exchange Act of 1943, as amended (the “Exchange Act”)), (g) personal property leased in connection with real property to the extent that rents attributable to such personal property do not exceed 15% of the total rent received under the lease and are treated as “rents from real property”; and (h) investments in stock or debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or offerings of debt with at least a five year term;

Second, of our investments not included in the 75% asset class, the value of our interest in any one issuer’s securities may not exceed 5% of the value of our total assets;

Third, we may not own more than 10% of the voting power or value of any one issuer’s outstanding securities;

Fourth, no more than 20% of the value of our total assets may consist of the securities of one or more TRSs;

Fifth, no more than 25% of the value of our total assets may consist of the securities of TRSs and other non-TRS taxable subsidiaries and other assets that are not qualifying assets for purposes of the 75% asset test; and

Sixth, no more than 25% of our total assets may consist of debt instruments issued by publicly offered REITs that qualify as “real estate assets” only because of the express inclusion of “debt instruments issued by publicly offered REITs” in the definition of “real estate assets”.

Distribution Requirements. Each taxable year, we must distribute dividends, other than capital gain dividends, to our stockholders in an aggregate amount not less than: the sum of (a) 90% of our “REIT taxable income,” computed without regard to the dividends-paid deduction or our net capital gain or loss, and (b) 90% of our after-tax net income, if any, from foreclosure property, minus the sum of certain items of non-cash income.

Taxable REIT Subsidiary. A REIT may directly or indirectly own stock in a TRS. A TRS may be any corporation in which we directly or indirectly own stock and where both NHI and the subsidiary make a joint election to treat the corporation as a TRS, in which case it is treated separately from us and will be subject to U.S. federal corporate income taxation. Our stock, if any, of a TRS is not subject to the 10% or 5% asset tests. Instead, the value of all TRSs owned by us cannot exceed 20% of the value of our assets. We currently own all of the membership interests of NHI-SS TRS, LLC, a TRS and may form additional TRSs in the future.

We also lease “qualified healthcare properties” on an arm’s-length basis to a TRS (or subsidiary thereof) and the property is operated on behalf of such subsidiary by a person who qualifies as an “independent contractor” and who is, or is related to a person who is, actively engaged in the trade or business of operating healthcare facilities for any person unrelated to us or our TRS. Generally, the rent that we receive from our TRS in such structures will be treated as “rents from real property.”

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Subsidiary REITs. We, along with our TRS, currently own all of the common interests in NHI PropCo Member LLC, an entity that will elect to be taxed as a REIT under the Internal Revenue Code (the “Subsidiary REIT”) and we may own and acquire direct or indirect interests in additional Subsidiary REITs in the future. We believe that the Subsidiary REIT is organized and operates in a manner that permits it to qualify for taxation as a REIT for U.S. federal income tax purposes. However, if the Subsidiary REIT were to fail to qualify as a REIT, then (i) the Subsidiary REIT would become subject to regular U.S. corporate income tax and (ii) our equity interest in the Subsidiary REIT would cease to be a qualifying real estate asset for purposes of the 75% asset test and could become subject to the 5% asset test, the 10% voting share asset test, and the 10% value asset test generally applicable to our ownership in corporations other than REITs, qualified REIT subsidiaries (“QRSs”) and TRSs. If the Subsidiary REIT were to fail to qualify as a REIT and if we were not able to treat the Subsidiary REIT as a TRS of ours pursuant to certain prophylactic elections we have made, it is possible that we would not meet the 10% voting share test and the 10% value test with respect to our interest in the Subsidiary REIT, in which event we could fail to qualify as a REIT unless we could avail ourselves of certain relief provisions.

Failure to Qualify. If we lose our status as a REIT (currently or with respect to any tax years for which the statute of limitations has not expired), we will face serious tax consequences that will substantially reduce the funds available to satisfy our obligations, to implement our business strategy and to make distributions to our stockholders for each of the years involved because:

We would be subject to U.S. federal income tax at the regular corporate rate applicable to regular C corporations on our taxable income, determined without reduction for amounts distributed to stockholders;

For tax years beginning after December 31, 2022, we would possibly be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases;

We would not be required to make any distributions to stockholders, and any dividends to stockholders would be taxable as ordinary income to the extent of our current and accumulated earnings and profits (which may be subject to tax at preferential rates to individual stockholders); and

Unless we are entitled to relief under statutory provisions, we could not elect to be subject to tax as a REIT for four taxable years following the year during which we were disqualified.

In the event we are no longer required to pay dividends to maintain REIT status, this could adversely affect the value of our common stock. See “Item 1A. Risk Factors - Risks Related to Our Status as a REIT”.

Investment Policies

Our investment objectives are to (i) provide consistent and growing current income for distribution to our stockholders through investments primarily in healthcare-related facilities or in the operations thereof through independent third-party management, (ii) provide the opportunity to realize capital growth resulting from appreciation, if any, in the residual value of our portfolio properties, and (iii) preserve and protect stockholders’ capital through a balance of diversity, flexibility and liquidity. There can be no assurance that these objectives will be realized. Our investment policies include making investments in real estate, mortgage and other notes receivable, and joint ventures structured to comply with the provisions of RIDEA. We consider the creditworthiness of the operator to be an important factor in underwriting the lease or loan investment, and we generally have the right to approve any changes in operators.

During 2022, we made commitments to fund new investments in real estate and loans totaling approximately $101.5 million. In making new investments, we consider such factors as (i) the geographic area and type of property, (ii) the location, construction quality, condition and design of the property, (iii) the current and anticipated cash flow and its adequacy to meet operational needs, and lease or mortgage obligations to provide a competitive income return to our investors, (iv) the growth, tax and regulatory environments of the communities in which the properties are located, (v) occupancy and demand for similar facilities in the same or nearby communities, (vi) the quality, experience and creditworthiness of the management operating the facilities located on the property and (vii) the mix of private and government-sponsored residents. There can be no assurances that investments meeting our standards regarding these attributes will be found or closed. Our intention is to make investments in properties with substantial, long-term potential. However, we may choose to sell properties if they no longer meet our investment objectives.

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We will not, without the approval of a majority of the Board of Directors and review of a committee comprised of disinterested directors, enter into any joint venture or partnership relationships with or acquire from or sell to any director, officer or employee of NHI, or any affiliate thereof, as the case may be, any of our assets or other property.

The Board of Directors, without the approval of the stockholders, may alter our investment policies if it determines that such a change is in our best interests and our stockholders’ best interests. The methods of implementing our investment policies may vary as new investment and financing techniques are developed or for other reasons. Management may recommend changes in investment criteria from time to time.

Our investments in healthcare-related facilities may utilize borrowed funds or the issuance of equity. We may negotiate lines of credit or arrange for other short or long-term borrowings from lenders. We may arrange for long-term borrowings from institutional investors or through public offerings. We have previously invested, and may in the future invest, in properties subject to existing loans or secured by mortgages, deeds of trust or similar liens with favorable terms or in mortgage investment pools.

Investor Information

We publish our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to such reports on our website at www.nhireit.com. We have a policy of publishing these on the website as soon as reasonably practicable after filing them with, or furnishing them to, the SEC. Information contained on our website is not incorporated by reference into this Annual Report on Form 10-K. The SEC also maintains reports, proxy statements, information statements, and other information regarding issuers that file electronically at http://www.sec.gov.

We also maintain the following documents on our website:

The NHI Code of Business Conduct and Ethics which has been adopted for all employees, officers and directors of the Company.

Information on our “NHI EthicsPoint” which allows all interested parties to communicate with NHI executive officers and directors. The toll free number is 877-880-2974 and the communications may be made anonymously, if desired.

The NHI Restated Audit Committee Charter.

The NHI Revised Compensation Committee Charter.

The NHI Revised Nominating and Corporate Governance Committee Charter.

The NHI Corporate Governance Guidelines.

We will furnish, free of charge, a copy of any of the above documents to any interested investor upon receipt of a written request.

Our transfer agent is Computershare. Computershare will assist registered owners with the NHI Dividend Reinvestment plan, change of address, transfer of ownership, payment of dividends, replacement of lost checks or stock certificates. Computershare’s contact information is: Computershare Trust Company, N.A., P.O. Box 43078, Providence, RI 02940-3078. The toll free number is 800-568-3476 and the website is www.computershare.com.

ITEM 1A. RISK FACTORS

There are many significant factors that could materially adversely impact our financial condition, results of operations, cash flows, distributions and stock price. The following are risks we believe are material to our stockholders. There may be additional risks and uncertainties that we have not presently identified or have not deemed material. Some of the following risk factors constitute forward-looking statements. Please refer to “Cautionary Statement Regarding Forward Looking Statements” at the beginning of this Annual Report on Form 10-K.

Risks Related to Our Managers, Tenants and Borrowers

Actual or perceived risks associated with public health epidemics or outbreaks, such as the COVID-19 pandemic, have had and may in the future have a material adverse effect on our operators’ business and results of operations.
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The business and results of operations of the operators of our properties and the Company have been and may continue to be affected by the COVID-19 pandemic, and could in the future be adversely affected by other pandemics, epidemics, outbreaks of infectious disease or other public health crises. Our tenants and borrowers provide services to individual consumers, the majority of whom may be more vulnerable than the general population during a public health crisis due to their age, complex medical conditions, or other socioeconomic factors. For example, according to the Centers for Disease Control and Prevention, older adults and people with certain underlying medical conditions are at higher risk for serious illness and death from COVID-19. Although vaccines and booster shots for the COVID-19 virus are widely available in the United States, COVID-19 continues to result in a significant number of hospitalizations. In addition, there are uncertainties about the efficacy of the vaccines against the growing number of COVID-19 variants.

Revenues for the tenants and operators of our properties are significantly impacted by occupancy. A public health crisis may diminish the public trust in senior housing properties or medical facilities, especially those that have treated or house consumers affected by contagious diseases, which may result in a decline in consumers seeking services offered through our properties. Building occupancy rates at several of our properties has decreased significantly in comparison to pre-pandemic levels for a variety of reasons tied to COVID-19, including potential occupants’ postponement of moving to a senior housing facility due to perceived risks of community living arrangements. Such decreased occupancy is likely to continue in 2023, and could be further impacted by federal initiatives intended to reduce the number of multi-occupancy rooms in SNFs. In addition, actions our operators take to address COVID-19 have materially increased their operating costs, in comparison to pre-pandemic levels, and a future health crisis may also result in increased operating costs. Such costs include those related to enhanced health and safety precautions and increased retention and recruitment labor costs among other measures. A decrease in occupancy or increase in costs is likely to have a material adverse effect on the ability of our tenants and operators to meet their financial and other contractual obligations to us, including the payment of rent, as well as on our results of operations. In some cases, we have had to, and may continue to have to, write-off unpaid rental payments, incur lease accounting charges due to the uncollectibility of rental payments and/or restructure our tenants’ and operators’ long-term rent obligations. In response to requests by operators adversely impacted by COVID-19, we provided pandemic-related rent concessions totaling $10.7 million during 2022. Furthermore, infections at our facilities could lead to material increases in litigation costs for which our operators, or possibly we, may be liable.

The federal, state and local governments have implemented assistance programs in connection with COVID-19 that have benefited certain of our tenants and operators, but such government assistance may be insufficient to offset the downturn in business of our tenants and operators. In addition, federal and state governments and local health authorities have imposed measures intended to limit the spread of COVID-19 and to mitigate the burden on the healthcare system, which have increased or may in the future increase operating costs for our tenants, managers and borrowers. For example, a CMS regulation requires COVID-19 vaccinations for workers in most Medicare- and Medicaid-certified providers and suppliers, including hospitals and long-term care facilities such as SNFs. This vaccine mandate may result in heightened labor challenges for our tenants, managers and borrowers. Labor challenges may be exacerbated because the staff of our tenants and borrowers may be at greater risk of contracting contagious diseases due to their frequent exposure to vulnerable patients.

The COVID-19 pandemic continues to evolve. The continuation of, or any increase in the severity of, the COVID-19 pandemic, including the possibility of new COVID-19 variants, could have a material adverse effect on our operators’ business and results of operations. The extent to which the COVID-19 pandemic will continue to impact our business and results of operations will depend on future developments related to the pandemic, such as the duration and severity of the pandemic, the acceptance and distribution of effective medical treatments and vaccines (including additional doses of vaccines) and the impact of government actions affecting the healthcare industry and broader economy. In addition, a future pandemic or similar public health emergency, and the public’s and government’s response to any such future public health crisis, could have a material, adverse effect on our business.

We depend on the operating success of our tenants, managers and borrowers and if their financial condition or business prospects deteriorate, our financial condition and results of operations could be adversely affected.

We rely on our tenants, managers and borrowers and their ability to perform their obligations to us,. Any of our tenants, managers or borrowers may experience a weakening in their overall financial condition, including as a result of deteriorating operating performance, changes in industry or market conditions, including rising interest rates or inflation, or other factors. If their financial condition deteriorates, they may be unable or unwilling to make payments or perform their obligations to us in a timely manner if at all.

Revenues for the operators of our properties are primarily driven by occupancy and reimbursement by Medicare, Medicaid and private payor. Revenues from government reimbursement have, and may continue to, come under pressure due to
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reimbursement cuts resulting from federal and state budget shortfalls and constraints. Periods of weak economic growth in the U.S. which affect housing sales, investment returns and personal incomes may adversely affect senior housing occupancy rates. An oversupply of senior housing real estate may also apply downward pressure to the occupancy rates of our operators. Expenses for the facilities are driven by the costs of labor, food, utilities, taxes, insurance and rent or debt service. Liability insurance and staffing costs continue to increase for our operators. Historically low unemployment has created significant wage pressure for our operators.

In addition, inflation, both real and anticipated as well as any resulting governmental policies, could adversely affect the economy and the costs of labor, goods and services for our operators. Because our operators are typically required to pay all property operating expenses, increases in property-level expenses at our leased properties generally do not directly affect us. Increased operating costs could have an adverse impact on our operators if increases in their operating expenses exceed increases in their revenue, which may adversely affect their ability to pay rent owed to us. An increase in our operators’ expenses and a failure of their revenues to increase at least with inflation could adversely affect our operators’ and our financial condition and our results of operations.

To the extent any decrease in revenues and/or any increase in operating expenses of our operators results in a property not generating enough cash to make scheduled payments to us, our revenues, net income and funds from operations would be adversely affected. Such events and circumstances would cause us to evaluate whether there was an impairment of the real estate or mortgage loan that should be charged to earnings. Such impairment would be measured as the amount by which the carrying amount of the asset exceeded its fair value. Consequently, we might be unable to maintain or increase our current dividend and the market price of our stock may decline.

We are exposed to the risk that our managers, tenants and borrowers may become subject to bankruptcy or insolvency proceedings.

Although our lease agreements provide us the right to evict a tenant/operator and demand immediate payment of rent and exercise other remedies, and our mortgage loans provide us the right to terminate any funding obligations, demand immediate repayment of principal and unpaid interest, foreclose on the collateral and exercise other remedies, the bankruptcy laws afford certain rights to a party that has filed for bankruptcy or reorganization. A tenant or borrower in bankruptcy may be able to limit or delay our ability to collect unpaid rent in the case of a lease or to receive unpaid principal and/or interest in the case of a mortgage loan and to exercise other rights and remedies. For example, a tenant may reject its lease with us in a bankruptcy proceeding. In such a case, our claim against the tenant for unpaid and future rents would be limited by the statutory cap of the U.S. Bankruptcy Code. This statutory cap could be substantially less than the remaining rent owed under the lease, and any claim we have for unpaid rent might not be paid in full. In addition, a tenant may assert in a bankruptcy proceeding that its lease should be re-characterized as a financing agreement. If such a claim is successful, our rights and remedies as a lender, compared to a landlord, are generally more limited. We may be required to fund certain expenses (e.g. real estate taxes, maintenance and capital improvements) to preserve the value of a property, avoid the imposition of liens on a property and/or transition a property to a new tenant or borrower. In some instances, we have terminated our lease with a tenant and leased the facility to another tenant. In certain of those situations, we provided working capital loans to, and limited indemnification of, the new tenant. If we cannot transition a leased facility to a new tenant, we may take possession of that property, which may expose us to certain successor liabilities. Should such events occur, our revenue and operating cash flow may be adversely affected.

Certain tenants in our portfolio account for a significant percentage of the rent we expect to generate from our portfolio, and the failure of any of these tenants to meet their obligations to us could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

The successful performance of our real estate investments is materially dependent on the financial stability of our tenants/operators. For the year ended December 31, 2022, approximately 30% of our total revenue is generated by two tenants, including Senior Living (18%), and NHC (13%). Payment defaults or a decline in the operating performance by these or other tenants/operators could materially and adversely affect our business, financial condition and results of operations and our ability to pay expected dividends to our stockholders. As previously disclosed, we received no rent due under a master lease from a Welltower-controlled subsidiary, which master lease represented 12% of our total revenue for the year ended December 31, 2020, after a change in tenant ownership occurred in late July 2021. Following the filing of a lawsuit, NHI was able to settle the dispute and terminate the master lease with respect to these properties effective April 1, 2022. In the event of another tenant default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property. Further, we may not be able to re-lease the property for the rent previously received, or at all, or lease terminations may cause us to sell the property at a loss. The result of any of the foregoing risks could materially and adversely affect our business, financial conditions and results of operations and our ability to make distributions to our stockholders.
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Two members of our Board of Directors are also members of the board of directors of NHC, and their interests may differ from those of our stockholders.

Two of our board members, including our chairman of the Board of Directors, are also members of NHC’s board of directors. Those directors may have conflicting interests with holders of the Company’s common stock with respect to the NHC properties. During the year ended December 31, 2022, revenue from NHC represented 13% of our total revenue. With respect to all decisions by our Board of Directors related to the NHC properties, the two directors that are also members of NHC’s board of directors are recused and do not participate in the NHI Board discussions or vote related to such matters. However, these relationships could influence the Board of Director’s decisions in with respect to the properties leased to and operated by NHC. As of December 31, 2022, NHC owned 1,630,642 shares (approximately 4%) of our common stock.

We are exposed to risks related to governmental regulations and payors, principally Medicare and Medicaid, and the effect of changes to laws, regulations and reimbursement rates on our tenants’ and borrowers’ business.

Our tenants, managers and borrowers are subject to complex federal, state and local laws and regulations relating to governmental healthcare programs. See “Item 1. Business - Government Regulation.” Regulation of the healthcare industry generally has intensified over time both in the number and type of regulations and in the efforts to enforce those regulations. Federal, state and local laws and regulations affecting the healthcare industry include those relating to, among other things, licensure; certification and enrollment with government programs; facility operations; addition or expansion of facilities; services and equipment; allowable costs; the preparation and filing of cost reports; privacy and security of health related and other personal information; prices for services; quality of medical equipment and services; necessity and adequacy of medical care, patient rights, billing and coding for services and properly handling overpayments; maintenance of adequate records; relationships with physicians and other referrals sources and referral recipients; debt collection; communications with patients and consumers; interoperability; and information blocking. If our tenants, operators or borrowers fail to comply with applicable laws and regulations, they may be subject to liabilities and other consequences including civil penalties, loss of facility licensure, exclusion from participation in the Medicare, Medicaid, and other government healthcare programs, civil lawsuits and criminal penalties. In addition, different interpretations or enforcement of, or changes to, applicable laws and regulations in the future could subject current or past practices to allegations of illegality or impropriety or could require our tenants, managers and borrowers to make changes to their facilities, equipment, personnel, services, and operating expenses If the operations, cash flows or financial condition of our tenants, operators and/or borrowers are materially adversely impacted by current or future government regulation, our revenue and operations may be adversely affected as well. In addition, if an operator, borrower or tenant defaults on its lease or loan with us, our ability to replace the operator or tenant may be delayed by federal, state, or local approval processes.

Our tenants’, operators’ and borrowers’ businesses are also affected by government and private payor reimbursement. Payments from government programs and private payors are subject to statutory and regulatory changes, retroactive rate adjustments, recovery of program overpayments or set-offs, administrative rulings, policy interpretations, payment or other delays by fiscal intermediaries, government funding restrictions (at a program level or with respect to specific facilities) and interruption or delays in payments due to any ongoing governmental investigations and audits at such facilities. In recent years, legislative and regulatory changes have resulted in limitations and reductions in payments for certain services under government programs. For example, as a result of federal deficit reduction initiatives, Medicare reimbursement is subject to automatic, across-the-board spending reductions known as sequestration. Several states face budgetary pressures that have resulted, and will likely continue to result, in reduced Medicaid funding, through such measures as tightening patient eligibility requirements, reducing coverage, and enrolling Medicaid recipients in managed care programs. In addition, CMS may implement or oversee changes through new or modified demonstration projects, including those authorized pursuant to Medicaid waivers.

Any reductions in Medicare or Medicaid reimbursement could have an adverse effect on the financial operations of our borrowers, operators and tenants who operate SNFs. Further, reductions in payments under government healthcare programs may negatively impact payments from private payors, as some private payors rely on government payment systems to determine payment rates. There can be no assurance that adequate reimbursement levels will continue to be available for services provided by any facility operator, whether the facility receives reimbursement from Medicare, Medicaid or private payor sources. Significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on an operator’s liquidity, financial condition and results of operations, which could adversely affect the ability of an operator to meet its obligations to us.

More generally, the legislative and regulatory environment for healthcare products and services is dynamic, and Congress and certain state legislatures have considered or enacted a large number of laws and regulations intended to make major
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changes in the healthcare system, including laws that affect how healthcare services are delivered and reimbursed. Recent government initiatives and proposals relevant to our properties include those focused on transparency of SNF ownership and minimum SNF staffing requirements. Other industry participants, such as private payors, may also introduce financial or delivery system reforms. There is uncertainty with regard to whether, when and what health reform initiatives will be adopted in the future and the impact of such reform efforts on providers and other healthcare industry participants, including our tenants, managers and borrowers.

We are exposed to the risk that the cash flows of our tenants, managers and borrowers may be adversely affected by increased liability claims and liability insurance costs.

ALF and SNF operators have experienced substantial increases in both the number and size of patient care liability claims in recent years. As a result, general and professional liability costs have increased and may continue to increase. Nationwide, long-term care liability insurance rates are increasing because of large jury awards in states like Texas and Florida. Both Texas and Florida have now adopted SNF liability laws that modify or limit tort damages. Despite some of these reforms, the long-term care industry overall continues to experience very high general and professional liability costs. Insurance companies have responded to this claims crisis by severely restricting their capacity to write long-term care general and professional liability policies. No assurance can be given that the climate for long-term care general and professional liability insurance will improve in either of the foregoing states or any other states where the facilities operators conduct business. Insurance companies may continue to reduce or stop writing general and professional liability policies for ALFs and SNFs. Thus, general and professional liability insurance coverage may be restricted, very costly or not available. Increased general and professional liability costs, may adversely affect our tenants’ or operators’ future operations, cash flows and financial condition and may have a material adverse effect on the tenants’ or operators’ ability to meet their obligations to us.

We are exposed to the risk that we may not be fully indemnified by our tenants, managers and borrowers against future litigation.

Our leases and notes require that the tenant/manager/borrowers name us as an additional insured party on their insurance policies covering professional liability or personal injury claims. These instruments also require the tenant/borrower to indemnify and hold us harmless for all claims arising out of or incidental to the occupancy and use of each facility. However, claims could exceed the policy limits, the insurance company could fail or coverage may not otherwise be available. We cannot give any assurance that these protective measures will completely eliminate any risk to us related to future litigation, the costs of which could have a material adverse impact on us.

Risks Related to Our Business and Operations

We depend on the success of property development and construction activities, which may fail to achieve the operating results we expect.

When we decide to invest in the renovation of an existing property or in the development of a new property, we make assumptions about the future potential cash flows of that property. We estimate our return based on expected occupancy, rental rates and future capital costs. If our projections prove to be inaccurate due to increased capital costs, lower occupancy or other factors, our investment in that property may not generate the cash flow we expected. Construction and development projects involve risks such as (i) development of a project could be abandoned after expending significant resources resulting in loss of deposits or failure to recover expenses already incurred; (ii) development and construction costs of a project could exceed original estimates due to increased interest rates and higher material costs; (iii) project delays could results in increases in construction costs and debt service expenses as a result of a variety of factors that are beyond our control, including natural disasters, labor conditions, material shortages, and regulatory hurdles; and (iv) financing for a project could be unavailable on favorable terms or at all. Recently developed properties may take longer than expected to achieve stabilized operating levels, if at all. To the extent such facilities experience such increases in cost or delays in construction or financing, or otherwise fail to reach stabilized operating levels or achieve stabilization later than expected, it could materially adversely affect our tenants’ abilities to make payments to us under their leases and thus adversely affect our business and results of operations.

We are exposed to the risk that the illiquidity of real estate investments could impede our ability to respond to adverse changes in the performance of our properties.

Real estate investments are relatively illiquid and, therefore, our ability to quickly sell or exchange any of our properties in response to changes in economic and other conditions, including rising interest rates, may be limited. All of our properties are "special purpose" properties that cannot be readily converted to general residential, retail or office use. Facilities that participate in Medicare or Medicaid must meet extensive program requirements, including physical plant and operational requirements.
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Transfers of operations of facilities are subject to regulatory approvals not required for transfers of other types of real estate. Thus, if the operation of any of our properties becomes unprofitable due to competition, age of improvements or other factors such that our tenant or borrower becomes unable to meet its obligations on the lease or mortgage loan, the liquidation value of the property may be less than the net book value or the amount owed on any related mortgage loan, because the property may not be readily adaptable to other uses. The sale of the property or the replacement of an operator that has defaulted on its lease or loan could also be delayed by the approval process of any federal, state or local agency necessary for the transfer of the property or the replacement of the operator with a new operator licensed to manage the facility. No assurances can be given that we will recognize full value for any property that we are required to sell for liquidity reasons. Should such events occur, our results of operations and cash flows could be adversely affected.

We are exposed to risks associated with our investments in unconsolidated entities, including our lack of sole decision-making authority and our reliance on the financial condition of other interests.

Our investments in unconsolidated entities could be adversely affected by our lack of sole decision-making authority regarding major decisions, our reliance on the financial condition of other interests, any disputes that may arise between us and other partners, and our exposure to potential losses from the actions of partners. Risks of dealing with parties outside NHI include limitations on unilateral major decisions opposed by other interests, the prospect of divergent goals of ownership including disputes regarding management, ownership or disposition of a property, or limitations on the transfer of our interests without the consent of our partners. Risks of the unconsolidated entity extend to areas in which the financial health of our partners may impact our plans. Our partners might become bankrupt or fail to fund their share of required capital contributions, which may hinder significant action in the entity. We may disagree with our partners about decisions affecting a property or the entity itself, which could result in litigation or arbitration that increases our expenses, distracts our officers and directors and disrupts the day-to-day operations of the property, including by delaying important decisions until the dispute is resolved; and finally, we may suffer losses as a result of actions taken by our partners with respect to our investments.

We are subject to risks associated with our joint venture investment with Life Care Services for Timber Ridge, an entrance fee CCRC, associated with Type A benefits offered to the residents of the joint venture's entrance fee community and related accounting requirements.

Effective January 31, 2020, we entered into a joint venture with Life Care Services (“LCS”) which consists of two parts, NHI-LCS JV I, LLC (“Timber Ridge PropCo”), which owns the real estate and is owned 80% by NHI and 20% by LCS, and Timber Ridge OpCo, LLC (“Timber Ridge OpCo”) which operates the property and is owned 25% by NHI’s TRS and 75% by LCS. Rents received from the Timber Ridge OpCo in the RIDEA structure are treated as qualifying rents from real property for REIT tax purposes only if (i) they are paid pursuant to a lease of a “qualified healthcare property” and (ii) the operator qualifies as an “eligible independent contractor,” as defined in the Internal Revenue Code. If either of these requirements are not satisfied, then the rents will not be qualifying rents.

As part of acquisition of the real estate in January 2020, Timber Ridge PropCo accepted the property subject to trust liens previously granted to residents of Timber Ridge. Beginning in 2008, early residents of Timber Ridge executed loans to the then owner/operators backed by liens and entered into a Deed of Trust and Indenture of Trust (the “Deed and Indenture”) for the benefit of the trustee on behalf of all residents who made mortgage loans to the owner/operator in accordance with a resident agreement. The Deed and Indenture granted a security interest in the Timber Ridge property to secure the loans made by the early residents of the property this practice was discontinued at Timber Ridge in 2008, prior to our investment. However, the remaining outstanding “old” loans made by the residents are still secured by a security interest in the Timber Ridge property. The trustee for all of the residents who made “old” loans in accordance with the resident agreements entered into a subordination agreement concurrent with Timber Ridge PropCo’s acquisition of the property, pursuant to which the trustee acknowledged and confirmed that the security interests created under the Deed and Indenture were subordinate to any security interests granted in connection with the loan made by NHI to Timber Ridge PropCo. With the periodic settlement of some of the outstanding resident loans in the course of normal entrance-fee community operations by Timber Ridge OpCo, the balance owing on the Deed and Indenture at December 31, 2022 was $13.6 million. By terms of the resident loan assumption agreement, during the term of the lease (seven years with two renewal options), Timber Ridge OpCo is to indemnify Timber Ridge PropCo for any repayment by Timber Ridge PropCo of these liabilities under the guarantee. We cannot give any assurance that these protective measures will completely eliminate any risk to us related to claims under the Deed and Indenture.

As a result of the RIDEA structure, we have an investment in the operations of Timber Ridge. Timber Ridge is a Class A quality, Type A care CCRC. A Type A entrance fee community generally means the care of the resident is provided for upon payment of an entrance fee and thereafter payment of a monthly set service fee. The entrance fee is divided into a refundable and non-refundable portion depending upon the resident’s chosen contract program. The service fee is determined at the time of
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move-in into an IL unit and is subject to certain inflation-based adjustments regardless of the resident’s future care needs. A resident must move into an IL unit initially and not require care at the time of move-in. However, thereafter the resident’s care requirements from assisted living to memory care to skilled nursing are provided for. The refundable portion of the upfront entrance fee is recorded as a liability on the financial statements of Timber Ridge OpCo. The non-refundable portion of the upfront entrance fee is recorded as deferred revenue and amortized over the actuarial life of the resident. We believe the structure of the joint venture does not require that Timber Ridge OpCo’s financial statements be consolidated into NHI, but if we are unable to properly maintain that structure or become required for any reason to consolidate Timber Ridge OpCo’s financial statements into ours, the results would have a material adverse impact on our financial results.

We are subject to additional risks related to healthcare operations associated with our investments in unconsolidated entities, which could have a material adverse effect on our results of operations.

Since January 31, 2020, we have one investment in an unconsolidated entity, Timber Ridge OpCo. As such, we are exposed to various operational risks with respect to this investment that may increase our costs or adversely affect our ability to increase revenues. These risks include fluctuations in resident occupancy, operating expenses, and economic conditions; competition; certification and inspection laws, regulations, and standards; the availability of and increases in cost of general and professional liability insurance coverage; litigation; federal, state and local taxes and regulations; costs associated with government investigations and enforcement actions; the availability and increases in cost of labor; and other risks applicable to any operating business. Any one or a combination of these factors may adversely affect our revenue and operations.

COVID-19 has had and may continue to have an adverse effect on our overall business and financial performance.

COVID-19 has caused, and may continue to cause, severe economic, market and other disruptions worldwide. We cannot assure you that conditions in the bank lending, capital and other financial markets will not continue to deteriorate as a result of the COVID-19 pandemic, or that our access to capital and other sources of funding will not become constrained, which could adversely affect the availability and terms of future borrowings, renewals or refinancings. Such future constraints could increase our borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments.

The impact of COVID-19 on our results of operations, liquidity and financial condition could adversely affect our ability to pay dividends at expected levels or at all. All dividends are made at the discretion of our Board of Directors in accordance with Maryland law and depend on our earnings, our financial condition, debt and equity capital available to us, our expectation of our future capital requirements and operating performance, restrictive covenants in our financial and other contractual arrangements, maintenance of our REIT qualification, restrictions under Maryland law and other factors as our Board of Directors may deem relevant from time to time. Our Board of Directors will continue to assess our dividend rate on an ongoing basis, as COVID-19 and related market conditions and our financial position continue to evolve.

We are exposed to operational risks with respect to our SHOP structured communities.

During 2022, we transitioned 15 of our former Holiday properties to be SHOP structured communities. Our SHOP structured communities expose us to various operational risks that may increase our costs or adversely affect our ability to generate revenues. As the owner of a property under a SHOP structure, we are ultimately responsible for all operational risks and other liabilities of the property, other than those arising out of certain actions by our manager, such as gross negligence or willful misconduct. Operational risks include, and our resulting revenues therefore depend on, among other things: (i) occupancy rates; (ii) rental rates charged to residents; (iii) our operators’ reputations and ability to attract and retain residents; (iv) general economic conditions and market factors that impact seniors including those exacerbated by the COVID-19 pandemic; (v) competition from other senior housing providers; (vi) compliance with federal, state, and local laws and regulations and industry standards; (vii) litigation involving our properties or residents, including but not limited to litigation related to COVID-19; (viii) the availability and cost of general and professional liability insurance coverage or increases in insurance policy deductibles; and (ix) the ability to control operating expenses, which have increased, and may continue to increase, due to the COVID-19 pandemic. In addition, the success of our SHOP structured communities will depend largely on our ability to establish and maintain good relationships with our managers. Although the SHOP structure gives us certain oversight approval rights (e.g., budgets, material contracts, etc.) and the right to review operational and financial reporting information, we have outsourced to our third-party managers the day to day operations of the communities. Therefore, we are dependent on our managers to operate these communities in a manner that complies with applicable law, minimizes legal risk and maximizes the value of our investment. Failure by our managers to adequately manage these risks could have a material adverse effect on our business, results of operations and financial condition.

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From time to time, disputes may arise between us and our managers regarding their performance or compliance with the terms of the agreements we have entered into with them, which in turn could adversely affect our results of operations. We will generally attempt to resolve any such disputes through discussions and negotiations; however, if we are unable to reach satisfactory results through discussions and negotiations, we may choose to terminate the applicable agreement, litigate the dispute or submit the matter to third-party dispute resolution, the outcome of which may be unfavorable to us.

In the event that any of the agreements with our managers are terminated, we can provide no assurances that we could find a replacement manager or that any replacement manager will be successful in managing our SHOP structured communities.

Breaches of, disruptions to, or other unauthorized interference with the privacy and security of Company information could cause us to incur substantial costs and reputational damage, and could become subject to litigation and enforcement actions.

Our business, like that of other REITs, involves the receipt, storage and transmission of information about our Company, our tenants, managers and borrowers, and our employees, some of which is entrusted to third-party service providers and vendors. We also work with third-party service providers and vendors to provide technology, systems and services that we use in connection with the receipt, storage and transmission of this information. As a matter of course, we may store or process the personal data of employees and other persons as required to provide our services and such personal data or other data may be hosted or exchanged with our partners and other third-party providers.

As with all companies that utilize information systems, our information systems, and those of our third-party service providers and vendors, may be vulnerable to continually evolving cybersecurity risks. We employ industry standard administrative, technical and physical safeguards designed to protect the integrity and security of personal data we collect or process. We have implemented and regularly review and update processes and procedures to protect against unauthorized access to or use of secured data and to prevent data loss. Unauthorized parties may attempt to gain access to these systems or our information through fraud or deception of our associates, third-party service providers or vendors. Hardware, software or applications we obtain from third parties may contain defects in design or manufacture or other problems that could unexpectedly compromise information security. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are also constantly changing and evolving and may be difficult to anticipate or detect for long periods of time. The ever-evolving threats mean we and our third-party service providers and vendors must continually evaluate and adapt our respective systems and processes, and there is no guarantee that they will be adequate to safeguard against all data security breaches or misuses of data. Despite the security measures we have in place, and any additional measures we may implement in the future, our facilities and systems, and those of our third-party service providers, could be vulnerable to service interruptions, outages, cyber-attacks and security breaches and incidents, human error, earthquakes, hurricanes, floods, pandemics, fires, other natural disasters, power losses, disruptions in telecommunications services, fraud, military or political conflicts, terrorist attacks and other geopolitical unrest, computer viruses, ransomware, and other malicious software, changes in social, political, or regulatory conditions or in laws and policies, or other changes or events.

Any significant compromise or breach of our data security, whether external or internal, or misuse of our data, could disrupt our operations, result in significant costs, fines and lawsuits, harm our business relationships, increase our security and insurance costs and damage our reputation. Moreover, any significant cybersecurity events could require us to devote significant management resources to address the problems created by such events, interfere with the pursuit of other important business strategies and initiatives, and cause us to incur additional expenditures, which could be material, including to investigate such events, remedy cybersecurity problems, recover lost data, prevent future compromises and adapt systems and practices in response to such events. There is no assurance that any remedial actions will meaningfully limit the success of future attempts to breach our information technology systems.

In addition, as the regulatory environment related to information security, data collection and use, and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in significant additional costs.

We are exposed to risks related to environmental laws and the costs associated with liabilities related to hazardous substances.

Under various federal and state laws, owners or operators of real property may be required to respond to the release of hazardous substances on the property and may be held liable for property damage, personal injuries or penalties that result from environmental contamination of currently or formerly owned real estate, often regardless of knowledge of or responsibility for the contamination. These laws also expose us to the possibility that we may become liable to reimburse the government for damages and costs it incurs in connection with the contamination. Generally, such liability attaches to a person based on the
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person’s relationship to the property. Although our tenants and operators are primarily responsible for the condition of the property they occupy, we also could be held liable to a governmental authority or to third parties for property damage, personal injuries, and for investigation and clean-up costs incurred in connection with the contamination or we could be required to incur additional costs to change how the property is constructed or operated due to presence of such substances. However, we review environmental site assessment of the properties that we purchase or encumber prior to taking an interest in them. Those assessments are designed to meet the “all appropriate inquiry” standard, which qualifies us for the innocent purchaser defense if environmental liabilities arise. Notwithstanding these assessments, however, environmental liabilities, including mold, may be present in our properties and we may incur costs to remediate contamination, which could have a material adverse effect on our business or financial condition. In addition, the presence of hazardous substances or a failure to properly remediate any resulting contamination could adversely affect our ability to lease, mortgage, or sell an affected property.

We are subject to risks of damage from catastrophic weather and other natural or man-made disasters and the physical effects of climate change.

Natural and man-made disasters, including terrorist attacks and acts of nature such as hurricanes, tornados, earthquakes, flooding and wildfires, may cause damage to our properties or business disruption to our tenants, managers and borrowers. These adverse weather and natural or man-made events could cause substantial damage or loss to our properties which could exceed applicable property insurance coverage. Such events could also have a material adverse impact on our tenants’, operators’ and borrowers’ operations and ability to meet their obligations to us. In the event of a loss in excess of insured limits, we could lose our capital invested in the affected property, as well as anticipated future revenue from that property. Any such loss could materially and adversely affect our business and our financial condition and results of operations.

Climate change may also have indirect effects on our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable. To the extent that significant changes in the climate occur in areas where our properties are located, we may experience more frequent extreme weather events which may result in physical damage to or a decrease in demand for properties located in these areas or affected by these conditions. In addition, changes in federal and state legislation and regulation on climate change could result in increased capital expenditures to improve the energy efficiency of our existing properties and could also require us to spend more on our new development properties without a corresponding increase in revenue. Should the impact of climate change be material in nature, including destruction of our properties, or occur for lengthy periods of time, our financial condition or results of operations may be adversely affected.

We depend on the success of our future acquisitions and investments.

We are exposed to the risk that our future acquisitions may not prove to be successful. We could encounter unanticipated difficulties and expenditures relating to any acquired properties, including contingent liabilities, and newly acquired properties might require significant attention of NHI’s management that would otherwise be devoted to our existing business. If we agree to provide construction funding to a borrower and the project is not completed, we may need to take steps to ensure completion of the project. Moreover, if we issue equity securities or incur additional debt, or both, to finance future acquisitions, it may reduce our per share financial results.

We depend on our ability to reinvest cash in real estate investments in a timely manner and on acceptable terms.

From time to time, we will have cash available from principal payments on our notes receivable and the sale of properties, including tenant purchase option exercises, under the terms of master leases or similar financial support arrangements. We must reinvest these proceeds, on a timely basis, in new investments or in qualified short-term investments. We compete for real estate investments with a broad variety of potential investors. This competition for attractive investments may negatively affect our ability to make timely investments on terms acceptable to us. Delays in reinvesting our cash may negatively impact revenues and the amount of distributions to stockholders.

Competition for acquisitions may result in increased prices for properties.

We may face increased competition for acquisition opportunities from other well-capitalized investors, including publicly traded and privately held REITs, private real estate funds, partnerships and others. This may mean that we are unsuccessful in a potential acquisition of a desired property at an acceptable price or, even if we are able to acquire a desired property, competition from other real estate investors may significantly increase the purchase price.

We depend on our ability to retain our management team and other personnel and attract suitable replacements should any such personnel leave.

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The management and governance of the Company depends on the services of certain key personnel, including senior management. The departure of any key personnel could have an adverse effect on the Company and adversely affect our financial condition and results of operations. Our senior management team possesses substantial experience and expertise and has strong business relationships with our tenants and operators and other members of the business communities and industries in which we operate. As a result, the loss of these personnel could jeopardize our relationships and operations. We cannot predict the impact that any such departures could have on our ability to achieve our objectives. Furthermore, such a loss could be negatively perceived in the capital markets. Other than Mr. Mendelsohn, our Chief Executive Officer, we do not have employment agreements with any of our management team. In addition, we do not have key man insurance on any of our key employees. Our ability to retain and motivate our management team and other personnel and attract suitable replacements should any such personnel leave, could have a significant impact on our financial condition and results of operations.

We are exposed to the risk that our assets may be subject to impairment charges.

As a REIT, a significant percentage of our assets is invested in real estate. We regularly evaluate our real estate investments and other assets for impairment indicators. The judgment regarding the existence of impairment indicators is based on factors such as market conditions, operator performance and legal structure. If we determine that a significant impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset, which could have a material adverse effect on our reported results of operations in the period in which the impairment charge occurs. Such impairment charges may make it more difficult for us to meet the financial ratios in our indebtedness and may reduce the borrowing base, which may reduce the amounts of cash we would otherwise have available to pay expenses, make dividend distributions, service other indebtedness and operate our business.

In 2022, we recorded impairment charges totaling $51.6 million on 19 properties. In 2021, we recognized impairments of $51.8 million on ten properties.

Our ability to raise capital through equity sales is dependent, in part, on the market price of our common stock, and our failure to meet market expectations with respect to our business, or other factors we do not control, could negatively impact such market price and availability of equity capital.

As of December 31, 2022, we had the potential to access the remaining $415.7 million through the issuance of common stock under our $500.0 million ATM program. In addition, we maintain an effective automatic shelf registration statement through which capital could be raised via the issuance of equity securities. As with other publicly traded companies, the availability of equity capital will depend, in part, on the market price of our common stock which, in turn, will depend upon various market conditions and other factors, some of which we cannot control, that may change from time to time including:

the extent of investor interest;
the general reputation of REITs and the attractiveness of their equity securities in comparison to other equity securities, including securities issued by other real estate-based companies;
the financial performance of us and our tenants, managers and borrowers;
investment and tenant concentrations in our investment portfolio;
concerns about our operators’, tenants’ and borrowers’ financial condition due to uncertainty regarding reimbursement from governmental and other third-party payor programs;
our credit ratings and analyst reports on us and the REIT industry in general, including recommendations, and our ability to meet our guidance estimates or analysts’ estimates;
general economic, global and market conditions, including changes in interest rates on fixed income securities, which may lead prospective purchasers of our common stock to demand a higher annual yield from future distributions;
our failure to maintain or increase our dividend, which is dependent, to a large part, on the increase in funds from operations, which in turn depends upon increased revenues from additional investments and rental increases; and
other factors such as governmental regulatory action and changes in REIT tax laws, as well as changes in litigation and regulatory proceedings.

The market value of the equity securities of a REIT is generally based upon the market’s perception of the REIT’s growth potential and its current and potential future earnings and cash distributions. Our failure to meet the market’s expectation with regard to future earnings and cash distributions would likely adversely affect the market price of our common stock and, as a result, the availability of equity capital to us.

Risks Related to Our Debt

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We may need to refinance existing debt or incur additional debt in the future, which may not be available on terms acceptable to us.

We operate with a policy of incurring debt when, in the opinion of our Board of Directors, it is advisable. Currently, we believe that our current liquidity, availability under our unsecured credit facility, potential proceeds from our ATM equity program and our capacity to service additional debt will enable us to meet our obligations, including dividends, and continue to make investments in healthcare real estate. On March 31, 2022, we entered into a new unsecured revolving credit agreement (the “2022 Credit Agreement”) providing us with a $700.0 million unsecured revolving credit facility, replacing our previous $550.0 million unsecured revolver. The 2022 Credit Agreement matures in March 2026, but may be extended at our option, subject to the satisfaction of certain conditions, for two additional six-month periods. In January 2023, we repaid $125 million in private placement notes upon maturity. As a result, as of January 31, 2023 we have approximately $1.2 billion in outstanding indebtedness and approximately $498.0 million available to draw under our unsecured revolving credit facility. We have a $50.0 million term loan maturing in November 2023 and $240.0 million maturing in September 2023. We may incur additional debt by borrowing under our 2022 Credit Agreement, mortgaging properties we own and/or issuing debt securities in a public offering or in a private transaction. Our ability to raise reasonably priced capital is not guaranteed. We may be unable to raise reasonably priced capital because of reasons related to our business or for reasons beyond our control, such as market conditions and rising interest rates. If our access to capital becomes limited, it could have an impact on our ability to refinance our debt obligations, fund dividend payments, acquire properties and fund acquisition activities.

We have covenants related to our indebtedness which impose certain operational limitations and a breach of those covenants could materially adversely affect our financial condition and results of operations.

The terms of our current indebtedness as well as debt instruments that the Company may enter into in the future are subject to customary financial and operational covenants. Among other things, these provisions require us to maintain certain financial ratios and minimum net worth and impose certain limits on our ability to incur indebtedness, create liens and make investments or acquisitions. Our continued ability to incur debt and operate our business is subject to compliance with these covenants, which limit operational flexibility. Breaches of these covenants could result in a default under applicable debt instruments, even if payment obligations are satisfied. Financial and other covenants that limit our operational flexibility, as well as defaults resulting from a breach of any of these covenants in our debt instruments, could have a material adverse effect on our financial condition and results of operations.

Downgrades in our credit ratings could have a material adverse effect on our cost and availability of capital.

We plan to manage the Company to maintain a capital structure consistent with our current profile, but there can be no assurance that we will be able to maintain our current credit ratings. Moody's Investors Services (“Moody's”) announced on October 13, 2022 that it has affirmed the Company’s investment grade issuer credit rating and a senior unsecured debt rating of Baa3 and has revised it with a “Stable” outlook to the Company. Fitch Ratings (“Fitch”) reaffirmed its BBB- and “Stable” outlook on the Company on December 9, 2021 and S&P Global Ratings (“S&P Global”) also reaffirmed its BBB- and “Stable” outlook on the Company at November 14, 2022. Any downgrades of ratings or changes to outlooks by any or all of the rating agencies could have a material adverse effect on our cost and availability of capital, which could in turn have a material adverse effect on our results of operations, liquidity, cash flows, the trading/redemption price of our securities and our ability to satisfy our debt service obligations and to pay dividends and distributions to our equity holders.

We depend on revenues derived mainly from fixed rate investments in real estate assets, while a portion of our debt used to finance those investments bears interest at variable rates.

Our business model assumes that we can earn a spread between the returns earned from our investments in real estate as compared to our cost of debt and/or equity capital. Interest rates have been increasing over the past year and, as a result, the spread and our profitability on our investments have decreased. We are exposed to interest rate risk in the potential for a further narrowing of our spread and profitability if interest rates continue to increase in the future. Certain of our debt obligations are floating rate obligations with interest rates that vary with the movement of the Secured Overnight Financing Rate (“SOFR”) or other indexes. Our revenues are derived mainly from fixed rate investments in real estate assets. Although our leases generally contain escalating rent clauses that provide a partial hedge against interest rate fluctuations, if interest rates rise, our interest costs for our existing floating rate debt and any new debt we incur would also increase. This increasing cost of debt could reduce our profitability by increasing the cost of financing our existing portfolio and our investment activity. Rising interest rates could limit our ability to refinance existing debt upon maturity or cause us to pay higher rates upon refinancing. We manage a portion of our exposure to interest rate risk by accessing debt with staggered maturities and through the use of derivative instruments, such as interest rate swap agreements with major financial institutions. Increased interest rates may also negatively affect the market price of our common stock and increase the cost of new equity capital.
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We rely on external sources of capital to fund future capital needs, and if we encounter difficulty in obtaining such capital, we may not be able to make future investments necessary to grow our business or meet maturing commitments.

As a REIT under the Internal Revenue Code, we are required to, among other things, distribute at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction or our net capital gain or loss) each year to our stockholders. Because of this distribution requirement, we may not be able to fund, from cash retained from operations, all future capital needs, including capital needed to make investments and to satisfy or refinance maturing commitments. As a result, we rely on external sources of capital, including debt and equity financing. If we are unable to obtain needed capital at all or only on unfavorable terms from these sources, we might not be able to make the investments needed to grow our business, or to meet our obligations and commitments as they mature, which could negatively affect the ratings of our debt and even, in extreme circumstances, affect our ability to continue operations. We may not be in a position to take advantage of future investment opportunities in the event that we are unable to access the capital markets on a timely basis or we are only able to obtain financing on unfavorable terms.

Changes in interest rates may adversely affect our cash flows.

Pursuant to our 2022 Credit Agreement and the amendment to the existing term loan agreement, each entered into effective in March 2022, our indebtedness transitioned from bearing interest at a variable interest rate using a LIBOR benchmark to one that uses Term SOFR and Daily SOFR. SOFR is the preferred alternative rate for LIBOR that has been identified by the Alternative Reference Rates Committee (ARRC), a U.S.-based group convened by the Federal Reserve and the Federal Reserve Bank of New York. SOFR is calculated based on short-term repurchase agreements, backed by U.S. Treasury securities. SOFR is calculated differently from LIBOR and has inherent differences, which could give rise to uncertainties, including the limited historical data and volatility in the benchmark rates. Because of these and other differences, there is no assurance that SOFR will perform in the same way as LIBOR would have performed at any time, and there is no guarantee that it is a comparable substitute for LIBOR. Uncertainty as to the nature of such potential changes, alternative reference rates, including SOFR, or other reforms may adversely affect the trading market for LIBOR- or SOFR-based securities, including ours. As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be affected, and our available cash flow may be adversely affected.

Risks Related to Our Status as a REIT

We depend on the ability to continue to qualify for taxation as a REIT for U.S. federal income tax purposes.

We intend to operate as a REIT under the Internal Revenue Code and believe we have and will continue to operate in such a manner. In addition, we currently hold an interest in s Subsidiary REIT (and may in the future own or acquire additional interests in Subsidiary REITs). Since REIT qualification requires us to meet a number of complex requirements, it is possible that we (or our Subsidiary REIT) may fail to fulfill them. If we (or our Subsidiary REIT) fail to qualify as a REIT:

we (or our Subsidiary REIT) will not be allowed a deduction for distributions to stockholders in computing our taxable income;
we (or our Subsidiary REIT) will be subject to corporate-level income tax, on taxable income at regular corporate rates;
we (or our Subsidiary REIT) could be subject to increased state and local income taxes;
For tax years beginning after December 31, 2022, we (or our Subsidiary REIT) would possibly be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases; and
unless we (or our Subsidiary REIT) are entitled to relief under relevant statutory provisions, we (or our Subsidiary REIT, as applicable) will be disqualified from taxation as a REIT for the four taxable years following the year during which we (or our Subsidiary REIT, as applicable) fail to qualify as a REIT.

Because of all these factors, our (or our Subsidiary REIT’s) failure to qualify as a REIT could also impair our ability to expand our business and could materially adversely affect the value of our common stock. The present federal income tax treatment of REITs may be modified, possibly with retroactive effect, by legislative, judicial or administrative action at any time, which could affect the federal income tax treatment of an investment in us. The federal income tax rules dealing with REITs constantly are under review by persons involved in the legislative process, the U.S. Internal Revenue Service (the “IRS”) and the U.S. Treasury Department, which results in statutory changes as well as frequent revisions to regulations and interpretations. Revisions in federal tax laws and interpretations thereof could affect or cause us to change our investments and commitments and affect the tax considerations of an investment in us.
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There are no assurances of our ability to pay dividends in the future.

Our ability to pay dividends may be adversely affected upon the occurrence of any of the risks described herein. Our payment of dividends is subject to compliance with restrictions contained in our credit agreements, notes and any preferred stock that our Board may from time to time designate and authorize for issuance. All dividends will be paid at the discretion of our Board and will depend upon our earnings, our financial condition, maintenance of our REIT status and such other factors as our Board may deem relevant from time to time. There are no assurances of our ability to pay dividends in the future. In addition, our dividends in the past have included, and may in the future include a return of capital.

Complying with REIT requirements may cause us to forego otherwise attractive acquisition opportunities or liquidate otherwise attractive investments, which could materially hinder our performance.

To qualify as a REIT for U.S. federal income tax purposes, we (and any Subsidiary REIT of ours) must continually satisfy certain tests, including tests concerning the sources of our income, the nature and diversification of our assets, the amounts we distribute to our stockholders and the ownership of our stock. To meet these tests, we may be required to forego investments or acquisitions we might otherwise make. Thus, compliance with the REIT requirements may materially hinder our performance.

We believe that the ownership and management of assets in our SHOP structures is in compliance with the REIT requirements; however; application of the REIT rules to such assets is complex, fact dependent and subject to interpretation. There can be no assurances that the IRS will agree with our characterization of these assets and if the IRS were to successfully contend that our SHOP structures do not meet the REIT requirements, all or a portion of the rent that we receive under these structures could be non-qualifying income for purposes of the REIT gross income tests. In such event we may be required to rely on the REIT savings provisions under the Internal Revenue Code, reorganize our SHOP structures, or take such other steps to avoid incurring non-qualifying income, any of which could be at a significant financial cost.

Our ownership of and relationship with any TRS that we have formed or will form will be limited and a failure to comply with the limits would jeopardize our REIT status and may result in the application of a 100% excise tax.

A REIT may own up to 100% of the stock of one or more TRSs. A TRS may earn income that would not be qualifying income if earned directly by the parent REIT. Both the subsidiary and the REIT must jointly elect to treat the subsidiary as a TRS. A corporation (other than a REIT) of which a TRS directly or indirectly owns securities possessing more than 35% of the total voting power or total value of the outstanding securities of such corporation will automatically be treated as a TRS. Overall, no more than 20% of the value of a REIT’s total assets may consist of stock or securities of one or more TRSs.

Rents received from a TRS in a RIDEA structure are treated as qualifying rents from real property for REIT tax purposes only if (i) they are paid pursuant to a lease of a “qualified healthcare property” and (ii) the operator qualifies as an “eligible independent contractor,” as defined in the Internal Revenue Code. If either of these requirements is not satisfied, then the rents will not be qualifying rents. The Internal Revenue Code also imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s length basis. Any domestic TRS that we form will pay U.S. federal, state and local income tax on its taxable income, and its after-tax net income will be available for distribution to us but is not required to be distributed to us unless necessary to maintain our REIT qualification.

Legislative, regulatory, or administrative changes could adversely affect us or our security holders.

The tax laws or regulations governing REITs or the administrative interpretations thereof may be amended at any time. We cannot predict if or when any new or amended law, regulation, or administrative interpretation will be adopted, promulgated, or become effective, and any such change may apply retroactively. We and our security holders may be adversely affected by any new or amended law, regulation, or administrative interpretation.

Investors are urged to consult with their tax advisors with respect to the status of any tax legislation and any other regulatory or administrative developments and proposals and their potential effect on investment in our securities.

Risk Related to Our Organizational Structure

We have ownership limits in our charter with respect to our common stock and other classes of capital stock which may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders.

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Our charter, subject to certain exceptions, contains restrictions on the ownership and transfer of our common and preferred stock that are intended to assist us in preserving our qualification as a REIT. Our charter provides that any transfer that would cause NHI to be beneficially owned by fewer than 100 persons or would cause NHI to be “closely held” under the Internal Revenue Code would be void, which, subject to certain exceptions, results in no person or entity being allowed to own, actually or constructively, more than 9.9% of the outstanding shares of our stock. Our Board of Directors, in its sole discretion, may exempt a proposed transferee from the ownership limit and such an exemption has been granted through Excepted Holder Agreements to members of the Carl E. Adams family. Based on the Excepted Holder Agreements currently outstanding, the individual ownership limit for all other stockholders is approximately 7.5%. Our charter gives our Board of Directors broad powers to prohibit and rescind any attempted transfer in violation of the ownership limits. These ownership limits may delay, defer or prevent a transaction or a change of control that might involve a premium price for our common stock or might otherwise be in the best interests of our stockholders.

We are subject to certain provisions of Maryland law and our charter and bylaws that could hinder, delay or prevent a change in control transaction, even if the transaction involves a premium price for our common stock or our stockholders believe such transaction to be otherwise in their best interests.

The Maryland Business Combination Act provides that, unless exempted, a Maryland corporation may not engage in business combinations, including mergers, dispositions of 10% or more of its assets, issuances of shares of stock and other specified transactions with an “interested stockholder” or an affiliate of an interested stockholder for five years after the most recent date on which the interested stockholder became an interested stockholder, and thereafter, unless specified criteria are met. An interested stockholder is generally a person owning or controlling, directly or indirectly, 10% or more of the voting power of the outstanding stock of a Maryland corporation. Unless our Board of Directors takes action to exempt us, generally or with respect to certain transactions, from this statute in the future, the Maryland Business Combination Act will be applicable to business combinations between us and other persons. The Company’s charter and bylaws also contain certain provisions that could have the effect of making it more difficult for a third party to acquire, or discouraging a third party from attempting to acquire, control of the Company. These provisions include a staggered board of directors, blank check preferred stock, and the application of Maryland corporate law provisions on business combinations and control shares. Such provisions could limit the price that certain investors might be willing to pay in the future for the common stock. The foregoing matters may, together or separately, have the effect of discouraging or making more difficult an acquisition or change of control of the Company.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.
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ITEM 2. PROPERTIES.
PROPERTIES OWNED OR ASSOCIATED WITH MORTGAGE LOAN INVESTMENTS AS OF DECEMBER 31, 2022 ($ in thousands)
Real Estate InvestmentsSHOPGrossNet Operating
LocationSHOSNFHOSPILF
Investment1
Income2
South Carolina442$336,291 $34,282 
Texas21298,599 28,599 
Florida310224,378 26,017 
Tennessee31650,792 16,453 
Washington31200,530 15,127 
Connecticut3138,877 13,003 
North Carolina6137,141 11,096 
Arkansas250,152 9,163 
Oklahoma11196,675 8,381 
Wisconsin2149,905 7,048 
Georgia2296,521 6,882 
Oregon3395,259 4,850 
Indiana994,237 4,542 
Iowa740,237 3,450 
Massachusetts152,108 3,425 
California25139,833 3,009 
Alabama1217,260 2,945 
Missouri1527,695 2,580 
Maryland146,431 2,533 
Michigan544,138 2,531 
Minnesota531,144 2,389 
Nebraska328,682 2,133 
Illinois13196,481 1,770 
Kentucky12,143 1,312 
Ohio4186,753 1,290 
Idaho19,673 932 
Arizona17,131 864 
New Jersey124,919 751 
Pennsylvania229,367 691 
Colorado17,600 642 
Louisiana415,000 (71)
Virginia4151,396 (2,696)
94651152,727,348 215,923 
Corporate office2,550 — 
Non-geographic8,469 
Net operating income from properties sold, held for sale and note payoffs15,821 
$2,729,898 $240,213 
1 Excludes assets held for sale.
2 Includes interest income and other.

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PROPERTIES ASSOCIATED WITH MORTGAGE LOAN INVESTMENTS AS OF DECEMBER 31, 2022 ($ in thousands)
Interest
LocationSHOSNFInvestmentIncome
Florida1$10,000 $583 
Indiana310,297 727 
Michigan114,700 1,341 
South Carolina132,700 2,371 
Texas542,295 384 
Virginia1318,181 2,554 
Wisconsin236,404 2,884 
98$164,577 10,844 
Other non-mortgage income 13,854 
Interest income and other$24,698 


10-YEAR LEASE EXPIRATIONS

The following table provides additional information on our leases which are scheduled to expire based on the maturity contained in the most recent lease agreement or extension.
AnnualizedPercentage of
NumberNumberGross Rent**Annualized
Yearof Properties of Units/Beds
 ($ in thousands)
 Gross Rent
20232254$3,136 1.5 %
2024— — %
2025142553 0.3 %
2026354,89737,481 17.8 %
2027361912,432 5.9 %
20281383211,587 5.5 %
2029294,31969,829 33.2 %
203054391,283 0.6 %
203132744,790 2.3 %
203234165,338 2.5 %
Thereafter665,59963,995 30.4 %
100.0 %
**Annualized Gross Rent refers to the amount of lease revenue that our portfolio would have generated in 2022 if all leases were in effect for the twelve-month calendar year, regardless of the commencement date, maturity date, or renewals.
The above table does not reflect purchase options. See Note 3 to the consolidated financial statements for discussion of purchase options.


ITEM 3. LEGAL PROCEEDINGS

Our healthcare facilities are subject to claims and suits in the ordinary course of business. Our managers, tenants and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. In addition, such claims may include, among other things, professional liability and general liability claims, as well as regulatory proceedings related to our SHOP segment. While there may be lawsuits pending against us and certain of the managers, owners and/or tenants of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no direct material adverse effect on our financial condition, results of operations or cash flows.

Welltower, Inc. In June 2021, Welltower announced that it would acquire certain assets from the senior housing portfolio of Holiday, a privately held senior living management company, that included 17 senior living facilities governed by a master lease originally executed between a Holiday subsidiary and NHI in 2013. We received no rent due under the master lease from the tenant for these facilities after this change in tenant ownership occurred in late July 2021.

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On December 20, 2021, NHI and its subsidiaries NHI-REIT of Next House, LLC, Myrtle Beach Retirement Resident LLC, and Voorhees Retirement Residence LLC filed suit against Welltower, Inc., Welltower Victory II TRS LLC, and Well Churchill Leasehold Owner LLC (collectively the "Defendants") in the Delaware Court of Chancery (Case No. 2021-1097-MTZ). In the litigation, we contended that the Defendants repeatedly failed to honor their legal obligations to NHI. In particular, we asserted that the Defendants acquired assets from a third party, Holiday, that included leases to NHI senior living facilities and fraudulently induced NHI to consent to the assignment of the leases, and then immediately failed to pay rent or provide a promised security agreement that was intended to secure against their default, all as part of an effort to pressure NHI to agree to new conditions outside the assignment agreement or force a sale of the properties to the Defendants. The lawsuit further asserted that the Defendants owed unpaid contractual rent.

In connection with a memorandum of understanding between the parties dated March 4, 2022, NHI applied the remaining approximately $8.8 million lease deposit to past due rents in the first quarter of 2022. Also, as provided by the memorandum of understanding, Welltower transferred approximately $6.9 million to an escrow account to be released upon satisfactory transition of the facility operations and mutual dismissal of the lawsuit. NHI and certain of its subsidiaries entered into a settlement agreement dated March 31, 2022 with Defendants formalizing the terms to settle the lawsuit.

NHI and certain of its subsidiaries terminated the master lease with Well Churchill Leasehold Owner, LLC as successor in interest to NHI Master Tenant LLC, effective April 1, 2022, upon completion of the transition of the properties subject to the master lease, as follows: (i) one property was sold to a third party, (ii) one property was transitioned to an existing operator relationship and leased pursuant to an existing master lease, and (iii) the remaining 15 properties were transitioned into two new SHOP partnership ventures. See Note 5 to our consolidated financial statements for more information on these new ventures.

Also effective April 1, 2022, the parties agreed to dismiss the lawsuit and mutually release all claims related to or arising out of the litigation and the $6.9 million in escrowed funds were released to NHI and recognized as rental income for the year ended December 31, 2022. We recognized a loss of approximately $0.7 million, reflected in “Loss on operations transfer, net” on the Consolidated Statement of Income for the year ended December 31, 2022. This net loss represents the amount of net working capital deficit assumed by NHI in connection with the transfer of operations following the termination of the master lease. The net working capital assumed by NHI on April 1, 2022 was comprised primarily of facility furniture, fixtures and equipment, net resident accounts receivable, accounts payable and other accrued liabilities.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable

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PART II.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

The Company’s charter contains certain provisions which are designed to ensure that the Company’s status as a REIT is protected for federal income tax purposes. One of the provisions ensures that any transfer (of shares) which would cause NHI to be beneficially owned by fewer than 100 persons or would cause NHI to be “closely-held” under the Internal Revenue Code would be void which, subject to certain exceptions, result in no stockholder being allowed to own, either directly or indirectly pursuant to certain tax attribution rules, more than 9.9% of the Company’s common stock with the exception of prior agreements in 1991 which were confirmed in writing in 2008 with the Company’s founders Dr. Carl E. Adams and Jennie Mae Adams and their lineal descendants. Based on these agreements, the ownership limit for all other stockholders is approximately 7.5%. If a stockholder’s stock ownership exceeds the limit, then such shares over the limit become Excess Stock within the meaning in the Company’s charter and lose rights to vote and receive dividends in certain situations. Our charter gives our Board of Directors broad powers to prohibit and rescind any attempted transfer in violation of the ownership limits. In addition, W. Andrew Adams’ Excess Holder Agreement also provides that he will not own shares of stock in any tenant of the Company if such ownership would cause the Company to constructively own more than a 9.9% interest in such tenant. The purpose of these provisions is to protect the Company’s status as a REIT for tax purposes.

In order to qualify for the beneficial tax treatment accorded to a REIT, we must make distributions to holders of our common stock equal on an annual basis to at least 90% of our REIT taxable income (excluding net capital gains), as defined in the Internal Revenue Code. Cash available for distribution to our stockholders is primarily derived from rental payments received under our leases and from interest payments received on our notes. All distributions will be made by us at the discretion of the Board of Directors and will depend on our cash flow and earnings, our financial condition, covenants contained in our financing documents and such other factors as the Board of Directors deems relevant. Our REIT taxable income is calculated without reference to our cash flow. Therefore, under certain circumstances, our required distributions may exceed the cash available for distribution.

Our common stock is traded on the New York Stock Exchange under the symbol “NHI.” As of February 13, 2023, there were approximately 689 holders of record of shares and 56,540 beneficial owners of shares.

The following graph demonstrates the performance of the cumulative total return to the stockholders of our common stock during the previous five years in comparison to the cumulative total return on the MSCI US REIT Index and the Standard & Poor’s 500 Stock Index. The MSCI US REIT Index is a free float-adjusted market capitalization weighted index that is comprised of equity REIT securities. The MSCI US REIT Index includes securities with exposure to core real estate (e.g. residential and retail properties) as well as securities with exposure to other types of real estate (e.g. casinos, theaters).
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nhi-20221231_g1.jpg
201720182019202020212022
NHI$100.00$105.71$120.04$109.20$96.51$94.79
MSCI$100.00$95.43$120.09$110.99$158.79$119.87
S&P 500$100.00$95.62$125.72$148.85$191.58$156.88

The graph above is not deemed to be “soliciting material” and is “furnished” and shall not be deemed to be “filed” with the SEC or incorporated by reference in any filing under Exchange Act or the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in any such filing.

Issuer Purchases of Equity Securities

None.

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ITEM 6. RESERVED.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis is based primarily on the consolidated financial statements of National Health Investors, Inc. for the periods presented and should be read together with the notes thereto contained in this Annual Report on Form 10-K. Other important factors are identified in “Item 1. Business” and “Item 1A. Risk Factors” above. This section of this Annual Report on Form 10-K generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021. Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 that are not included in this Annual Report on Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Executive Overview

National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed real estate investment trust 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 segments: Real Estate Investments and SHOP. Our Real Estate Investments segment consists of real estate investments and mortgage and other notes receivables in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities and a hospital. We fund our real estate investments primarily through: (1) operating cash flow, (2) debt offerings, including 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 independent living facilities that provide residential living and other services for residents located throughout the United States that are operated on behalf of the Company by two 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.

Real Estate Investments

As of December 31, 2022, we had investments in real estate and mortgage and other notes receivable involving 177 facilities located in 32 states. These investments involve 103 senior housing properties, 73 skilled nursing facilities and one hospital, excluding 13 properties classified as assets held for sale. These investments consisted of properties with an original cost of approximately $2.4 billion, rented under primarily triple-net leases to 24 tenants, and $248.5 million aggregate carrying value of mortgage and other notes receivable, excluding an allowance for expected credit losses of $15.3 million, due from 14 borrowers.

We classify all of the properties in our Real Estate Investments portfolio as either senior housing or medical facilities. Because our leases represent different underlying revenue sources and result in differing risk profiles, we further classify our senior housing properties as either need-driven (assisted living facilities and senior living campuses) or discretionary (independent living and entrance-fee communities).

Senior Housing – Need-Driven includes assisted living facilities and senior living campuses which primarily attract private payment for services from residents who require assistance with activities of daily living. Need-driven properties are subject to regulatory oversight.

Senior Housing – Discretionary includes independent living facilities and entrance-fee communities which primarily attract private payment for services from residents who are making the lifestyle choice of living in an age-restricted multi-family community that offers social programs, meals, housekeeping and in some cases access to healthcare services. Discretionary properties are subject to limited regulatory oversight. There is a correlation between demand for this type of community and the strength of the housing market.

Medical Facilities within our portfolio receive payment primarily from Medicare, Medicaid and health insurance. These properties include skilled nursing facilities and a hospital that attract patients who have a need for acute or complex medical attention, preventative medicine, or rehabilitation services. Medical properties are subject to state and federal regulatory oversight and, in the case of hospitals, Joint Commission accreditation.

Senior Housing Operating Portfolio

Effective April 1, 2022, 15 senior housing ILFs previously part of the legacy Holiday Retirement properties were transferred from a triple-net lease to two separate ventures comprising our SHOP, which represents a new reportable segment. These ventures, in which NHI owns a majority interest, own the underlying independent living operations and are structured to
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comply with REIT requirements that utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes. These properties are operated by two 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 managers in the same manner or to the same extent as we are to our triple-net tenants. However, we rely on the 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 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 December 31, 2022, our SHOP consisted of 15 ILFs with a combined 1,732 units located in eight states.
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The following tables summarize our portfolio, excluding $2.6 million for our corporate office, assets held for sale and a credit loss reserve of $15.3 million, as of December 31, 2022 ($ in thousands):

Real Estate Investments and SHOP
PropertiesBeds/Units
NOI1
% TotalInvestment
Real Estate Properties
Senior Housing - Need-Driven
Assisted Living66 3,592 $18,063 7.5 %$691,865 
Senior Living Campus10 1,370 10,893 4.5 %245,989 
Total Senior Housing - Need-Driven76 4,962 28,956 12.0 %937,854 
Senior Housing - Discretionary
Independent Living903 24,289 10.1 %107,236 
Entrance-Fee Communities11 2,911 61,763 25.7 %745,944 
Total Senior Housing - Discretionary18 3,814 86,052 35.8 %853,180 
Total Senior Housing94 8,776 115,008 47.8 %1,791,034 
Medical Facilities
Skilled Nursing Facilities65 8,564 79,574 33.3 %557,996 
Hospital71 4,090 1.7 %40,250 
Total Medical Facilities66 8,635 83,664 35.0 %598,246 
Current Year Disposals and Held for Sale9,240 3.9 %
Total Real Estate Properties16017,411 207,912 86.7 %2,389,280 
Mortgage and Other Notes Receivable
Senior Housing - Need-Driven564 6,309 2.6 %85,553 
Senior Housing - Discretionary248 2,371 1.0 %32,700 
Skilled Nursing Facilities797 760 0.3 %46,323 
Other Notes Receivable— — 8,362 3.5 %83,903 
Current Year Note Payoffs6,581 2.7 %
Total Mortgage and Other Notes Receivable17 1,609 24,383 10.1 %248,479 
SHOP
Independent Living15 1,732 7,603 3.2 %338,067 
Total192 20,752 $239,898 100.0 %$2,975,826 
1Excludes Non-segment/Corporate NOI


Portfolio SummaryPropertiesNOI% PortfolioInvestment
Real Estate Properties160 $207,912 86.6 %$2,389,280 
Mortgage and Other Notes Receivable17 24,383 10.2 %248,479 
SHOP15 7,603 3.2 %338,067 
Total Portfolio192 $239,898 100.0 %$2,975,826 
Portfolio by Operator Type
Public55 $60,799 25.3 %$411,740 
National Chain (Privately Owned)26,188 10.9 %134,892 
Regional108 121,100 50.5 %1,935,773 
Small13 8,387 3.5 %155,354 
Current Year Disposals and Held for Sale9,240 3.9 %— 
Current Year Note Payoffs6,581 2.7 %— 
Total Real Estate Investments Portfolio177 232,295 96.8 %2,637,759 
SHOP15 7,603 3.2 %338,067 
Total Portfolio192 $239,898 100.0 %$2,975,826 


For the year ended December 31, 2022, operators of facilities in our Real Estate Investments portfolio who provided 3% or more and collectively 59% of our total revenues were (parent company, in alphabetical order): Discovery Senior Living; Encore
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Senior Living, Health Services Management; Holiday Retirement; Life Care Services; National HealthCare Corporation; Senior Living Communities; and The Ensign Group.

As of December 31, 2022, our average effective annualized Net Operating Income (“NOI”) for the lease properties in our Real Estate Investments reportable segment was $9,500 per bed for SNFs, $11,543 per unit for SLCs, $13,448 per unit for ALFs, $9,208 per unit for ILFs, $21,240 per unit for EFCs, and $57,599 per bed for the hospital, excluding the non-cash write-off of Bickford and two other tenants’ straight-line rents receivable and lease incentives discussed below under “Tenant Concentration”. As of December 31, 2022, our average effective annualized NOI for the SHOP reportable segment was $17,558 per unit.

COVID-19 Pandemic

The COVID-19 pandemic has had an impact on the operations of many of our tenants, managers and borrowers. The revenues from our SHOP ventures, borrowers and operators of our leased properties are dependent on occupancy. Future occupancy rates may be adversely affected by the possibility of new COVID variants, increased resident move-outs, re-implementation of restrictions on new resident move-ins, and the possibility of potential residents foregoing or delaying a move. Operating expenses of our SHOP ventures and those of our borrowers and the tenants of our leased properties may also be negatively impacted as a result of the additional enhanced health and safety precautions implemented in response to the COVID-19 pandemic. A decrease in occupancy or increase in costs could have a material adverse effect on our results of operations and on the ability of tenants of our leased properties and borrowers to meet their financial and other contractual obligations to us, including the payments of rent, interest and principal.

Throughout the pandemic to date, we have granted various rent concessions to tenants whose operations have been adversely affected by the pandemic. When applicable, we have accounted for rent concessions as variable lease payments, recorded as rental income when received, in accordance with the Financial Accounting Standards Board’s Lease Modification Q&A. Reference Note 2 to the consolidated financial statements for further discussion.

As of December 31, 2022, aggregate pandemic-related rent concessions granted to tenants that have been accounted for as variable lease payments totaled approximately $44.3 million, of which $3.7 million were rent abatements. During the year ended December 31, 2022, we granted pandemic-related rent deferrals of $9.3 million to seven tenants, of which Bickford accounted for approximately $4.0 million. Repayments and other reductions of pandemic-related rent deferrals recognized in “Rental Income” during the year ended December 31, 2022 and 2021 were $3.5 million and $0.1 million, respectively. Additionally, $4.1 million of pandemic-related rent deferrals were forgiven during the year ended December 31, 2022.

Rent deferrals accounted for as variable lease payments granted for the years ended December 31, 2021 and 2020 totaled approximately $26.4 million and $5.0 million, respectively, of which Bickford accounted for approximately $18.3 million and $3.5 million, respectively.

See “Item 1A. Risk Factors” in this Annual Report on Form 10-K for further information regarding the risks presented by the COVID-19 pandemic.

Critical Accounting Estimates

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. These accounting principles require us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we reconsider and evaluate our estimates and assumptions. Management has discussed the development and selection of its critical accounting policies and estimates with the Audit Committee of the Board of Directors.

We base our estimates on historical experience, current trends and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.

We consider an accounting estimate or assumption critical if:

1.the nature of the estimates or assumptions is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change; and
2.the impact of the estimates and assumptions on financial condition or operating performance is material.
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If actual experience differs from the assumptions and other considerations used in estimating amounts reflected in our consolidated financial statements, the resulting changes could have a material adverse effect on our consolidated results of operations, liquidity and/or financial condition.

Our significant accounting policies are discussed in Note 2 to our consolidated financial statements in this report. We believe the accounting estimates listed below are the most critical to fully understanding and evaluating our financial results, and require our most difficult, subjective or complex judgments.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries and subsidiaries in which we have a controlling interest. We also consolidate certain entities when control of such entities can be achieved through means other than voting rights if the Company is deemed to be the primary beneficiary of such entities. We make judgments about which entities are variable interest entities (“VIEs”) based on an assessment of whether (i) the total equity investment at risk is insufficient to finance that entity’s activities without additional subordinated financial support, (ii) as a group, the holders of the equity investment at risk do not have a controlling financial interest, or (iii) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. Additionally, we make judgments with respect to our level of influence or control of an entity and whether we are the primary beneficiary of a VIE. These considerations include, but are not limited to, our power to direct the activities that most significantly impact the entity's economic performance, the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity, and our ability and the rights of other investors to participate in policy making decisions, replace the manager and/or liquidate the entity. Our ability to correctly determine the primary beneficiary of a VIE at inception of our involvement impacts the presentation of these entities in our consolidated financial statements.

Real Estate Properties

Real property we develop is recorded at cost, including the capitalization of interest during construction. The cost of real property investments we acquire is allocated to net tangible and identifiable intangible assets and liabilities based on their relative fair values. We make estimates as part of our allocation of the purchase price of acquisitions to the various components of the acquisition based upon the fair value of each component. For properties acquired in transactions accounted for as asset purchases, the purchase price, which includes transaction costs, is allocated based on the relative fair values of the assets and liabilities acquired. Cost includes the amount of contingent consideration, if any, deemed to be probable at the acquisition date. Contingent consideration is deemed to be probable to the extent that a significant reversal in amounts recognized is not likely to occur when the uncertainty associated with the contingent consideration is subsequently resolved. The most significant components of our allocations are typically the allocation of fair value to land, equipment, buildings and other improvements, and intangible assets and liabilities, if any. Our estimates of the values of these components will affect the amount of depreciation and amortization we record over the estimated useful life of the property acquired or the remaining lease term. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use for real estate allocation.

Impairments of Real Estate Properties.

We evaluate the recoverability of the carrying values of our properties on a property-by-property basis. We review each property for recoverability when events or circumstances, including significant physical changes in the property, significant adverse changes in general economic conditions, reclassification of real estate property as held for sale, or significant deterioration of the underlying cash flows of the property, indicate that the carrying amount of the property may not be recoverable. The need to recognize an impairment charge is based on estimated undiscounted future cash flows from a property compared to the carrying value of that property. Accordingly, management’s evaluation requires judgment to determine the existence of indicators of impairment and estimates of undiscounted cash flows. If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the property exceeds the fair value of the property. Refer to Note 3. Investment Activity to our consolidated financial statements for more details.

There were no material changes in the accounting methodology we use to assess impairment charges during the year ended December 31, 2022. During the year ended December 31, 2022, we recorded impairment charges of approximately $51.6 million related to 19 properties all within the Real Estate Investments segment.
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Lease Classification

Lease accounting standards require that, for purposes of lease classification, we assess whether the lease, by its terms, transfers substantially all of the fair value of the asset under lease. This consideration will drive accounting for the alternative classifications among either operating, sales-type, or direct financing types of leases. For classification purposes, we distinguish cash flows that follow under terms of the lease from those that will derive, subsequent to the lease, from the ultimate disposition or re-deployment of the asset. From this segregation of the sources of cash flow, we are able to establish whether the lease is, in essence, a sale or financing based in it having transferred substantially all of the fair value of the leased asset. Accordingly, management’s projected residual values represent significant assumptions in our accounting for leases.

While we do not incorporate residual value guarantees in our lease provisions, the contractual structure of other provisions provides a basis for expectations of realizable value from our properties, upon expiration of their lease terms. Additionally, we consider historical, demographic and market trends in developing our estimates. For each new lease, we discount our estimate of unguaranteed residual value and include this amount along with the stream of lease payments (also discounted) called for in the lease. We assess the stream of lease payments and the value deriving from eventual return of our property to establish whether the lease payments themselves comprise a return of substantially all of the fair value of the property under lease. We do not use a “bright line” in considering what constitutes “substantially all of the fair value,” but we undertake a more focused assessment when the lease payments approach 90% of the composition of all future cash flows expected from the asset.

We do not believe there is a reasonable likelihood that there will be a material change in the future estimates or assumptions we use to assess lease classifications.

Allowance for Credit Losses

For our mortgage and other notes receivable, we evaluate the estimated collectability of contractual loan payments amid general economic conditions on the basis of a like-kind pooling of our loans. We estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. In developing our expectation of losses, we will consider financial assets that share similar risk characteristics such as rate, age, type, location and adequacy of collateral on a collective basis. Other note investments which do not share common features will continue to be evaluated on an instrument-by-instrument basis.

The determination of fair value and whether a shortfall in operating revenues or the existence of operating losses is indicative of a loss in value involves significant judgment. Our estimates consider all available evidence including, as appropriate, the present value of the expected future cash flows discounted at market rates, general economic conditions and trends, the duration of the fair value deficiency, and any other relevant factors. When an economic downturn whose duration is expected to span a year or more is encountered, such as the potential impact of the COVID-19 pandemic, we consider projections about an expected economic recovery before we conclude that evidence of impairment exists. While we believe that the net carrying amounts of our notes receivable and other investments are realizable, it is possible that future events could require us to make significant adjustments or revisions to these estimates. During the fourth quarter of 2022, we designated a mortgage note receivable of $10.0 million and a mezzanine loan of $14.5 million with affiliates of one operator/borrower as non-performing. For the year ended December 31, 2022, we recognized credit loss charges of $10.4 million of which $8.7 million related to these two loans upon their designation as non-performing.

While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results. Our model utilizes estimates of probability of default and loss given default. We review our assumptions and adjust these estimates accordingly on a quarterly basis. A 10% increase or decrease in either the probability of default or loss given default would result in an additional provision or recovery of $1.6 million.

2022 Activity

The following summarizes significant activity that occurred for the year ended December 31, 2022:

During the first quarter, we applied the remaining approximately $8.8 million legacy Holiday lease deposit to past due rents that was reflected as rental income.

On April 1, 2022, we received $6.9 million in previously escrowed funds upon settlement and dismissal of the Welltower litigation related to the master lease for the legacy Holiday portfolio that was reflected as rental income.
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Concurrently with the settlement and dismissal, we transitioned 15 of the legacy Holiday ILFs into two separate ventures that own the underlying independent living operations, forming our new SHOP segment.

We converted Bickford to the cash basis of accounting for their lease agreements and wrote off approximately $18.1 million of straight-line rents receivable and $7.1 million of lease incentives to rental income.

We converted two other tenants to the cash basis of accounting for their lease agreements and wrote off approximately $7.9 million of straight-line rents receivable.

During the fourth quarter of 2022, we designated a mortgage note receivable and a mezzanine loan totaling an aggregate $24.5 million with affiliates of one borrower as non-performing and recorded additional credit loss reserves of approximately $8.7 million for these loans. This operator/borrower is also one of the tenants converted to cash basis of accounting.

We disposed of 22 facilities from our Real Estate Investments segment for net proceeds of $169.0 million.

We received repayment in full of a $111.3 million mortgage note receivable.

We repurchased through open market transactions 2.5 million shares of our common stock for an average price of $61.56 per share, excluding commissions.

The SHOP segment NOI was $7.6 million for the year ended December 31, 2022.

Since January 1, 2022, we have completed or committed to the following real estate and note investments ($ in thousands):
DatePropertiesAsset ClassAmount
Real Estate Investments
Encore Senior LivingQ2 20221ALF$13,300 
Bickford Senior LivingQ4 20221ALF17,200 
Note Investments
Encore Senior LivingQ1 20221ALF28,500 
  Capital Funding GroupQ4 20225SNF42,500 
$101,500 

Encore Senior Living

In January 2022, we entered into an agreement to fund a $28.5 million development loan with Encore Senior Living to construct a 108-unit assisted living and memory care community in Fitchburg, Wisconsin. The four-year loan agreement has an annual interest rate of 8.5% and two one-year extensions. We have a purchase option on the property once it has stabilized. The total amount funded on the note was $14.2 million as of December 31, 2022

In the second quarter of 2022, we acquired a 53-unit ALF located in Oshkosh, Wisconsin, from Encore Senior Living. The acquisition price was $13.3 million and included the cancellation of an outstanding construction note receivable to us of $9.1 million, including interest. We have agreed to pay up to $0.8 million in additional cash consideration pending the results of an ongoing property tax appeal. As of December 31, 2022, no amount of this consideration is expected to be paid. We added the facility to an existing master lease for a term of 15 years at an initial lease rate of 7.25%, with an annual escalator of 2.5%.

Bickford

In November 2022, we acquired a 60-unit ALF located in Virginia Beach, Virginia, from Bickford. The acquisition price was $17.2 million, including $0.2 million in closing costs, and the cancellation of an outstanding construction note receivable of $14.0 million including interest. The acquisition price also included a reduction of $3.0 million in Bickford’s outstanding pandemic-related rent deferrals that were recognized in rental income in the fourth quarter of 2022 based on the fair value of the real estate assets received. We added the facility to an existing master lease with Bickford for a term of 10.5 years at an initial rate of 8.0%, with annual CPI escalators subject to a floor and ceiling.
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Capital Funding Group

In November 2022, we funded a $42.5 million senior loan to refinance a portfolio of five skilled nursing facilities located in Texas. The loan was made to affiliates of Capital Funding Group and the properties are leased by subsidiaries of The Ensign Group. The five-year loan agreement has an annual interest rate of 7.25% and two one-year extensions.

During the year ended December 31, 2022, we completed the following real estate property dispositions within our Real Estate Investments reportable segment as described below ($ in thousands):

OperatorDatePropertiesAsset ClassNet ProceedsNet Real Estate InvestmentGain
Impairment1
Hospital Corporation of AmericaQ1 20221MOB$4,868 $1,904 $2,964 $— 
Vitality Senior Living2
Q1 20221SLC8,302 8,285 17 — 
Holiday2
Q2 20221ILF2,990 3,020 — 30 
Chancellor Senior Living2
Q2 20222ALF7,305 7,357 — 52 
Bickford2
Q2 20223ALF25,959 28,268 — 2,309 
Comfort CareQ2 20224ALF40,000 38,444 1,556 — 
Helix HealthcareQ2 20221HOSP19,500 10,535 8,965 — 
Discovery Senior Living2
Q3 20222ALF/SLC16,379 15,159 1,220 — 
National HealthCare Corporation (“NHC”)3
Q3 20227SNF43,686 30,066 13,620 — 
22$168,989 $143,038 $28,342 $2,391 
1 Impairments are included in “Loan and realty losses” in the Consolidated Statements of Income.
2 Total impairment charges recognized on these properties were $28.5 million for the year ended December 31, 2022.
3 See “Tenant Concentration” below for additional information on the NHC disposition.

Total rental income related to the disposed properties was $7.0 million, $10.9 million and $16.6 million for years ended December 31, 2022, 2021 and 2020, respectively. Reference Note 3 to the consolidated financial statements for more detail on the 2022 property dispositions within our Real Estate Investments reportable segment.

Life Care Services - Sagewood

In the second quarter of 2022, we received from Life Care Services - Sagewood the repayment of its remaining principal of $111.3 million mortgage note receivable along with all accrued interest and a prepayment fee of approximately $1.1 million which is reflected in “Gain on note receivable payoff” in the Consolidated Statements of Income for the year ended December 31, 2022. Interest income was $5.2 million, $10.2 million and $11.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

2023 Investment Activity

In February 2023, we acquired two memory care communities operated by Silverado Senior Living for approximately $37.5 million. The newly developed properties that opened in 2022 and include a 60-unit community in Summerlin, Nevada and a 60-unit community in Frederick, Maryland and are leased pursuant to a 20-year lease master lease with a first-year lease rate of 7.5% and annual escalators of 2.0%.

In February 2023, we acquired a 60-unit assisted living and memory care community in Chesapeake, Virginia from Bickford. The acquisition price was $17.3 million, including approximately $0.1 million in closing costs, the satisfaction of an outstanding construction note receivable of $14.2 million including interest, and cash consideration of $0.5 million. The acquisition price also included a reduction of $2.5 million in Bickford’s outstanding pandemic-related deferrals. We added the community to an existing master lease with Bickford was added to an existing master lease with Bickford at an initial rate of 8.0%, with annual CPI escalators subject to a floor and ceiling.

Assets Held for Sale and Long-Lived Assets

At December 31, 2022, 13 properties in our Real Estate Investments reportable segment, with an aggregate net real estate balance of $43.3 million, were classified as assets held for sale on our Consolidated Balance Sheet. Rental income associated
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with the 13 properties was $2.1 million, $5.6 million, and $7.6 million for the year ended December 31, 2022, 2021 and 2020, respectively.

During the year ended December 31, 2022, we recorded impairments of approximately $51.6 million on 19 properties which were sold or classified as held for sale related to our Real Estate Investments reportable segment. During the year ended December 31, 2021, we recorded impairments of approximately $51.8 million on ten properties which were sold or classified as held for sale related to our Real Estate Investments reportable segment. Impairment charges are included in “Loan and realty losses” in the Consolidated Statements of Income.

Tenant Purchase Options

Certain of our leases contain purchase options allowing tenants to acquire the leased properties. For options exercisable or exercisable in the near future, we are engaged in preliminary negotiations to continue as lessor or in some other capacity.

A summary of these tenant options is presented below ($ in thousands):

AssetNumber ofLease1st OptionOptionContractual
TypePropertiesExpirationOpen Year
Basis1
Rent
SHO2May 20352027i$5,868 
SNF1September 20282028ii$501 
1 Tenant purchase options generally give the lessee an option to purchase the underlying property for consideration determined by (i) a fixed base price plus a specified share in any appreciation; or (ii) fixed base price.

We cannot reasonably estimate at this time the probability that any other purchase options will be exercised in the future. Consideration to be received from the exercise of any tenant purchase option is expected to exceed our net investment in the leased property or properties.

Other

Our leases for real estate 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 year ended December 31, 2022, 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 recognized on a straight-line basis over the term of the lease.

Tenant Concentration

As discussed in Note 3 to the consolidated financial statements, we have two tenants (including their affiliated entities, which are the legal tenants) from whom we individually derive at least 10% of our total revenues. NHC is a publicly traded company and we do not report specific occupancy information from them.

Occupancy

The following table summarizes the average portfolio occupancy for Senior Living Communities, Bickford and SHOP for the periods indicated, excluding development properties in operation less than 24 months, notes receivable, and properties transitioned to new tenants or disposed.
Properties4Q211Q222Q223Q224Q22December 2022January 2023
Senior Living Communities981.7%81.7%82.3%83.3%83.5%83.9%84.0%
Bickford1
3983.9%82.8%83.1%84.7%83.5%82.9%81.7%
SHOP2
1580.6%77.7%76.5%76.9%75.8%75.5%75.4%

1Prior periods restated to reflect the purchase option exercised in November 2022 on an ALF in Virginia.
2Prior periods restated for a first quarter 2022 single asset disposition.



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Tenant Monitoring

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 the operator’s method of acquiring the use of its assets (interest and rent), its non-cash expenses (depreciation and amortization), 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 entrance-fee communities, 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.

We believe that EBITDARM is a useful way to analyze the cash potential of a group of assets. From EBITDARM we calculate a coverage ratio (EBITDARM/cash rent), measuring the ability of the operator to meet its monthly obligation. In addition to EBITDARM and the coverage ratio, we rely on a careful balance sheet analysis, and other analytical procedures to help us identify potential areas of concern relative to our operators’ ability to generate sufficient liquidity to meet their obligations, including their obligation to continue to pay the amount due to us. Typical among our operators is a varying lag in reporting to us the results of their operations. Across our portfolio, however, our operators report their results, typically within either 30 or 45 days and at the latest, within 90 days of month’s end. For computational purposes, we exclude mortgages and other notes receivable, development and lease-up properties that have been in operation less than 24 months. For stabilized acquisitions in the portfolio less than 24 months and renewing leases with changes in scheduled rent, we include pro forma cash rent. Same-store portfolio coverage excludes properties that have transitioned operators in the past 24 months or assets subsequently sold except as noted.

The results of our coverage ratio analysis are presented below on a trailing twelve-month basis, as of September 30, 2022 and 2021 (the most recent periods available).

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NHI Real Estate Investments Portfolio
By asset typeSHOSNFMEDICAL NON-SNFTOTAL
Properties100681169
3Q211.05x2.75x2.70x1.66x
3Q221.17x2.41x2.51x1.63x
Market servedNeed DrivenNeed Driven excl. BickfordDiscretionaryDiscretionary excl. SLCMedicalMedical excl. NHC
Properties86471456934
3Q210.87x0.75x1.31x1.57x2.75x1.91x
3Q221.02x0.96x1.36x1.69x2.42x2.03x
Major tenants
NHC1
SLC2
Bickford2
Properties351039
3Q213.94x1.19x1.00x
3Q222.98x1.22x1.09x
NHI Real Estate Investments Same-Store Portfolio3
By asset typeSHOSNFMEDICAL NON-SNFTOTAL
Properties9767164
3Q211.07x2.76xN/A1.66x
3Q221.18x2.41xN/A1.62x
Market servedNeed DrivenNeed Driven excl. BickfordDiscretionaryDiscretionary excl. SLC MedicalMedical excl. NHC
Properties84451346732
3Q210.87x0.76x1.34x1.75x2.76x1.84x
3Q221.03x0.97x1.37x1.78x2.41x1.97x
Major tenants
NHC 1
SLC2
Bickford2
Properties351039
3Q213.94x1.19x1.00x
3Q222.98x1.22x1.09x

1 NHC based on corporate-level Fixed Charge Coverage Ratio and includes three ILFs and excludes seven sold SNF assets (four in MA and three in NH) during 2022.
2 Excluding PPP funds received from the third quarter 2021, SLC and Bickford coverage was 1.00x and 0.84x, respectively. SLC operates nine discretionary CCRC properties and one need driven assisted living community. Bickford proforma coverage at the restructured lease amount would be 1.31x for third quarter 2022.
3 Excludes properties that have transitioned operators in past 24 months and includes properties classified as held for sale.

These results include any amounts received and recognized by the operators from the HHS CARES Act Provider Relief Fund and funds received under the Paycheck Protection Program if the loan has been forgiven. Our operators may not consistently account for any COVID-19 pandemic relief funds received which can impact comparability among operators and across periods.

Fluctuations in portfolio coverage are a result of market and economic trends, local market competition, and regulatory factors as well as the operational success of our tenants. We use the results of individual leases to inform our decision making with respect to specific tenants, but trends described above by property type and operator bear analysis. Our senior housing
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portfolio shows a decline brought about primarily by a softening in occupancy and rising expenses, including wage pressures. Additionally, the COVID-19 pandemic in the U.S. has further softened coverage for these operators as well as across our portfolio. For many of the affected operators, as is typical of our portfolio in general, NHI has security deposits in place and/or corporate guarantees should actual cash rental shortfalls eventually materialize. In certain instances, our operators may increase their security deposits with us in an amount equal to the coverage shortfall, and, upon subsequent compliance with the required lease coverage ratio, the operator would then be entitled to a full refund. The sufficiency of credit enhancements (e.g. tenant deposits and guarantees) as a protection against economic downturn will be a focus as we monitor economic and financial conditions, including the effects of the COVID-19 pandemic. The metrics presented in the tables above give no effect to the presence of these security deposits. Because of the recent disposals of the Florida medical office building and a behavioral hospital, we combined the medical office building (“MOB”) and Hospital categories previously presented into the “Medical Non-SNF” category.

Other Portfolio Activity

Real Estate and Mortgage Write-downs

In addition to inflation risk, increased interest rates and new COVID-19 pandemic variants, our borrowers and tenants experience periods of significant financial pressures and difficulties similar to those encountered by other health care providers.

Effective January 1, 2020, we adopted ASU 2016-13, Financial Instruments – Credit Losses, which broadened the information we must consider in developing our expected credit loss estimates to include forecasted economic information in addition to our historical experience. We have established a reserve for estimated credit losses of $15.3 million and a liability of $0.7 million for estimated credit losses on unfunded loan commitments as of December 31, 2022. Provision for expected credit losses, reflected in “Loan and realty losses” on the Consolidated Statements of Income, totaled $10.4 million, $0.9 million and $1.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. We evaluate the reserves for estimated credit losses on a quarterly basis and make adjustments based on current circumstances as considered necessary.

Our consolidated financial statements for the year ended December 31, 2022 reflect impairment charges of our long-lived assets of approximately $51.6 million as a result of economic and financial factors, including the effects of the COVID-19 pandemic. We reduced the carrying value of any impaired properties to estimated fair values, or with respect to the properties classified as held for sale, to estimated fair value less costs to sell. We have no significant intangible assets currently recorded on our Consolidated Balance Sheet as of December 31, 2022, that would require assessment for impairment.

We believe that the carrying amounts of our real estate properties are recoverable and that mortgage and other notes receivable, net of reserves, are realizable and supported by the value of the underlying collateral. However, it is possible that future events could require us to make additional significant adjustments to these carrying amounts. Refer to Note 3. Investment Activity in the consolidated financial statements for more information.

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Results of Operations

The significant items affecting revenues and expenses are described below ($ in thousands):
Years Ended
December 31, Period Change
20222021$%
Revenues:
Rental income
HOSP leased to Vizion Health$3,471 $2,034 $1,437 70.6 %
EFCs leased to Senior Living Communities47,098 45,037 2,061 4.6 %
ALFs leased to Chancellor Senior Living2,845 8,500 (5,655)(66.5)%
SHOs leased to Discovery Senior Living6,683 8,652 (1,969)(22.8)%
SHOs leased to The Ensign Group25,902 24,427 1,475 6.0 %
SHOs leased to Holiday Retirement— 13,024 (13,024)(100.0)%
ALFs leased to Bickford Senior Living18,710 24,652 (5,942)(24.1)%
Other new and existing leases91,234 91,524 (290)(0.3)%
Current year disposals and assets held for sale28,650 26,958 1,692 6.3 %
224,593 244,808 (20,215)(8.3)%
Straight-line rent adjustments, new and existing leases(16,681)14,603 (31,284)NM
Escrow funds received from tenants for property operating expenses9,788 11,638 (1,850)(15.9)%
Total Rental Income217,700 271,049 (53,349)(19.7)%
Resident fees and services35,796 — 35,796 NM
Interest income from mortgage and other notes
Vizion Health1,702 1,027 675 65.7 %
Encore Senior Living construction loans2,579 1,835 744 40.5 %
Montecito Medical Real Estate1,792 161 1,631 NM
Mortgage loan payoffs6,581 10,164 (3,583)(35.3)%
Other existing mortgages and notes11,729 11,347 382 3.4 %
Total Interest Income from Mortgage and Other Notes24,383 24,534 (151)(0.6)%
Other income315 3,132 (2,817)(89.9)%
Total Revenue278,194 298,715 (20,521)(6.9)%
Expenses:
Depreciation
SHOs leased to Holiday Retirement— 9,296 (9,296)(100.0)%
ALFs leased to Bickford Senior Living10,307 11,611 (1,304)(11.2)%
ALFs leased to Chancellor Senior Living2,157 3,529 (1,372)(38.9)%
SHOP depreciation6,408 — 6,408 NM
Current year disposals and assets held for sale4,984 9,845 (4,861)(49.4)%
Other new and existing assets47,024 46,517 507 1.1 %
Total Depreciation70,880 80,798 (9,918)(12.3)%
Interest44,917 50,810 (5,893)(11.6)%
Senior housing operating expenses28,193 — 28,193 NM
General and administrative22,768 18,431 4,337 23.5 %
Taxes and insurance on leased properties9,788 11,638 (1,850)(15.9)%
Loan and realty losses61,911 52,766 9,145 17.3 %
Other expenses3,399 1,696 1,703 NM
241,856 216,139 25,717 11.9 %
Loss on operations transfer, net(710)— (710)NM
Gain on note receivable payoff1,113 — 1,113 NM
Loss on early retirement of debt(151)(1,912)1,761 (92.1)%
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Gains (losses) from equity method investment569 (1,545)2,114 NM
Gains on sales of real estate, net28,342 32,498 (4,156)(12.8)%
   Other income— 350 (350)(100.0)%
Net income65,501 111,967 (46,466)(41.5)%
Less: net loss (income) attributable to noncontrolling interests902 (163)1,065 NM
Net income attributable to common stockholders$66,403 $111,804 $(45,401)(40.6)%
NM - not meaningful

Financial highlights for the year ended December 31, 2022, compared to 2021 were as follows:

Rental income recognized from our tenants decreased $53.3 million, or 19.7%, as a result of the Holiday portfolio transition of approximately $13.0 million, dispositions of 22 properties for approximately $7.0 million, net of new investments funded since December 2021. Included in rental income for the year ended December 31, 2022, is approximately $26.0 million in write-offs of straight-line rents receivable for three tenants placed on cash basis of rental income recognition, and $7.1 million in write-offs of lease incentives related to Bickford.

Resident fees and services and senior housing operating expenses include revenues and expenses from our SHOP activities which commenced on April 1, 2022. See Note 5 to the consolidated financial statements.

Funds received for reimbursement of property operating expenses totaled $9.8 million for the year ended December 31, 2022, 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 the result of property dispositions in the current year.

Interest income from mortgage and other notes decreased $0.2 million, or 0.6%, primarily due to new and existing loan fundings, net of paydowns on loans.

Other income decreased $2.8 million primarily due to the recognition of a lease termination fee upon disposition of a property during 2021.

Depreciation expense decreased $9.9 million, or 12.3%, primarily as a result of dispositions of approximately $143.0 million since December 2021.

Interest expense decreased $5.9 million, or 11.6%, as a result of debt maturities and repayments on borrowings.

General and administrative expenses increased $4.3 million, or 23.5%. The increase was primarily due to higher compensation and benefit expenses of approximately $2.1 million as a result of additional personnel and $1.3 million in professional fees.

Loan and realty losses increased $9.1 million, or 17.3%, primarily as a result of an increase in the credit loss reserve in 2022 for two loans designated as non-performing. In 2022, we incurred impairment charges of approximately $51.6 million on 19 properties which were sold or classified as assets held for sale related to our Real Estate Investments reportable segment. During the year ended December 31, 2021, we incurred impairment charges of approximately $51.8 million on ten properties which were sold or classified as held for sale related to our Real Estate Investments reportable segment.

Loss on early retirement of debt decreased by $1.8 million. The losses of $1.9 million recognized in 2021 related to the early repayments of a term loan and two Fannie Mae loans.

Gain on note receivable payoff of $1.1 million reflects the prepayment fee received from the early repayment of a $111.3 million mortgage note receivable in the second quarter of 2022. See Note 4 to the consolidated financial statements.

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Gains (losses) from equity method investment for the year ended December 31, 2022 represent cash distributions received and for the year ended December 31, 2021 represent our proportionate share of losses related to our Timber Ridge OpCo investment. Reference Note 6 to the consolidated financial statements for more information.

Gains on sales of real estate decreased $4.2 million, or 12.8%. For the year ended December 31,2022, we recorded $28.3 million in gains from dispositions of 22 real estate assets. For the year ended December 31, 2021, we recorded $32.5 million in gains from dispositions of 22 real estate assets. Reference “Asset Dispositions” in Note 3 to the consolidated financial statements for more information.




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Liquidity and Capital Resources

At December 31, 2022, we had $658.0 million available to draw on our revolving credit facility, $19.3 million in unrestricted cash and cash equivalents, and the potential to access the remaining $415.7 million through the issuance of common stock under the Company’s $500.0 million at-the-market (“ATM”) 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.

Sources and Uses of Funds

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 SHOP and general corporate overhead.

These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below ($ in thousands):

Year EndedOne Year ChangeYear EndedOne Year Change
12/31/202212/31/2021$%12/31/2020$%
Cash and cash equivalents and restricted cash, January 1$39,485 $46,343 $(6,858)(14.8)%$15,669 $30,674 NM
Net cash provided by operating activities185,340 210,859 (25,519)(12.1)%232,148 (21,289)(9.2)%
Net cash provided by (used in) investing activities197,945 185,277 12,668 6.8 %(89,712)274,989 NM
Net cash used in financing activities(401,254)(402,994)1,740 (0.4)%(111,762)(291,232)NM
Cash and cash equivalents and restricted cash, December 31$21,516 $39,485 $(17,969)(45.5)%$46,343 $(6,858)(14.8)%

Operating Activities – Net cash provided by operating activities for the year ended December 31, 2022 decreased $25.5 million from the year ended December 31, 2021. Cash provided by operating activities was negatively impacted by the disposition of 44 properties since January 1, 2021 and benefited from the reduction in pandemic related rent concessions granted of approximately $17.1 million. In addition, cash provided by operations included the effects of new investments, the creation of the SHOP ventures in 2022, collections from escalators on existing leasing arrangements and interest payments on new real estate and note investments completed during 2022 and 2021.

Investing Activities – Net cash provided by investing activities for the year ended December 31, 2022 was comprised primarily of the proceeds from the sales of real estate of approximately $169.0 million and the collection of principal on mortgage and other notes receivable of $119.2 million, offset by $90.8 million of investments in mortgage and other notes and renovations and acquisitions of real estate.

Financing Activities – Net cash used in financing activities for the year ended December 31, 2022 differs from the same period in 2021 primarily as a result of an approximately $167.2 million decrease in net borrowings, inclusive of the $400.0 million senior note offering in 2021 discussed below, an approximately $47.9 million decrease in proceeds from issuance of common stock, an approximately $21.1 million decrease in dividend payments, and approximately $152.0 million used to repurchase common stock in 2022.

Debt Obligations

As of December 31, 2022, we had outstanding debt of $1.1 billion. Reference Note 8 to the consolidated financial statements for additional information about our outstanding indebtedness. Also, reference “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for more details on our indebtedness and the impact of interest rate risk.

Unsecured Bank Credit Facility - On March 31, 2022, we entered into a new unsecured revolving credit agreement (the “2022 Credit Agreement”) providing us with a $700.0 million unsecured revolving credit facility, replacing our previous $550.0 million unsecured revolver. The 2022 Credit Agreement 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 either (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
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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%. We incurred $4.5 million of deferred financing costs in connection with the 2022 Credit Agreement.

Concurrently with the execution of the 2022 Credit Agreement, we amended our $300.0 million term loan, maturing in September 2023 (“2023 Term Loan”). The amendment modifies the existing covenants to align with provisions in the 2022 Credit Agreement and to accrue interest on borrowings based on SOFR (plus a credit spread adjustment) that were previously based on LIBOR, with no change to the existing applicable interest rate margins. We may also elect for the 2023 Term Loan to accrue interest at a base rate plus the applicable margin. As of December 31, 2022, we had repaid $60.0 million of the 2023 Term Loan.

In March 2022, we repaid a $75.0 million term loan with a maturity in August 2022 with proceeds from the revolving credit facility. The term loan bore interest at a rate of 30-day LIBOR plus 135 basis points (“bps”), based on our current ratings. Upon repayment, we expensed approximately $0.2 million of unamortized loan costs associated with this loan which is included in “Loss on early retirement of debt” in our Consolidated Statement of Income for the year ended December 31, 2022.

As of December 31, 2022, the revolver and term loan bore interest at a rate of one-month Term SOFR (plus a 10 bps spread adjustment) plus 105 bps and 125 bps, based on our debt ratings, or 5.51% and 5.71%, respectively. The facility fee for the revolver was 25 bps per annum.

In January 2023, we repaid a $125.0 million of private placement notes that were issued in January 2015 primarily with proceeds from the revolving credit facility. At January 31, 2023, $202.0 million was outstanding under the revolving credit facility.

The current SOFR spreads and facility fee for our revolving credit facility and 2023 Term Loan reflect our ratings compliance based on the applicable margin for SOFR loans at a debt rating of BBB-/Baa3 in the Interest Rate Schedule provided below in summary format:

Interest Rate Schedule

SOFR Spread
Debt RatingsRevolving Credit FacilityRevolving Credit Facility Fee2023 Term Loan
A+/A10.725%0.125%0.75%
A/A20.725%0.125%0.80%
A-/A30.725%0.125%0.85%
BBB+/Baa10.775%0.150%0.90%
BBB/Baa20.850%0.200%1.00%
BBB-/Baa31.050%0.250%1.25%
Lower than BBB-/Baa31.400%0.300%1.65%

Beyond the applicable ratios detailed above, if our credit rating from at least two credit rating agencies is downgraded below “BBB-/Baa3” the debt under our credit agreements will be subject to defined increases in interest rates and fees.

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 December 31, 2022, were within required limits for each reporting period in 2022 and 2021. The calculation of our leverage ratio involves intermediate determinations of our “Consolidated Total Indebtedness” and of our “Total Asset Value,” as defined in the 2022 Credit Agreement.

Senior Notes Offering - In January 2021, we issued $400.0 million aggregate principal amount of 3.00% senior notes that mature on February 1, 2031 and pay interest semi-annually on February 1 and August 1 of each year (the “2031 Senior Notes”). The 2031 Senior Notes were sold at an issue price of 99.196% of face value before the underwriters’ discount. Our net proceeds from the 2031 Senior Notes offering, after deducting underwriting discounts and expenses, were approximately $392.3 million and were used to repay a $100.0 million term loan and reduce borrowings outstanding under our revolving credit facility.

We remain in compliance with all debt covenants under the unsecured bank credit facility, 2031 Senior Notes and other debt agreements.
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When we take on new debt or when we modify or replace existing debt, we incur debt issuance costs. These costs are subject to amortization over the term of the new debt instrument and may result in the write-off of fees associated with debt which has been replaced or modified.

Debt Maturities - Reference Note 8 to the consolidated financial statements for more information on our debt maturities.

Credit Ratings - Moody's Investors Services (“Moody’s) announced on November 5, 2020 that it assigned an investment grade issuer credit rating and a senior unsecured debt rating of ‘Baa3’ with a “Negative” outlook to the Company. Moody’s released a credit opinion on October 13, 2022 which affirmed the rating and revised the outlook to “Stable” for the Company. Both Fitch and S&P Global announced in November 2019 a public issuer credit rating of BBB- with an outlook of “Stable”. Fitch reaffirmed its rating most recently on December 9, 2021, and S&P Global reaffirmed its rating on November 14, 2022. Our unsecured private placement note agreements include a rate increase provision that is effective if any rating agency lowers our credit rating below investment grade and our compliance leverage increases to 50% or more. Any reduction in outlook or downgrade in our credit ratings from the rating agencies could negatively impact our costs of borrowings.

Debt Metrics - We believe that our fixed charge coverage ratio, which is the ratio of Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization, including amounts in discontinued operations, excluding real estate asset impairments and gains on dispositions) to fixed charges (interest expense at contractual rates net of capitalized interest and principal payments on debt), and the ratio of consolidated net debt to Adjusted EBITDA are meaningful measures of our ability to service our debt. We use these two measures as a useful basis to compare the strength of our balance sheet with those in our peer group. We also believe our balance sheet gives us a competitive advantage when accessing debt markets.

We calculate our fixed charge coverage ratio as approximately 5.9x for the year ended December 31, 2022 (see our discussion under the heading Adjusted EBITDA including a reconciliation to our net income). Giving effect to significant acquisitions, financings, disposals and payoffs on an annualized basis, our consolidated net debt to Adjusted EBITDA ratio is approximately 4.7x for the year ended December 31, 2022 ($ in thousands):

Consolidated Total Debt$1,147,511 
Less: cash and cash equivalents(19,291)
Consolidated Net Debt$1,128,220 
Adjusted EBITDA$251,788 
Annualized impact of recent investments, disposals and payoffs(9,496)
$242,292 
Consolidated Net Debt to Adjusted EBITDA4.7x

Supplemental Guarantor Financial Information

The Company’s $940.0 million bank credit facility, unsecured private placement notes due January 2023 through January 2027 with an aggregate principal amount of $400.0 million and 2031 Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s subsidiaries, except for certain excluded subsidiaries (“Guarantors”). The Guarantors are either owned, controlled or are affiliates of the Company.

The following tables present summarized financial information for the Company and the Guarantors, on a combined basis after eliminating (i) intercompany transactions and balances among the guarantor entities and (ii) equity in earnings from, and any investments in, any subsidiary that is a non-guarantor ($ in thousands):

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As of
December 31, 2022
Real estate properties, net
$1,790,525 
Other assets, net
355,509 
Note receivable due from non-guarantor subsidiary
81,396 
Totals assets
$2,227,430 
Debt
$1,071,287 
Other liabilities
66,717 
Total liabilities
$1,138,004 
Redeemable noncontrolling interest
$9,825 
Noncontrolling interest
$1,067 
Year Ended
December 31, 2022
Revenues
$242,738 
Interest revenue on note due from non-guarantor subsidiary4,657 
Expenses
222,272 
Gain from equity method investee569 
Gains on sales of real estate28,342 
Loss on early retirement of debt(151)
Other income— 
Net income
$53,883 
Net income attributable to NHI and the subsidiary guarantors$55,189 

Equity

At December 31, 2022, we had 43,388,742 shares of common stock outstanding with a market value of $2.3 billion. Equity on our Consolidated Balance Sheet totaled $1.3 billion.
Dividends - Our Board of Directors approves a regular quarterly dividend which is reflective of expected taxable income on a recurring basis. Taxable income is determined in accordance with the Internal Revenue Code and differs from net income for financial statements purposes determined in accordance with U.S. generally accepted accounting principles (“GAAP”). Our Board of Directors has historically directed the Company toward maintaining a strong balance sheet. Therefore, we consider the competing interests of short and long-term debt (interest rates, maturities and other terms) versus the higher cost of new equity, and we accept some level of risk associated with leveraging our investments. We intend to continue to make new investments that meet our underwriting criteria and where the spreads over our cost of equity and debt capital on a leverage neutral basis will generate sufficient returns to our stockholders. We do not expect to utilize borrowings to satisfy the payment of dividends and project that cash flows from operations will be adequate to fund dividends at the current rate.

We intend to comply with REIT dividend requirements that we distribute at least 90% of our annual taxable income for the year ended December 31, 2022 and thereafter. Historically, the Company has distributed at least 100% of annual taxable income. Dividends declared for the fourth quarter of each fiscal year are paid by the end of the following January and are, with some exceptions, treated for tax purposes as having been paid in the fiscal year just ended as provided in IRS Code Sec. 857(b)(8).
Our dividends per share for the last three years are as follows:
202220212020
$3.60 $3.8025 $4.41 

Share Repurchase Plan - On April 15, 2022, the Company’s Board of Directors approved a stock repurchase plan for up to $240.0 million of the Company’s common stock (the “2022 Repurchase Plan”). During the year ended December 31, 2022, we repurchased through open market transactions 2,468,354 shares of common stock for an average price of $61.56 per share,
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excluding commissions. All shares received were constructively retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Cumulative dividends in excess of net income” in the Consolidated Balance Sheet.

On February 17, 2023, our Board of Directors terminated the current stock repurchase program and authorized a revised repurchase program (the “Revised Repurchase Plan”) pursuant to which we may purchase up to $160.0 million in shares of our issued and outstanding common stock, par value $0.01 per share. The Revised Repurchase Plan is effective for a period of one year and does not require us to repurchase any specific number of shares. The Revised Repurchase Plan may be suspended or discontinued at any time. Shares may be repurchased from time-to-time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with the terms of Rule 10b-18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”) and shall be made in accordance with all applicable laws and regulations in effect. The timing and number of shares repurchased, if any, will depend on a variety of factors, including price, general market and economic conditions, alternative investment opportunities and other corporate considerations.

Shelf Registration Statement - We have an automatic shelf registration statement on file with the Securities and Exchange Commission that allows the Company to offer and sell to the public an unspecified amount of common stock, preferred stock, debt securities, warrants and or units at prices and on terms to be announced when and if such securities are offered. The details of any future offerings, along with the use of proceeds from any securities offered, will be described in a prospectus supplement or other offering materials, at the time of offering. Our shelf registration statement expires in March 2023. We expect to file a new shelf registration statement in the first quarter of 2023.

At-the-Market (ATM) Equity Program - We maintain an ATM program which allows us to sell our common stock directly into the market and have entered into an ATM equity offering sales agreement pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $500.0 million of the Company’s common shares. No shares were issued under the ATM program during 2022. During the year ended December 31, 2021, we issued 661,951 common shares through the ATM program with an average price of $73.62, resulting in net proceeds after transaction costs of approximately $47.9 million.

Our use of ATM proceeds rebalanced our leverage in response to our acquisitions and keeps our options flexible for further expansion. We typically use proceeds from the ATM program for general corporate purposes, which may include future acquisitions and repayment of indebtedness, including borrowings under our credit facility. We view our ATM program as an effective way to match-fund our smaller acquisitions by exercising control over the timing and size of transactions and achieving a more favorable cost of capital as compared to larger follow-on offerings.

Material Cash Requirements

We had approximately $26.4 million in cash and cash equivalents on hand and $498.0 million in availability under our unsecured revolving credit facility as of January 31, 2023. Our expected material cash requirements for the twelve months ended December 31, 2023 and thereafter consist of long-term debt maturities; interest on long-term debt; and contractually obligated expenditures. We expect to meet our short-term liquidity needs largely through cash generated from operations and borrowings under our revolving credit facility, refer to the Unsecured Bank Credit Facility discussion above, and sales from real estate investments, although we may choose to seek alternative sources of liquidity. Should we have additional liquidity needs, we believe that we could access long-term financing in the debt and equity capital markets.

The following table summarizes information as of December 31, 2022 related to our material cash requirements ($ in thousands):

TotalTwelve Months Ended December 31, 2023Thereafter
Debt maturities$1,156,049 $415,408 $740,641 
Interest payments64,685 37,666 27,019 
Construction and loan commitments64,138 34,393 29,745 
$1,284,872 $487,467 $797,405 
Our debt maturities in 2023 are comprised primarily of private placement notes of $125.0 million paid in January 2023, $50.0 million maturing in November 2023 and the 2023 Term Loan maturing in September 2023.

We believe our current liquidity position, supplemented by our ability to generate positive cash flows from operations in the future, and our low net leverage will be sufficient to meet all of our short-term and long-term financial commitments.
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Loan and Development Commitments and Contingencies

The following tables summarize information as of December 31, 2022 related to our outstanding commitments and contingencies which are more fully described in the notes to the consolidated financial statements ($ in thousands):

Asset ClassTypeTotalFunded
Remaining1
Loan Commitments:
Bickford Senior LivingSHOConstruction$28,900 $(28,853)$47 
Encore Senior LivingSHOConstruction50,725 (36,375)14,350 
Senior Living CommunitiesSHORevolving Credit20,000 (15,847)4,153 
Timber Ridge OpCoSHOWorking Capital5,000 — 5,000 
Watermark RetirementSHOWorking Capital5,000 (1,976)3,024 
Montecito Medical Real EstateMOBMezzanine Loan50,000 (20,255)29,745 
$159,625 $(103,306)$56,319 
1 Of the total, $26,574 is expected to be payable within 12 months with the remaining commitment due between three to five years.


See Note 4 to our consolidated financial statements for details of our loan commitments. As provided above, loans funded do not include the effects of discounts or commitment fees. The credit loss liability for unfunded loan commitments was $0.7 million as of December 31, 2022 and is estimated using the same methodology as for our funded mortgage and other notes receivable based on the estimated amount that we expect to fund.

Asset ClassTypeTotalFunded
Remaining1
Development Commitments:
Woodland Village SHO Renovation $7,515 $(7,425)$90 
Senior Living CommunitiesSHORenovation9,930 (9,930)— 
Watermark RetirementSHORenovation6,500 (5,959)541 
   Navion Senior SolutionsSHORenovation3,500 (1,062)2,438 
OtherSHOVarious4,550 (1,300)3,250 
SHOPILFRenovation1,500 — 1,500 
$33,495 $(25,676)$7,819 
1 Expected to be payable within 12 months..

In addition to the commitments listed above, we have agreed to pay up to $0.8 million in additional cash consideration pending the results of an ongoing property tax appeal related to a property acquired in the second quarter of 2022. As of December 31, 2022, no amount of this consideration is expected to be paid. One of our consolidated real estate partnerships, Discovery PropCo, has committed to fund up to $2.0 million toward the purchase of condominium units located at one of the facilities of which $1.0 million has been funded as of December 31, 2022.


Asset ClassTotalFundedRemaining
Contingencies (Lease Inducements):
Timber Ridge OpCoSHO$10,000 $— $10,000 
IntegraCareSHO750 — 750 
Wingate HealthcareSHO5,000 — 5,000 
Navion Senior SolutionsSHO4,850 (2,700)2,150 
Discovery Senior LivingSHO4,000 — 4,000 
Ignite Medical ResortsSHO2,000 — 2,000 
Sante PartnersSHO2,000 — 2,000 
$28,600 $(2,700)$25,900 

In February 2023, Timber Ridge OpCo formally requested payout of its $10.0 million lease inducement based upon the achievement of all performance conditions. The Company is confirming that all performance conditions were met and expects to fund the lease inducement payout in the first quarter of 2023.

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We adjust rental income for the amortization of lease inducements paid to our tenants. Amortization of lease inducement payments against revenues was $7.6 million for the year ended December 31, 2022, which includes the write-off of $7.1 million of lease incentives related to Bickford in the second quarter of 2022 as discussed in more detail in Note 3 to the consolidated financial statements. Amortization of lease inducement payments against revenues was $1.0 million for both the years ended December 31, 2021 and 2020.

Capital funding commitments

Capital expenditures related to our Real Estate Investments segment are primarily for the acquisition of new investments. The leases for our properties in the Real Estate Investments segment generally require the tenant to pay for all repairs and maintenance expenses and a minimum amount of capital expenditures each year. The tenants are also required to maintain insurance coverage at least equal to the replacement cost of a property. Therefore, we do not expect material expenditures in 2023 related to existing properties in the Real Estate Investments segment.

The capital funding commitments in our SHOP segment are principally for improvements to our facilities. We expect our SHOP ventures to incur approximately $7.6 million in capital expenditures during 2023 that we anticipate will be funded partially from the net operating income generated from the ventures and additional capital contributions from the partners. We expect to fund our commitments to the ventures for capital expenditures with our operating cash flow and other existing liquidity sources.

Natural Disasters

During the year ended December 31, 2022, our properties incurred minimal to no damage relating to natural disaster events. We or our tenants may incur unplanned costs for minor repairs and restoring operations, as well as costs to evacuate employees and residents. Our lease agreements require our tenants to maintain sufficient property and business interruption insurance, subject to certain deductibles.

Litigation

For a description of our currently outstanding litigation, see “Legal Proceedings” in Part I, Item 3 of this Annual Report on Form 10-K.

FFO & FAD

These supplemental performance measures may not be comparable to similarly titled measures used by other REITs. Consequently, our Funds From Operations (“FFO”), Normalized FFO and Normalized Funds Available for Distribution (“FAD”) may not provide a meaningful measure of our performance as compared to that of other REITs. Since other REITs may not use our definition of these measures, caution should be exercised when comparing our FFO, Normalized FFO and Normalized FAD to that of other REITs. These measures do not represent cash generated from operating activities in accordance with GAAP (these measures do not include changes in operating assets and liabilities) and therefore should not be considered an alternative to net earnings as an indication of performance, or to net cash flow from operating activities as determined by GAAP as a measure of liquidity, and are not necessarily indicative of cash available to fund cash needs.

Funds From Operations - FFO

Our FFO per diluted common share for the year ended December 31, 2022 decreased $1.07 or 23.2% over the same period in 2021 due primarily to the write-offs of straight-line rents receivable and unamortized lease incentives totaling approximately $36.4 million, increased credit loss reserve of $9.4 million, increased legal fees of $1.7 million for the Welltower litigation and transition activities for the legacy Holiday portfolio and property dispositions completed since December 2021, partially offset by the recognition of the Holiday lease deposit of $8.8 million and escrow of $6.9 million in rental income, and reduced interest expense. FFO, as defined by the National Association of Real Estate Investment Trusts (“NAREIT”) and applied by us, is net income (computed in accordance with GAAP), excluding gains (or losses) from sales of real estate property, impairments of real estate, and real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures, if any. The Company’s computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or have a different interpretation of the current NAREIT definition from that of the Company; therefore, caution should be exercised when comparing our Company’s FFO to that of other REITs. Diluted FFO assumes the exercise of stock options and other potentially dilutive securities.

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Our Normalized FFO per diluted common share for the year ended December 31, 2022 decreased $0.30 or 6.5% over the same period in 2021. Normalized FFO excludes from FFO certain items which, due to their infrequent or unpredictable nature, may create some difficulty in comparing FFO for the current period to similar prior periods, and may include, but are not limited to, impairment of non-real estate assets, gains and losses attributable to the acquisition and disposition of non-real estate assets and liabilities, and recoveries of previous write-downs.

FFO and Normalized FFO are important supplemental measures of operating performance for a REIT. Because the historical cost accounting convention used for real estate assets requires depreciation (except on land), such accounting presentation implies that the value of real estate assets diminishes predictably over time. Since real estate values instead have historically risen and fallen with market conditions, presentations of operating results for a REIT that uses historical cost accounting for depreciation could be less informative, and should be supplemented with a measure such as FFO. The term FFO was designed by the REIT industry to address this issue.

Funds Available for Distribution - FAD

Our Normalized FAD for the year ended December 31, 2022 decreased $8.4 million or 4.0% over the same period in 2021 due primarily to increased legal fees of $1.7 million for the Welltower litigation and transition activities for the legacy Holiday portfolio and property dispositions completed since December 2021, partially offset by the recognition of the Holiday lease deposit of $8.8 million and escrow of $6.9 million in rental income and reduced interest expense. In addition to the adjustments included in the calculation of Normalized FFO, Normalized FAD excludes the impact of any straight-line lease revenue, amortization of the original issue discount on our senior unsecured notes, amortization of debt issuance costs, and non-cash share based compensation. We also adjust Normalized FAD for the net change in our allowance for expected credit losses, non-cash share based compensation as well as certain non-cash items related to our equity method investments such as straight-line lease expense and amortization of purchase accounting adjustments.

Normalized FAD is an important supplemental performance measure for a REIT and a useful measure of liquidity as an indicator of the ability to distribute dividends to stockholders. GAAP requires a lessor to recognize contractual lease payments into income on a straight-line basis over the expected term of the lease. This straight-line adjustment has the effect of reporting lease income that is significantly more or less than the contractual cash flows received pursuant to the terms of the lease agreement. GAAP also requires any discount or premium related to indebtedness and debt issuance costs to be amortized as non-cash adjustments to earnings.

The following table reconciles net income, the most directly comparable GAAP metric, to FFO, Normalized FFO and Normalized FAD and is presented for both basic and diluted weighted average common shares for FFO and Normalized FFO ($ in thousands, except share and per share amounts):

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Years ended December 31,
202220212020
Net income attributable to common stockholders$66,403 $111,804 $185,126 
Elimination of certain non-cash items in net income:
Real estate depreciation70,734 80,798 83,150 
Real estate depreciation related to noncontrolling interests(1,393)(839)(777)
Gains on sales of real estate, net(28,342)(32,498)(21,316)
Impairments of real estate51,555 51,817 — 
NAREIT FFO attributable to common stockholders158,957 211,082 246,183 
Loss on operations transfer, net710 — — 
Portfolio transition costs, net of noncontrolling interests426 — — 
Gain on note receivable payoff(1,113)— — 
Loss on early retirement of debt151 1,912 3,924 
Non-cash write-offs of straight-line receivable and lease incentives36,353 709 380 
Non-cash rental income(3,000)— — 
Recognition of unamortized note receivable commitment fees— (375)— 
Lease termination fee— (2,464)— 
Litigation settlement— (616)— 
Normalized FFO attributable to common stockholders192,484 210,248 250,487 
Straight-line lease revenue, net(12,563)(15,312)(20,791)
Straight-line lease revenue, net, related to noncontrolling interests124 91 111 
Straight-line lease expense related to equity method investment(16)46 113 
Non-real estate depreciation146 — — 
Non-real estate depreciation related to noncontrolling interest(16)— — 
Amortization of lease incentives446 1,026 987 
Amortization of original issue discount322 295 303 
Amortization of debt issuance costs2,155 2,404 2,979 
Amortization related to equity method investment(847)1,109 1,261 
Note receivable credit loss expense10,356 949 991 
Equity method investment capital expenditures(420)(420)(420)
Equity method investment non-refundable fees received 1,206 622 660 
Equity method investment distributions(569)— — 
Non-cash share-based compensation8,613 8,415 3,061 
Senior housing portfolio recurring capital expenditures(390)— — 
Normalized FAD attributable to common stockholders$201,031 $209,473 $239,742 
BASIC
Weighted average common shares outstanding44,774,708 45,714,221 44,696,285 
NAREIT FFO attributable to common stockholders per share$3.55 $4.62 $5.51 
Normalized FFO attributable to common stockholders per share$4.30 $4.60 $5.60 
DILUTED
Weighted average common shares outstanding44,794,236 45,729,497 44,698,004 
NAREIT FFO attributable to common stockholders per share$3.55 $4.62 $5.51 
Normalized FFO attributable to common stockholders per share$4.30 $4.60 $5.60 

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Adjusted EBITDA

We consider Adjusted EBITDA to be an important supplemental measure because it provides information which we use to evaluate our performance and serves as an indication of our ability to service debt. We define Adjusted EBITDA as consolidated earnings before interest, taxes, depreciation and amortization, excluding real estate asset impairments and gains on dispositions and certain items which, due to their infrequent or unpredictable nature, may create some difficulty in comparing Adjusted EBITDA for the current period to similar prior periods. These items include, but are not limited to, impairment of non-real estate assets, gains and losses attributable to the acquisition and disposition of assets and liabilities, and recoveries of previous write-downs. Adjusted EBITDA also includes our proportionate share of unconsolidated equity method investments presented on a similar basis. Since others may not use our definition of Adjusted EBITDA, caution should be exercised when comparing our Adjusted EBITDA to that of other companies. EBITDA reflects GAAP interest expense, which excludes amounts capitalized during the period.

The following table reconciles net income, the most directly comparable GAAP metric, to Adjusted EBITDA ($ in thousands):

Years ended December 31,
202220212020
Net income$65,501 $111,967 $185,311 
Interest expense44,917 50,810 52,882 
Franchise, excise and other taxes844 788 534 
Depreciation70,880 80,798 83,150 
NHI’s share of EBITDA adjustments for unconsolidated entities2,976 2,848 1,495 
Gains on sales of real estate, net(28,342)(32,498)(21,316)
Impairments of real estate51,555 51,817 — 
Loss on operations transfer, net710 — — 
Litigation settlement— (616)— 
Gain on note receivable payoff(1,113)— — 
Loss on early retirement of debt151 1,912 3,924 
Non-cash write-off of straight-line rents receivable and lease amortization36,353 709 380 
Non-cash rental income(3,000)— — 
Note receivable credit loss expense10,356 949 991 
Lease termination fee— (2,464)— 
Recognition of unamortized note receivable commitment fees— (375)— 
Adjusted EBITDA$251,788 $266,645 $307,351 
Interest expense at contractual rates$42,487 $40,866 $43,458 
Interest rate swap payments, net— 7,306 6,352 
Principal payments389 371 1,082 
Fixed Charges$42,876 $48,543 $50,892 
Fixed Charge Coverage5.9x5.5x6.0x

For all periods presented, EBITDA reflects GAAP interest expense, which excludes amounts capitalized during the period.

Net Operating Income

NOI is a non-GAAP supplemental financial measure used to evaluate the operating performance of real estate. We define NOI as total revenues, less tenant reimbursements and property operating expenses. We believe NOI provides investors relevant and useful information as it measures the operating performance of our properties at the property level on an unleveraged basis. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties.

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The following table reconciles NOI to net income, the most directly comparable GAAP metric ($ in thousands):

Years Ended
December 31,
NOI Reconciliations:20222021
Net income$65,501 $111,967 
(Gains) losses from equity method investment(569)1,545 
Interest income and other— (350)
Loss on early retirement of debt151 1,912 
Gain on note receivable payoff(1,113)— 
Loss on operations transfer, net710 — 
Gains on sales of real estate, net(28,342)(32,498)
Loan and realty losses61,911 52,766 
General and administrative22,768 18,431 
Franchise, excise and other taxes844 788 
Legal2,555 908 
Interest44,917 50,810 
Depreciation70,880 80,798 
Consolidated net operating income (NOI)$240,213 $287,077 
NOI by segment:
   Real Estate Investments$232,295 $283,945 
   SHOP7,603 — 
   Non-Segment/Corporate315 3,132 
        Total NOI$240,213 $287,077 
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Interest Rate Risk

At December 31, 2022, we were exposed to market risks related to fluctuations in interest rates on approximately $282.0 million of variable-rate indebtedness and on our mortgage and other notes receivable. The unused portion ($658.0 million at December 31, 2022) of our revolving credit facility, should it be drawn upon, is subject to variable rates.

Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt and loans receivable unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. Conversely, changes in interest rates on variable rate debt and investments would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. Assuming a 50 basis-point increase or decrease in the interest rate related to variable-rate debt, and assuming no change in the outstanding balance as of December 31, 2022, net interest expense would increase or decrease annually by approximately $1.4 million or $0.03 per common share on a diluted basis.

We have historically used derivative financial instruments in the normal course of business to mitigate interest rate risk. We do not use derivative financial instruments for speculative purposes. Derivatives, if any, are included in the Consolidated Balance Sheets at their fair value. We may engage in hedging strategies to manage our exposure to market risks in the future, depending on an analysis of the interest rate environment and the costs and risks of such strategies. We had no derivative financial instruments outstanding during 2022.

The following table sets forth certain information with respect to our debt ($ in thousands):
December 31, 2022December 31, 2021
Balance1
% of total
Rate2
Balance1
% of total
Rate2
Fixed rate:
Private placement notes - unsecured$400,000 34.5 %4.15 %$400,000 31.9 %4.15 %
Senior notes - unsecured400,000 34.5 %3.00 %400,000 31.9 %3.00 %
Fannie Mae term loans - secured, non-recourse76,649 6.6 %3.96 %77,038 6.2 %3.97 %
Variable rate:
Bank term loans - unsecured240,000 20.8 %5.71 %375,000 30.0 %1.41 %
Revolving credit facility - unsecured42,000 3.6 %5.51 %— — %— %
$1,158,649 100.0 %3.91 %$1,252,038 100.0 %2.95 %
1 Differs from carrying amount due to unamortized discounts and loan costs.
2 Total is weighted average rate

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To highlight the sensitivity of our term loans, senior notes and secured mortgage debt to changes in interest rates, the following summary shows the effects on fair value (“FV”) assuming a parallel shift of 50 basis points (“bps”) in market interest rates for a contract with similar maturities as of December 31, 2022 ($ in thousands):
Balance
Fair Value1
FV reflecting change in interest rates
Fixed rate:-50 bps+50 bps
Private placement notes - unsecured$400,000 $384,747 $387,998 $381,545 
Senior notes - unsecured400,000 317,298 328,850 306,190 
Fannie Mae term loans - secured, non-recourse76,649 71,950 72,746 71,163 
1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.

At December 31, 2022, the fair value of our mortgage and other notes receivable, discounted for estimated changes in the risk-free rate, was approximately $227.6 million. A 50 basis-point increase in market rates would decrease the estimated fair value of our mortgage and other loans by approximately $3.5 million, while a 50 basis-point decrease in such rates would increase their estimated fair value by approximately $2.7 million.

Equity Price Risk

The Company is not subject to equity risk since it owns no marketable securities.

Inflation Risk

Our real estate leases generally provide for annual increases in contractual rent due based on a fixed amount or percentage or based on increases in the CPI. Leases with increases based on CPI may contain a minimum or a cap on the maximum annual increase. Substantially all of our leases require the tenant to pay all operating expenses for the property, whether paid directly by the tenant or reimbursed to us. We believe that inflationary increases will be at least partially offset by the contractual rent increases and expense reimbursements described above.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors
National Health Investors, Inc.
Murfreesboro, Tennessee


Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of National Health Investors, Inc. (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules listed in the accompanying index (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated February 21, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Asset Impairment - Real Estate Properties

The Company had total real estate properties, net of approximately $2.1 billion as of December 31, 2022. As described in Note 2 to the Company’s consolidated financial statements, management evaluates the recoverability of the carrying amount of its real estate properties when events or circumstances, including significant physical changes, significant adverse changes in general economic conditions, and significant deterioration of the underlying cash flows of a property indicate that the carrying amount may not be fully recoverable. A real estate property is impaired when the estimated undiscounted future cash flows of the property are less than the net carrying amount of the property. The Company recognized approximately $51.6 million in impairments for the year ended December 31, 2022.
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We identified management’s identification and assessment of the indicators of potential impairment of real estate properties as a critical audit matter. Identification of a potential impairment of real estate properties including due to significant physical changes in the property, significant adverse changes in general economic conditions, or significant deterioration of the underlying cash flows of the property requires a high degree of judgment. Auditing these judgments was especially challenging and complex due to the nature and extent of auditor effort required to address these matters.

The primary procedures we performed to address this critical audit matter included:

Assessing the reasonableness of management’s assumptions and inputs, including property specific factors for certain properties that included changes to the physical condition of the property, changes in general economic conditions, going concern uncertainties identified by certain tenants, and deterioration of the underlying cash flows of the property, including due to declines in occupancy, which are used by management to identify and assess whether an impairment indicator existed.

Reviewing internal documentation relevant to the analysis for certain properties including Board of Director minutes, letters of intent, and operations department communications, as applicable on a property-by-property basis, including for certain properties with lower lease coverage ratios, to assess whether additional indicators of impairment were present.

Variable Interest Entity Accounting – SHOP Ventures

As described in Note 2 to the Company’s consolidated financial statements, management consolidates a variable interest entity (“VIE”) for which control of the entity is achieved through means other than voting rights and the Company is the primary beneficiary of the VIE. During 2022, the Company formed the Merrill Gardens and Discovery joint ventures (collectively referred to as the “SHOP ventures”). The Company, as the primary beneficiary of these VIEs, consolidated the SHOP ventures. The Discovery member’s agreement was also amended in the fourth quarter of 2022.

We identified the accounting for the consolidation of the SHOP ventures, including the reconsideration caused by the amendment to the Discovery member’s agreement, as a critical audit matter. Determination of whether the SHOP ventures meet the definition of a VIE and whether the Company is the primary beneficiary required significant judgment by management to determine which activities significantly impact the design and purpose of each entity, whether equity members, as a group, lack the characteristics of a controlling financial interest, and which equity holder has the power to direct the activities that most significantly impact economic performance of each entity. In turn, increased auditor effort, including the involvement of professionals with specialized knowledge in consolidation accounting assessments, was required to evaluate management’s judgments.

The primary procedures we performed to address this critical audit matter included:

Analyzing the agreements and other relevant documents to determine the design, purpose and significant activities of the SHOP ventures and the nature of the rights conveyed to the Company through its equity investments in these entities.

Utilizing professionals with specialized knowledge and experience in consolidation accounting assessments to assist in evaluating the significant judgments impacting management’s conclusion as to whether the Company should consolidate the SHOP ventures.


/s/ BDO USA, LLP

We have served as the Company's auditor since 2004.

Nashville, Tennessee
February 21, 2023
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NATIONAL HEALTH INVESTORS, INC.
CONSOLIDATED BALANCE SHEETS
($ in thousands, except share and per share amounts)
December 31,
Assets:20222021
Real estate properties:
Land$177,527 $186,658 
Buildings and improvements2,549,019 2,707,422 
Construction in progress3,352 468 
2,729,898 2,894,548 
Less accumulated depreciation(611,688)(576,668)
Real estate properties, net2,118,210 2,317,880 
Mortgage and other notes receivable, net of reserve of $15,338 and $5,210, respectively
233,141 299,952 
Cash and cash equivalents19,291 37,412 
Straight-line rent receivable76,895 96,198 
Assets held for sale, net43,302 66,398 
Other assets, net16,585 21,036 
Total Assets$2,507,424 $2,838,876 
Liabilities and Equity:
Debt$1,147,511 $1,242,883 
Accounts payable and accrued expenses25,905 23,181 
Dividends payable39,050 41,266 
Lease deposit liabilities— 8,838 
Deferred income5,052 5,725 
Total Liabilities1,217,518 1,321,893 
Commitments and Contingencies
Redeemable noncontrolling interest9,825 — 
National Health Investors, Inc. Stockholders' Equity:
Common stock, $0.01 par value; 100,000,000 shares authorized;
43,388,742 and 45,850,599 shares issued and outstanding, respectively
434 459 
Capital in excess of par value1,599,427 1,591,182 
Cumulative dividends in excess of net income(329,636)(84,558)
Total National Health Investors, Inc. Stockholders' Equity1,270,225 1,507,083 
Noncontrolling interest9,856 9,900 
Total Equity1,280,081 1,516,983 
Total Liabilities and Equity$2,507,424 $2,838,876 

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.
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NATIONAL HEALTH INVESTORS, INC.
CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except share and per share amounts)
Years Ended December 31,
202220212020
Revenues:
Rental income$217,700 $271,049 $307,208 
Resident fees and services35,796 — — 
Interest income and other24,698 27,666 25,603 
278,194 298,715 332,811 
Expenses:
Depreciation70,880 80,798 83,150 
Interest44,917 50,810 52,882 
Senior housing operating expenses28,193 — — 
Legal2,555 908 1,252 
Franchise, excise and other taxes844 788 534 
General and administrative22,768 18,431 13,304 
Taxes and insurance on leased properties9,788 11,638 9,653 
Loan and realty losses61,911 52,766 991 
241,856 216,139 161,766 
Loss on operations transfer, net(710)— — 
Gain on note receivable payoff1,113 — — 
Loss on early retirement of debt(151)(1,912)(3,924)
Gains (losses) from equity method investment569 (1,545)(3,126)
Gains on sales of real estate, net28,342 32,498 21,316 
     Other income— 350 — 
Net income65,501 111,967 185,311 
Less: net loss (income) attributable to noncontrolling interests902 (163)(185)
Net income attributable to common stockholders$66,403 $111,804 $185,126 
Weighted average common shares outstanding:
Basic44,774,708 45,714,221 44,696,285 
Diluted44,794,236 45,729,497 44,698,004 
Earnings per common share:
Net income attributable to common stockholders - basic$1.48 $2.45 $4.14 
Net income attributable to common stockholders - diluted$1.48 $2.44 $4.14 


The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.
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NATIONAL HEALTH INVESTORS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
($ in thousands)
Years Ended December 31,
202220212020
Net income$65,501 $111,967 $185,311 
Other comprehensive income (loss):
Decrease in fair value of cash flow hedges— (137)(10,047)
Reclassification adjustment for amounts recognized in net income— 7,286 6,330 
Total other comprehensive income (loss)— 7,149 (3,717)
Comprehensive income65,501 119,116 181,594 
  Less: comprehensive loss (income) attributable to noncontrolling interests902 (163)(185)
Comprehensive income attributable to common stockholders$66,403 $118,953 $181,409 


The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.
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NATIONAL HEALTH INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
Years Ended December 31,
 202220212020
Cash flows from operating activities:  
Net income$65,501 $111,967 $185,311 
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation70,880 80,798 83,150 
Amortization of deferred loan costs, debt discounts and prepaids4,283 4,354 5,392 
Amortization of commitment fees and note receivable discounts(872)(729)(867)
Amortization of lease incentives7,555 1,026 987 
Straight-line lease revenue16,681 (14,603)(20,411)
Non-cash rental income(3,000)— — 
Non-cash interest income on mortgage and other notes receivable(4,314)(2,614)(3,839)
Non-cash lease deposit liability recognized as rental income(8,838)— — 
Gains on sales of real estate, net(28,342)(32,498)(21,316)
Gain on note receivable payoff(1,113)— — 
Loss on operations transfer, net710 — — 
Loss on early retirement of debt151 1,912 3,924 
(Gains) losses from equity method investment(569)1,545 3,126 
Loan and realty losses61,911 52,766 991 
Payment of lease incentives(1,200)(1,042)(623)
Non-cash share-based compensation8,613 8,415 3,061 
Changes in operating assets and liabilities:  
Other assets, net(3,534)(4,050)160 
Accounts payable and accrued expenses425 3,352 (6,681)
Deferred income412 260 (217)
Net cash provided by operating activities185,340 210,859 232,148 
Cash flows from investing activities:  
Investment in mortgage and other notes receivable(79,801)(72,236)(58,356)
Collection of mortgage and other notes receivable119,212 67,790 46,612 
Acquisition of real estate(6,364)(46,817)(102,712)
Proceeds from sales of real estate 168,958 238,864 39,631 
Investments in renovations of existing real estate(4,629)(3,465)(13,854)
Investments in equipment— (64)(158)
Investment in equity method investment— — (875)
Distributions from equity method investment569 1,205 — 
Net cash provided by (used in) investing activities197,945 185,277 (89,712)
Cash flows from financing activities:  
Proceeds from revolving credit facility225,000 95,000 205,000 
Payments on revolving credit facility(183,000)(393,000)(207,000)
Borrowings on term loans— — 100,000 
Payments on term loans(135,388)(293,316)(43,729)
Proceeds from issuance of senior notes— 396,784 — 
Prepayment fee for early retirement of debt— (1,462)(1,619)
Deferred loan costs(4,612)(5,018)(1,039)
Distributions to noncontrolling interests(916)(910)(748)
Proceeds from noncontrolling interests11,738 — 13 
Taxes remitted on employee stock awards(288)— (2,705)
Proceeds from equity offering, net— 47,904 34,649 
Equity issuance costs(66)— — 
Convertible bond redemption— (66,076)— 
Dividends paid to stockholders(161,771)(182,900)(194,584)
Payments to repurchase shares of common stock(151,951)— — 
Net cash used in financing activities(401,254)(402,994)(111,762)
(Decrease) increase in cash and cash equivalents and restricted cash(17,969)(6,858)30,674 
Cash and cash equivalents and restricted cash, beginning of year39,485 46,343 15,669 
Cash and cash equivalents and restricted cash, end of year$21,516 $39,485 $46,343 
The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.
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NATIONAL HEALTH INVESTORS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
($ in thousands)
Years Ended December 31,
 202220212020
Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized$42,659 $43,680 $43,406 
Supplemental disclosure of non-cash investing and financing activities:
Real estate acquired in exchange for mortgage notes receivable$23,071 $— $63,220 
Noncash portion of noncontrolling interest conveyed in acquisition$— $— $10,778 
Increase in mortgage note receivable from sale of real estate$— $— $4,000 
Change in other assets related to investments in real estate$— $— $348 
Change in other assets related to sales of real estate$102 $(33)$— 
Change in accounts payable related to investments in real estate construction$20 $(62)$784 
Change in accounts payable related to renovations of existing real estate$(37)$— $— 
Change in accounts payable related to distributions to noncontrolling interests$139 $64 $138 
Operating equipment received in lease termination$1,287 $— $— 
Increase in accounts payable related to transfer of operations$300 $— $— 

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.
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NATIONAL HEALTH INVESTORS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
($ in thousands except share and per share amounts)
 Common StockCapital in Excess of Par ValueCumulative Dividends in Excess of Net IncomeAccumulated Other Comprehensive Income (Loss)Total National Health Investors Stockholders’ EquityNoncontrolling InterestsTotal Equity
 SharesAmount
Balances at December 31, 201944,587,486 $446 $1,505,948 $(5,331)$(3,432)$1,497,631 $621 $1,498,252 
Cumulative effect of change in accounting principle— — — (4,225)— (4,225)— (4,225)
Noncontrolling interests capital contribution— — — — — — 10,791 10,791 
Distributions declared to noncontrolling interests— — — — — — (886)(886)
Total comprehensive income— — — 185,126 (3,717)181,409 185 181,594 
Issuance of common stock, net535,990 34,644 — — 34,649 — 34,649 
Taxes remitted on employee stock awards— — (2,705)— — (2,705)— (2,705)
Shares issued on stock options exercised62,516 (2)— — (1)— (1)
Share-based compensation— — 3,061 — — 3,061 — 3,061 
Dividends declared, $4.41 per common share
— — — (197,585)— (197,585)— (197,585)
Balances at December 31, 202045,185,992 452 1,540,946 (22,015)(7,149)1,512,234 10,711 1,522,945 
Distributions declared to noncontrolling interests— — — — — — (974)(974)
Total comprehensive income— — — 111,804 7,149 118,953 163 119,116 
Issuance of common stock, net661,951 47,897 — — 47,904 — 47,904 
Equity component in redemption of convertible debt— — (6,076)— — (6,076)— (6,076)
Shares issued on stock options exercised2,656 — — — — — — — 
Share-based compensation— — 8,415 — — 8,415 — 8,415 
Dividends declared, $3.8025 per common share
— — — (174,347)— (174,347)— (174,347)
Balances at December 31, 202145,850,599 459 1,591,182 (84,558)— 1,507,083 9,900 1,516,983 
Distributions declared to noncontrolling interests, excluding $40 attributable to redeemable noncontrolling interests
— — — — — — (1,015)(1,015)
Total comprehensive income, excluding a loss of $843 attributable to redeemable noncontrolling interest
— — — 66,403 — 66,403 (59)66,344 
Reclassification of redeemable noncontrolling interest— — — — — — 1,030 1,030 
Equity issuance cost— — (80)— — (80)— (80)
Taxes remitted on employee stock awards— — (288)— — (288)— (288)
Shares issued on stock options exercised6,497 — — — — — — — 
Repurchases of common stock(2,468,354)(25)— (151,926)— (151,951)— (151,951)
Share-based compensation— — 8,613 — — 8,613 — 8,613 
Dividends declared, $3.60 per common share
— — — (159,555)— (159,555)— (159,555)
Balances at December 31, 202243,388,742 $434 $1,599,427 $(329,636)$— $1,270,225 $9,856 $1,280,081 

The accompanying notes to consolidated financial statements are an integral part of these consolidated financial statements.
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NATIONAL HEALTH INVESTORS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2022

Note 1. Organization and Nature of Business

National Health Investors, Inc. (“NHI,” “the Company,” “we,” “us” or “our”), established in 1991 as a Maryland corporation, is a self-managed real estate investment trust (“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 segments: Real Estate Investments and Senior Housing Operating Portfolio (“SHOP”). Our Real Estate Investments segment consists of real estate investments and lease, mortgage and other notes receivables 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”). As of December 31, 2022, we had investments of approximately $2.4 billion in 160 health-care real estate properties located in 32 states and leased pursuant primarily to triple-net leases to 24 tenants consisting of 94 senior housing communities (“SHO”), 65 SNFs and one hospital, excluding 13 properties classified as assets held for sale. Our portfolio of 17 mortgages along with other notes receivable totaled $248.5 million, excluding an allowance for expected credit losses of $15.3 million, as of December 31, 2022. Units and beds disclosures in these consolidated financial statements are unaudited.

Our SHOP segment is comprised of two ventures that own the operations of ILFs. As of December 31, 2022, we had investments of approximately $338.1 million in 15 properties with a combined 1,732 units located in eight states that are operated on behalf of the Company by two independent managers pursuant to the terms of separate management agreements that commenced April 1, 2022. The third-party managers, or related parties of the managers, own equity interests in the respective ventures.

Note 2. Basis of Presentation and Significant Accounting Policies

Principles of Consolidation - The consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, joint ventures and subsidiaries in which we have a controlling interest. We also consolidate certain entities when control of such entities can be achieved through means other than voting rights (“variable interest entities” or “VIEs”) if the Company is deemed to be the primary beneficiary of such entities. All material intercompany transactions and balances are eliminated in consolidation.

A VIE is broadly defined as an entity with one or more of the following characteristics: (a) the total equity investment at risk is insufficient to finance the entity’s activities without additional subordinated financial support; (b) as a group, the holders of the equity investment at risk lack (i) the ability to make decisions about the entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests, and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights.

We evaluate our arrangements with VIEs to identify entities for which control is achieved through means other than voting rights and to determine which business enterprise is the primary beneficiary of the VIE. In accordance with FASB guidance, management must evaluate each of the Company’s contractual relationships which creates a variable interest in other entities. If the Company has a variable interest and the entity is a VIE, then management must determine whether the Company is the primary beneficiary of the VIE. If it is determined that the Company is the primary beneficiary, NHI would consolidate the VIE. We identify the primary beneficiary of a VIE as the enterprise that has both: (i) the power to direct the activities of the VIE that most significantly impact the entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits of the VIE that could be significant to the entity. We perform this analysis on an ongoing basis.

If the Company has determined that an entity is not a VIE, the Company assesses the need for consolidation under all other provisions of Accounting Standards Codification (“ASC”) Topic 810, Consolidation. These provisions provide for consolidation of majority-owned entities where a majority voting interest held by the Company demonstrates control of such entities in the absence of any legal constraints.

Effective April 1, 2022 and at December 31, 2022, our consolidated total assets and liabilities include two consolidated ventures comprising our SHOP activities formed with two separate partners - Merrill Gardens, L.L.C. (“Merrill”) and DSHI NHI Holiday LLC (the “Discovery member”), a related party of Discovery Senior Living. We consider both ventures to be VIEs as the members of each, as a group, lack the characteristics of a controlling financial interest. We are deemed to be the primary beneficiary because we have the ability to control the activities that most significantly impact each VIE’s economic
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performance. The assets of the ventures primarily consist of real estate properties, cash and cash equivalents, and resident fees and services (accounts receivable). Their obligations primarily consist of operating expenses of the ILFs (accounts payable and accrued expenses) and capital expenditures for the properties. Assets of the consolidated SHOP ventures that can be used only to settle obligations of each respective SHOP venture primarily include approximately $260.6 million of real estate properties, net, $6.9 million of cash and cash equivalents and $1.3 million of accounts receivable, net. Liabilities of the consolidated SHOP ventures for which creditors do not have recourse to the general credit of the Company are not material. Reference Notes 5 and 10 for further discussion of these new ventures.

We also consolidate two real estate partnerships formed with our partners, Discovery Senior Housing Investor XXIV, LLC, a related party of Discovery Senior Living, and LCS Timber Ridge LLC, to invest in senior housing facilities. We consider both partnerships to be VIEs as either the members, as a group, lack the characteristics of a controlling financial interest or the total equity at risk is insufficient to finance activities without additional subordinated financial support. NHI directs the activities that most significantly impact economic performance of these ventures, subject to limited protective rights extended to our partners for specified business decisions. Because of our control of these partnerships, we include their assets, liabilities, noncontrolling interests and operations in our consolidated financial statements.

At December 31, 2022, we held interests in nine unconsolidated VIEs, and, because we lack either directly or through related parties the power to direct the activities that most significantly impact their economic performance, we have concluded that the Company is not the primary beneficiary. Accordingly, we account for our transactions with these entities and their subsidiaries at either amortized cost or net realizable value for straight-line rent receivables, excluding our investment accounted for under the equity method.

The Company’s unconsolidated VIEs are summarized below by date of initial involvement. For further discussion of the nature of the relationships, including the sources of exposure to these VIEs, see the notes to our consolidated financial statements cross-referenced below ($ in thousands).
DateNameSource of ExposureCarrying Amount Maximum Exposure to LossNote Reference
2014Senior Living CommunitiesNotes and straight-line receivable$90,196 $94,349 Notes 3, 4
2016Senior Living ManagementNotes$24,500 $24,500 
2018Bickford Senior LivingNotes and funding commitment$32,976 $46,023 Notes 3, 4
2019Encore Senior LivingNotes and straight-line receivable$39,091 $53,416 Notes 3, 4
2020Timber Ridge OpCo, LLC
Various1
$(5,000)$— Note 6
2020Watermark RetirementNotes and straight-line receivable$7,875 $10,898 Note 4
2021Montecito Medical Real EstateNotes and funding commitment$20,255 $50,000 Note 4
2021Vizion HealthNotes and straight-line receivable$19,791 $23,015 Notes 3, 4
2021Navion Senior Solutions
Various2
$8,127 $14,065 Notes 3, 4

1Loan commitment, equity method investment and straight-line rent receivables
2 Notes, loan commitments, straight-line rent receivables, and unamortized lease incentives

We are not obligated to provide support beyond our stated commitments to these tenants and borrowers whom we classify as VIEs, and accordingly, our maximum exposure to loss as a result of these relationships is limited to the amount of our commitments, as shown above and discussed in the notes. Economic loss on a lease, in excess of what is presented in the table above, if any, would be limited to that resulting from any period of non-payment of rent before we are able to take effective remedial action, as well as costs incurred in transitioning the lease to a new tenant. The potential extent of such loss would be dependent upon individual facts and circumstances, and is therefore not included in the table above.

In the future, NHI may be deemed the primary beneficiary of the operations if the tenants or borrowers do not have adequate liquidity to accept the risks and rewards as the tenant and operator of the properties and might be required to consolidate the financial position and results of operations of the tenants or borrowers into our consolidated financial statements.

We use the equity method of accounting when we own an interest in an entity whereby we can exert significant influence over but cannot control the entity’s operations. We discontinue equity method accounting if our investment in an entity (and net advances) is reduced to zero unless we have guaranteed obligations of the entity or are otherwise committed to provide further financial support for the entity. Reference Note 6 for further discussion of our equity method investment.    

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We structured our Timber Ridge OpCo investment to be compliant with the provisions of RIDEA which permits us to receive rent payments through a triple-net lease between a property company and an operating company and allows us to receive distributions from the operating company to a taxable REIT subsidiary (“TRS”). Our TRS holds our equity interests in unconsolidated operating companies thus providing an organizational structure that allows the TRS to engage in a broad range of activities and share in revenues that are otherwise non-qualifying income under the REIT gross income tests.

Noncontrolling Interests

Contingently redeemable noncontrolling interests are recorded at their initial carrying amounts upon issuance and are subsequently adjusted to reflect their share of gains or losses and distributions attributable to the noncontrolling interests. In periods where they are or will become probable of redemption, an adjustment to the redemption value of the noncontrolling interests is also recognized through “Capital in excess of par value” on the Company’s Consolidated Balance Sheets and included in our computation of earnings per share. As of December 31, 2022, the Merrill SHOP venture noncontrolling interest was classified as mezzanine equity, as discussed further in Note 10.

We consolidate the real estate partnerships formed with Discovery in June 2019 and LCS in January 2020, both of which invest in senior housing facilities. The noncontrolling interests associated with these two consolidated real estate partnerships, along with our Discovery member SHOP venture were classified as equity as of December 31, 2022.

Use of Estimates - The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant assumptions and estimates include purchase price allocations to record investments in real estate, impairment of real estate, and allowance for credit losses. Actual results could differ from those estimates.

Earnings Per Share - The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options using the treasury stock method, to the extent dilutive. Diluted earnings per share also incorporates the potential dilutive impact of our convertible debt that was repaid in 2021. We apply the treasury stock method to convertible debt instruments, the effect of which is that conversion will not be assumed for purposes of computing diluted earnings per share unless the average share price of our common stock for the period exceeds the conversion price per share.

Fair Value Measurements - Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A three-level fair value hierarchy is required to prioritize the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

If the fair value measurement is based on inputs from different levels of the hierarchy, the level within which the entire fair value measurement falls is the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. When an event or circumstance alters our assessment of the observability and thus the appropriate classification of an input to a fair value measurement which we deem to be significant to the fair value measurement as a whole, we will transfer that fair value measurement to the appropriate level within the fair value hierarchy.

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Real Property Owned - Real estate properties are recorded at cost or, if acquired through business combination, at fair value, including the fair value of contingent consideration, if any. Cost or fair value at the time of acquisition is allocated among land, buildings, improvements, personal property and lease and other intangibles. For properties acquired in transactions accounted for as asset purchases, the purchase price, which includes transaction costs, is allocated based on the relative fair values of the assets acquired. Cost includes the amount of contingent consideration, if any, deemed to be probable at the acquisition date. Contingent consideration is deemed to be probable to the extent that a significant reversal in amounts recognized is not likely to occur when the uncertainty associated with the contingent consideration is subsequently resolved. Cost also includes capitalized interest during construction periods. We use the straight-line method of depreciation for buildings over their estimated useful lives of 40 years, and improvements, including any equipment related to the SHOP segment, over their estimated useful lives ranging from 5 to 25 years. For contingent consideration arising from business combinations, the liability is adjusted to estimated fair value at each reporting date through earnings.

Expenditures for repairs and maintenance are expensed as incurred.

Impairment of Long-Lived Assets - We evaluate the recoverability of the carrying amount of our long-lived assets when events or circumstances, including significant physical changes, significant adverse changes in general economic conditions and significant deterioration of the underlying cash flows of the long-lived assets, indicate that the carrying amount of the long-lived asset may not be recoverable. The need to recognize an impairment charge is based on estimated undiscounted future cash flows compared to the carrying amount. If recognition of an impairment charge is necessary, it is measured as the amount by which the carrying amount of the property exceeds the estimated fair value of the long-lived asset.

During the years ended December 31, 2022 and 2021, we recognized impairment charges of approximately $51.6 million and $51.8 million, respectively, included in “Loan and realty losses” in our Consolidated Statements of Income. Reference Note 3 for more discussion.

Leases - Leases entered into or modified since 2019 are accounted for under the guidance of ASC Topic 842, Leases. All of our leases are classified as operating leases and generally have an initial leasehold term of 10 to 15 years followed by one or more five-year tenant renewal options. The leases are “triple-net leases” under which the tenant is responsible for the payment of all taxes, utilities, insurance premiums, repairs and other charges relating to the operation of the properties, including required levels of capital expenditures each year. The tenant is obligated at its expense to keep all improvements, fixtures and other components of the properties covered by “all risk” insurance in an amount equal to at least the full replacement cost thereof, and to maintain specified minimal personal injury and property damage insurance. The leases also require the tenant to indemnify and hold us harmless from all claims resulting from the use, occupancy and related activities of each property by the tenant, and to indemnify us against all costs related to any release, discovery, clean-up and removal of hazardous substances or materials, or other environmental responsibility with respect to each facility. While we do not incorporate residual value guarantees, the lease provisions and considerations discussed above impact our expectation of realizable value from our properties upon the expiration of their lease terms. The residual value of our real estate under lease is still subject to various market, asset, and tenant-specific risks and characteristics. As the classification of our leases is dependent on the fair value of estimated cash flows at lease commencement, management’s projected residual values represent significant assumptions in our accounting for operating leases. Similarly, the exercise of renewal options is also subject to these same risks, making a tenant’s lease term another significant variable in a lease’s cash flows. Initial direct costs that are incremental to entering into a lease are capitalized in accordance with the provisions of ASC Topic 842.

FASB Lease Modifications Related to Effects of the COVID-19 Pandemic - In April 2020, the FASB issued a question-and-answer document (the “Lease Modification Q&A”) focused on the application of lease accounting guidance to lease concessions provided as a result of the coronavirus pandemic (“COVID-19”). The Lease Modification Q&A clarifies that entities may elect not to evaluate whether lease-related relief provided to mitigate the economic effects of COVID-19 is a lease modification under ASC Topic 842. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 is a modification, can elect whether to apply the modification guidance if it does not substantially increase either its rights as lessor or the obligations of the tenant. An entity should apply the election consistently to leases with similar characteristics and circumstances. As of December 31, 2022, the Company provided $44.3 million in lease concessions as a result of COVID-19, as discussed in more detail in Note 9. NHI elected not to apply the modification guidance under ASC Topic 842 and accounted for the related concessions as variable lease payments, recorded as rental income when received.

Financial Instruments - Credit Losses - With the adoption of Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses effective January 1, 2020, we estimate and record an allowance for credit losses upon origination of the loan, based on expected credit losses over the term of the loan and update this estimate each reporting period. We calculate the estimated credit losses on mortgages by pooling these loans into two groups – investments in existing or new mortgages and construction mortgages. Mezzanine, revolving lines of credit and loans designated as non-performing are evaluated at the
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individual loan level. We estimate the allowance for credit losses by utilizing a loss model that relies on future expected credit losses, rather than incurred losses. This loss model incorporates our historical experience, adjusted for current conditions and our forecasts, using the probability of default and loss given default method. Incorporated into the construction mortgage loss model is an estimate of the probability that NHI will acquire the property. Using the resulting estimate, a portion of the outstanding construction mortgage balance which we currently expect will be reduced by our acquisition of the underlying property when construction is complete, is deducted from the construction mortgage balance included in the expected loss calculation. Mezzanine loans, revolving lines of credit and loans designated as non-performing are also based on the loss model to recognize expected future credit losses and are applied to each individual loan using borrower specific information. We also perform a qualitative assessment beyond model estimates and apply adjustments as necessary. The credit loss estimate is based on the net amortized cost balance of our mortgage and other notes receivables as of the balance sheet date.

Calculation of the allowance for credit losses involves significant judgment. It is possible that actual credit losses will differ materially from our current estimates. Write-offs are deducted from the allowance for credit losses when we judge the principal to be uncollectible.

Upon adoption of ASU 2016-13, we recorded an allowance for expected credit losses of $3.9 million that is reflected as an adjustment to “Mortgage and other notes receivable, net of reserve” in the Consolidated Balance Sheets and recorded a corresponding cumulative-effect adjustment to “Cumulative dividends in excess of net income” in the Consolidated Balance Sheets. We also recorded a $0.3 million reserve for estimated credit losses pertaining to unfunded loan commitments as an adjustment to “Cumulative dividends in excess of net income”. The corresponding credit loss liability is included in the financial statement line item “Accounts payable and accrued expenses” in the Consolidated Balance Sheets.

Cash and Cash Equivalents and Restricted Cash - Cash equivalents consist of all highly liquid investments with an original maturity of three months or less. Restricted cash includes amounts required to be held on deposit or subject to an agreement (e.g. with a qualified intermediary subject to an Internal Revenue Code Section 1031 exchange agreement or in accordance with agency agreements governing our mortgages).

The following table sets forth our “Cash and cash equivalents and restricted cash” reported within the Company’s Consolidated Statements of Cash Flows ($ in thousands):
As of December 31,
20222021
Cash and cash equivalents$19,291 $37,412 
Restricted cash (included in Other assets, net)2,225 2,073 
$21,516 $39,485 

Assets Held for Sale - We consider properties to be assets held for sale when (1) management commits to a plan to sell the property, (2) it is unlikely that the disposal plan will be significantly modified or discontinued; (3) the property is available for immediate sale in its present condition; (4) actions required to complete the sale of the property have been initiated; (5) sale of the property is probable and we anticipate the completed sale will occur within one year; and (6) the property is actively being marketed for sale at a price that is reasonable given our estimate of current market value. Upon designation of a property as an asset held for sale, we record the property’s value at the lower of its carrying value or its estimated fair value, less estimated transaction costs. Depreciation and amortization of the property are discontinued.

Concentration of Credit Risks - Our credit risks primarily relate to cash and cash equivalents and investments in mortgage and other notes receivable. Cash and cash equivalents are primarily held in bank accounts and overnight investments. We maintain our bank deposit accounts with large financial institutions in amounts that often exceed federally insured limits. We have not experienced any losses in such accounts. Our mortgages and other notes receivable consist primarily of secured loans on facilities.

Our financial instruments, principally our investments in notes receivable, are subject to the possibility of loss of the carrying values as a result of the failure of other parties to perform according to their contractual obligations which may make the instruments less valuable. We obtain collateral in the form of mortgage liens and other protective rights for notes receivable and continually monitor these rights in order to reduce such possibilities of loss. We evaluate the need to provide for reserves for potential losses on our financial instruments based on management’s periodic review of our portfolio on an instrument-by-instrument basis.

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Deferred Loan Costs - Costs incurred to acquire debt are capitalized and amortized by the straight-line method, which approximates the effective-interest method, over the term of the related debt.

Deferred Income - Deferred income primarily includes rents received in advance from tenants and non-refundable commitment fees received by us, which are amortized into income over the expected period of the related loan or lease. In the event that our financing commitment to a potential borrower or tenant expires, the related commitment fees are recognized into income immediately. Commitment fees may be charged based on the terms of the lease agreements and the creditworthiness of the parties.

Revenue Recognition

Rental Income - Our leases generally provide for rent escalators throughout the term of the lease. Base rental income is recognized using the straight-line method over the term of the lease to the extent that lease payments are considered collectible and the lease provides for specific contractual escalators. Under certain leases, we receive additional contingent rent, which is calculated on the increase in revenues of the tenant over a base year or base quarter. We recognize contingent rent annually or quarterly based on the actual revenues of the tenant once the target threshold has been achieved. Lease payments that depend on a factor directly related to future use of the property, such as an increase in annual revenues over a base year, are considered to be contingent rentals and are excluded from the schedule of minimum lease payments.

If rental income calculated on a straight-line basis exceeds the cash rent due under a lease, the difference is recorded as an increase to straight-line rent receivable in the Consolidated Balance Sheets and an increase in rental income in the Consolidated Statements of Income. If rental income on a straight-line basis is calculated to be less than cash received, there is a decrease in the same accounts.

Property operating expenses that are reimbursed by our operators are recorded as “Rental income” in the Consolidated Statements of Income. Accordingly, we record a corresponding expense, reflected in “Taxes and insurance on leased properties” in the Consolidated Statements of Income. Rental income includes reimbursement of property operating expenses for the years ended December 2022, 2021 and 2020, totaling $9.8 million, $11.6 million and $9.7 million, respectively.

Rental income is reduced for the non-cash amortization of payments made upon the eventual settlement of commitments and contingencies originally identified and recorded as lease inducements. We record lease inducements to the extent that it is probable that a significant reversal of amounts recognized will not occur when the uncertainty associated with the contingent consideration is subsequently resolved.

The Company reviews its operating lease receivables for collectability on a regular basis, taking into consideration changes in factors such as the tenant’s payment history, the financial condition of the tenant, business conditions in which the tenant operates and economic conditions in the area where the property is located. In the event that collectability with respect to any tenant is not probable, a direct write-off of the receivable is made as an adjustment to rental income and any future rental revenue is recognized only when the tenant makes a rental payment. During the year ended December 31, 2022, we placed three operators on cash basis of rental income recognition. During the year ended December 31, 2021, we placed Holiday Retirement (“Holiday”) on cash basis for its master lease. Reference Note 3 for further discussion.

Resident Fees and Services - Resident fee revenue associated with our SHOP activities is recognized as the related performance obligations are satisfied and includes resident room and care charges, community fees and other resident charges.

Residency agreements are generally short term (30 days to one year), and entitle the resident to certain room and care services for a monthly fee billed in advance. Revenue for certain related services is billed monthly in arrears. The Company has elected the lessor practical expedient within ASC 842, Leases, to not separate the lease and nonlease components within our resident agreements as the timing and pattern of transfer to the resident are the same. The Company has determined that the nonlease component is the predominant component within the contract and will recognize revenue under ASC 606, Revenue Recognition from Contracts with Customers.

Interest Income from Mortgage and Other Notes Receivable - Interest income is recognized based on the interest rates and principal amounts outstanding on the notes receivable. We identify a mortgage loan as non-performing if a required payment is not received within 30 days of the date it is due or a borrower’s current financial condition indicates a probability it cannot pay its current contractual amounts. A non-performing loan is returned to accrual status at such time as the loan becomes contractually current and management believes all future principal and interest will be received according to the contractual loan terms. During the fourth quarter of 2022, we designated a mortgage note receivable and a mezzanine loan totaling an aggregate $24.5 million with affiliates of one operator/borrower as non-performing.
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Derivatives - In the normal course of business, we are subject to risk from adverse fluctuations in interest rates. Occasionally, we may choose to manage this risk through the use of derivative financial instruments, primarily interest rate swaps. Counterparties to these contracts are major financial institutions. We are exposed to credit loss in the event of nonperformance by these counterparties. We do not use derivative instruments for trading or speculative purposes. Our objective in managing exposure to market risk is to limit the impact on cash flows relating to the change in market interest rates on our variable rate debt.

To qualify for hedge accounting, our interest rate swaps must effectively reduce the risk exposure that they are designed to hedge. In addition, at inception of a qualifying cash flow hedging relationship, the underlying transaction or transactions must be, and be expected to remain, probable of occurring in accordance with our related assertions. All of our hedges are cash flow hedges.

We recognize all derivative instruments, including embedded derivatives required to be bifurcated, as assets or liabilities at their fair value in the Consolidated Balance Sheets. Changes in the fair value of derivative instruments that are not designated as hedges or that do not meet the criteria of hedge accounting are recognized in earnings. For derivatives designated in qualifying cash flow hedging relationships, the change in fair value of the effective portion of the derivatives is recognized in accumulated other comprehensive income (loss), whereas the change in fair value of any ineffective portion is recognized in earnings. Gains and losses are reclassified from accumulated other comprehensive income (loss) into earnings once the underlying hedged transaction is recognized in earnings.

Income Tax - We intend at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended. Accordingly, we will generally not be subject to U.S. federal income tax, provided that we continue to qualify as a REIT and make distributions to stockholders at least equal to or in excess of 90% our taxable income. Certain activities that we undertake may be conducted by entities that have elected to be treated as taxable REIT subsidiaries (TRSs). TRSs are subject to federal, state, and local income taxes. Accordingly, a provision for income taxes has been made in the consolidated financial statements. A failure to qualify under the applicable REIT qualification rules and regulations would have a material adverse impact on our financial position, results of operations and cash flows.

Earnings and profits, which determine the taxability of dividends to stockholders, differ from net income reported for financial reporting purposes due primarily to differences in the basis of assets, estimated useful lives used to compute depreciation expense, gains on sales of real estate, non-cash compensation expense and recognition of commitment fees.

Our tax returns filed for years beginning in 2019 are subject to examination by taxing authorities. We classify interest and penalties related to uncertain tax positions, if any, in our Consolidated Statements of Income as a component of income tax expense.

Segments - We operate our business through two reportable segments: Real Estate Investments and SHOP. In our Real Estate Investments segment, we invest in (i) senior housing and healthcare real estate and lease those properties to healthcare operating companies under triple-net leases that obligate tenants to pay all property-related expenses and (ii) mortgage and other notes receivable throughout the United States. Our SHOP segment is comprised of the operations of 15 ILFs located throughout the United States that are operated on behalf of the Company by two independent managers pursuant to the terms of separate management agreements that commenced April 1, 2022. Reference Notes 5 and 16 for additional information.

Note 3. Investment Activity

Asset Acquisition

2022 Acquisitions and New Leases of Real Estate

During the year ended December 31, 2022, we completed the following real estate acquisitions within our Real Estate Investments reportable segment as described below ($ in thousands):

OperatorDatePropertiesAsset ClassLandBuilding and ImprovementsTotal
Encore Senior LivingQ2 20221ALF$542 $12,758 $13,300 
Bickford Senior LivingQ4 20221ALF2,052 15,148 17,200 
$2,594 $27,906 $30,500 
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In April 2022, we acquired a 53-unit ALF located in Oshkosh, Wisconsin, from Encore Senior Living. The acquisition price was $13.3 million and included the cancellation of an outstanding construction note receivable to us of $9.1 million, including interest. We have agreed to pay up to $0.8 million in additional cash consideration pending the results of an ongoing property tax appeal. As of December 31, 2022, no amount of this consideration is expected to be paid. We added the facility to an existing master lease for a term of 15 years at an initial lease rate of 7.25%, with an annual escalator of 2.5%.

In November 2022, we acquired a 60-unit ALF located in Virginia Beach, Virginia, from Bickford Senior Living (“Bickford”). The acquisition price was $17.2 million, including $0.2 million in closing costs, and the cancellation of an outstanding construction note receivable of $14.0 million including interest. The acquisition price also included a reduction of $3.0 million in Bickford’s outstanding pandemic-related rent deferrals that were recognized in rental income in the fourth quarter of 2022 based on the fair value of the real estate assets received. We added the facility to an existing master lease with Bickford for a term of 10.5 years at an initial rate of 8.0%, with annual CPI escalators subject to a floor and ceiling.

2021 Acquisitions and New Leases of Real Estate

During the year ended December 31, 2021, we completed the following real estate acquisitions as described below ($ in thousands):

OperatorDatePropertiesAsset ClassLandBuilding and ImprovementsTotal
Vizion HealthQ2 20211HOSP$1,470 $38,780 $40,250 
Navion Senior SolutionsQ2 20211SHO531 6,069 6,600 
$2,001 $44,849 $46,850 

Vizion Health

In May 2021, we acquired a 64-bed specialty behavioral hospital located in Oklahoma for a total purchase price of $40.3 million, including $0.3 million in closing costs, and concurrently leased the hospital to an affiliate of Vizion Health. The 15-year master lease, which includes two five-year extension options, has an initial lease rate of 8.5% with fixed annual escalators of 2.5%. We have committed to additional funding of capital improvements for the hospital of up to $2.0 million which will be added to the lease base as funded. At December 31, 2022, no funds have been drawn.

Navion Senior Solutions

In June 2021, we acquired a 48-unit assisted living and memory care community in Tennessee for a purchase price of $6.6 million, including closing costs of $0.1 million. The community was added to an existing master lease with Navion Senior Solutions (“Navion”) whose term was reset for 12 years, has a lease rate of 7.5% with fixed annual escalators of 2.5% and offers two optional extensions of five years each.

2022 Asset Dispositions

During the year ended December 31, 2022, we completed the following real estate property dispositions within our Real Estate Investments segment as described below ($ in thousands):

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OperatorDatePropertiesAsset ClassNet ProceedsNet Real Estate InvestmentGain
Impairment1
Hospital Corporation of AmericaQ1 20221MOB$4,868 $1,904 $2,964 $— 
Vitality Senior Living2
Q1 20221SLC8,302 8,285 17 — 
Holiday2
Q2 20221ILF2,990 3,020 — 30 
Chancellor Senior Living2
Q2 20222ALF7,305 7,357 — 52 
Bickford2
Q2 20223ALF25,959 28,268 — 2,309 
Comfort CareQ2 20224ALF40,000 38,444 1,556 — 
Helix HealthcareQ2 20221HOSP19,500 10,535 8,965 — 
Discovery Senior Living2
Q3 20222ALF/SLC16,379 15,159 1,220 — 
National HealthCare Corporation (“NHC”)3
Q3 20227SNF43,686 30,066 13,620 — 
22$168,989 $143,038 $28,342 $2,391 

1 Impairments are included in “Loan and realty losses” in the Consolidated Statement of Income for the year ended December 31, 2022.
2 Total impairment charges recognized on these properties were $28.5 million for the year ended December 31, 2022.
3 See “Tenant Concentration” below for additional information on the NHC disposition.

Total rental income related to the disposed properties was $7.0 million, $10.9 million and $16.6 million for years ended December 31, 2022, 2021 and 2020, respectively.

The disposal transactions for the three Bickford properties in the second quarter of 2022 included $2.4 million in contingent consideration representing cash placed in escrow that will be returned to the buyers to the extent the sold properties generate negative monthly cash flows over the twelve months following from the dates of sale. After the twelve-month period, any remaining funds not distributed will be paid to the Company. We have assessed that it is not probable that any of the escrowed funds would be received by the Company. To the extent this assessment changes, or funds are ultimately received, we will recognize the amount as a gain on the sale of real estate.

2021 Asset Dispositions

During the year ended December 31, 2021, we completed the following real estate property dispositions within our Real Estate Investments reportable segments as described below ($ in thousands):

TenantDatePropertiesAsset ClassNet ProceedsNet Real Estate Investment
Other1
Gain
Impairment2
BickfordQ2 20216SHO$39,924 $34,485 $1,871 $3,568 $— 
Community Health SystemsQ2 20211MOB3,887 946 62 2,879 — 
TrustPoint HospitalQ3 20211HOSP31,215 21,018 1,562 8,635 — 
HolidayQ3 20218SHO114,133 113,611 (1,360)1,882 — 
Quorum HealthQ3 20211HOSP8,314 9,568 — — 1,254 
Senior Living ManagementQ3 20211SHO12,847 3,212 210 9,425 — 
HolidayQ3 20211SHO5,666 10,388 (81)— 4,641 
Brookdale Senior LivingQ4 20211ALF11,880 11,696 — 184 — 
Senior Living ManagementQ4 20211SLC7,275 3,335 256 3,684 — 
GenesisQ4 20211SLC3,723 1,677 (166)2,211 — 
22$238,864 $209,936 $2,354 $32,468 $5,895 
1 Includes straight-line rent and deferred lease intangibles
2 Impairments are included in “Loan and realty losses” in the Consolidated Statements of Income for the year ended December 31, 2021.

Bickford

During the second quarter of 2021, we sold to affiliates of Bickford a portfolio of six properties that were being leased to Bickford for a purchase price of $52.9 million. We received approximately $39.9 million in cash consideration upon sale and originated a second mortgage note receivable for the remaining purchase price of $13.0 million. A gain was not recognized
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related to the $13.0 million second mortgage note receivable, which is discussed in more detail in Note 4. We recorded a gain upon completion of this transaction totaling approximately $3.6 million representing the excess of the $39.9 million cash consideration received over the net book value of the assets sold of $34.5 million and the write-off of straight-line rents receivable of approximately $1.9 million. Rental income from this portfolio was $1.6 million and $5.6 million for the years ended December 31, 2021 and 2020, respectively.

Upon completion of the sale, Bickford satisfied the terms of our prior agreement that contingently abated $2.1 million in rental income for the third quarter of 2020. Reference Note 9 for discussion of additional contingent consideration associated with this disposition that was not included in the transaction price at the time of closing.

Holiday

In August 2021, we sold a portfolio of eight properties that was leased to Holiday with an aggregate net book value of $113.6 million for total cash consideration of $115.0 million, and incurred transaction costs of $0.9 million, and recognized a gain of approximately $1.9 million associated with this transaction. Rental income was $5.9 million and $10.0 million for the years ended December 31, 2021 and 2020, respectively.

In September 2021, we sold a property that was leased to Holiday located in Indiana with a net book value of $10.4 million for total cash consideration of $5.8 million, incurred transactions costs of $0.1 million, and recognized an impairment of approximately $4.6 million associated with this transaction. Rental income was $0.4 million and $0.6 million for the year ended December 31, 2021 and 2020, respectively.

Assets Held for Sale and Long-Lived Assets

The following is a summary of our assets held for sale ($ in thousands):

For the Year Ended December 31,
20222021
Number of facilities1310
Real estate, net$43,302$66,398
Rental income associated with the assets held for sale as of December 31, 2022 totaled $2.1 million, $5.6 million, and $7.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Rental income associated with the assets held for sale as of December 31, 2021 totaled $5.4 million and $8.0 million for the years ended December 31, 2021 and 2020, respectively.

During the year ended December 31, 2022, we recorded impairments of approximately $51.6 million on 19 properties which were sold or classified as held for sale related to our Real Estate Investments reportable segment.

During the year ended December 31, 2021, we recorded impairments of approximately $51.8 million on ten properties which were sold or classified as held for sale related to our Real Estate Investments reportable segment.

Impairment charges are included in “Loan and realty losses” in the Consolidated Statements of Income.

We reduce the carrying value of impaired properties to their estimated fair value or, with respect to the properties classified as held for sale, to estimated fair value less costs to sell. To estimate the fair values of the properties, we utilized a market approach which considered binding agreements for sales (Level 1 inputs), non-binding offers to purchase from unrelated third parties and/or broker quotes of estimated values (Level 3 inputs), and/or independent third-party valuations (Level 1 and 3 inputs).

2023 Asset Acquisitions

In February 2023, we acquired two memory care communities operated by Silverado Senior Living for approximately $37.5 million. The newly developed properties that opened in 2022 and include a 60-unit community in Summerlin, Nevada and a 60-unit community in Frederick, Maryland and are leased pursuant to a 20-year lease master lease with a first-year lease rate of 7.5% and annual escalators of 2.0%.
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In February 2023, we acquired a 60-unit assisted living and memory care community in Chesapeake, Virginia from Bickford. The acquisition price was $17.3 million, including approximately $0.1 million in closing costs, the satisfaction of an outstanding construction note receivable of $14.2 million including interest, and cash consideration of $0.5 million. The acquisition price also included a reduction of $2.5 million in Bickford’s outstanding pandemic-related deferrals. We added the community to an existing master lease with Bickford was added to an existing master lease with Bickford at an initial rate of 8.0%, with annual CPI escalators subject to a floor and ceiling.

Tenant Concentration

The following table contains information regarding tenant concentration in our Real Estate Investments portfolio, excluding $2.6 million for our corporate office, $338.1 million for the SHOP segment, and a credit loss reserve of $15.3 million, based on the percentage of revenues for the years ended December 31, 2022, 2021 and 2020 related to tenants or affiliates of tenants, that exceed 10% of total revenue ($ in thousands):
As of December 31, 2022
Revenues1
Asset  Gross RealNotesYear Ended December 31,
Class
Estate2
Receivable202220212020
Senior Living CommunitiesEFC$573,631 $48,547 $51,183 18%$50,726 17%$50,734 15%
National HealthCare CorporationSNF133,770 — 36,893 13%37,735 12%37,820 11%
Bickford3
ALF414,870 32,727 N/AN/A34,599 12%49,451 15%
Holiday3
ILF— — N/AN/AN/AN/A40,705 12%
All others, netVarious1,329,461 167,205 144,534 52%164,017 55%144,448 44%
Escrow funds received from tenants
    for property operating expensesVarious— — 9,788 4%11,638 4%9,653 3%
$2,451,732 $248,479 242,398 298,715 332,811 
Resident fees and services4
35,796 13%— —%— —%
$278,194 $298,715 $332,811 

1 Includes interest income on notes receivable and rental income from properties classified as held for sale.
2 Amounts include any properties classified as held for sale.
3 Revenues included in All others, net for years when less than 10%.
4 There is no tenant concentration in resident fees and services because these agreements are with individual residents.

At December 31, 2022, the two states in which we had an investment concentration of 10% or more were South Carolina (12.1%) and Texas (10.7%). At December 31, 2021, the two states in which we had an investment concentration of 10% or more were also South Carolina (11.6%) and Texas (10.3%).

Senior Living Communities

As of December 31, 2022, we leased ten retirement communities totaling 2,200 units to Senior Living Communities, LLC (“Senior Living”) pursuant to triple-net lease agreements maturing through December 2029. We recognized straight-line rent revenue of $0.4 million, $2.5 million and $4.3 million from the Senior Living lease for the years ended December 31, 2022, 2021 and 2020, respectively.

NHC

The facilities leased to NHC, a publicly held company, are under a master lease and consist of three independent living facilities and 32 skilled nursing facilities (four of which are subleased to other parties for whom the lease payments are guaranteed to us by NHC). Effective September 1, 2022, we amended the master lease dated October 17, 1991, concurrently with the sale of a portfolio of seven skilled nursing facilities to increase the annual base rent due each year through the expiration of the master lease on December 31, 2026. There are two additional five-year renewal options at a fair rental value as negotiated between the parties.

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The annual base rent prior to the amendment was $30.8 million and was increased to $34.3 million for the year ended December 31, 2022, with credit given for rent paid in 2022 related to the sold portfolio. In addition to the base rent, NHC will continue to pay any additional rent and percentage rent as required by the master lease. Under the terms of the amended lease, the base annual rent escalates by 4% of the increase, if any, in each facility’s annual revenue over a 2007 base year. We refer to this additional rent component as “percentage rent.”

The following table summarizes the percentage rent income from NHC ($ in thousands):

Year Ended December 31,
202220212020
Current year$3,332 $3,536 $3,687 
Prior year final certification1
(206)(5)(14)
Total percentage rent income$3,126 $3,531 $3,673 
1 For purposes of the percentage rent calculation described in the master lease agreement, NHC’s annual revenue by facility for a given year is certified to NHI by March 31st of the following year.

Two of our board members, including our chairman, are also members of NHC’s board of directors. As of December 31, 2022, NHC owned 1,630,642 shares of our common stock.

Other Operators

Bickford

As of December 31, 2022, we leased 36 facilities, excluding three facilities classified as assets held for sale, under four leases to Bickford. Revenues from Bickford reflect the impact of pandemic-related rent concessions accounted for as variable lease payments of approximately $5.5 million, $18.3 million and $5.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

During the year ended December 31, 2022, we wrote off approximately $18.1 million of straight-line rents receivable and $7.1 million of lease incentives, which were included in “Other assets, net” on the Consolidated Balance Sheet, against rental income upon converting Bickford to the cash basis of accounting. These write-offs were the result of a change in our evaluation of collectability of future rent payments due under its four master lease agreements based upon information we obtained from Bickford in the second quarter of 2022 regarding its financial condition that raised substantial doubt as to its ability to continue as a going concern. Cash rent received from Bickford for the year ended December 31, 2022 was $27.6 million, which excludes $3.0 million of rental income related to the reduction of pandemic-related rent deferrals in connection with the acquisition of the ALF located in Virginia Beach, Virginia discussed above. Straight-line rent revenue of $1.7 million and $2.8 million was recognized from the Bickford leases for the years ended December 31, 2021 and 2020, respectively.

Other than the asset acquisition and the three properties sold discussed above, we completed various restructuring activities in the Bickford leased property portfolio during the first half of 2022. In March 2022, we transferred one ALF located in Pennsylvania from the Bickford portfolio to a new operator that is leased pursuant to a ten-year triple-net lease and wrote off approximately $0.7 million in a straight-line rent receivable, reducing rental income. Effective April 1, 2022, we restructured and amended three of Bickford’s master lease agreements covering 28 properties and reached agreement on the repayment terms of its outstanding pandemic-related deferrals. Significant terms of these agreements are as follows:

Extended the maturity dates of the modified leases to 2033 and 2035. The remaining master lease agreement covering 11 properties with an original maturity in 2023 was previously extended to 2028.

Reduced the combined rent for the portfolio to approximately $28.3 million (excluding the ALF in Virginia Beach acquired in the fourth quarter of 2022) per year through April 1, 2024, subject to a nominal annual increase, at which time the rent will be reset to a fair market value, but not less than 8.0% of our initial gross investment.

Required monthly payments beginning October 2022 through December 2024 based on a percentage of Bickford’s monthly revenues exceeding an established threshold to be applied to the outstanding pandemic-related deferrals granted to Bickford. The deferrals may be reduced by up to $6.0 million upon Bickford achieving certain performance targets and the sale or transition of certain properties to new operators of which $3.0 million was earned in the fourth quarter of 2022.

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Holiday

During the third quarter of 2021, Welltower Inc. (“Welltower”) completed an acquisition that resulted in a Welltower-controlled subsidiary becoming a tenant under our master lease for the NHI-owned Holiday real estate assets. We placed the tenant on the cash basis of accounting effective in the third quarter of 2021 because of non-payment of rent and completed the transitioning of the remaining properties in this portfolio effective April 1, 2022. Reference Note 9 for more discussion.

Other Portfolio Activity

Cash Basis Operators and Straight-line Rents Receivable Write-offs

We placed three operators on the cash basis of accounting for their leases during 2022, including Bickford discussed above. During 2021, the Welltower-controlled tenant of our Holiday portfolio was the only tenant on the cash basis. Rental income associated with these tenants totaled $21.4 million, $68.8 million and $104.4 million for the years ended December 31, 2022, 2021 and 2020, respectively, which includes the impact of write-offs of $26.0 million in total straight-line rents receivable and $7.1 million of lease incentives during the year ended December 31, 2022.

Tenant Purchase Options

Certain of our leases contain purchase options allowing tenants to acquire the leased properties. At December 31, 2022, we had tenant purchase options on three properties with an aggregate net investment of $59.6 million that will become exercisable between 2027 and 2028. Rental income from these properties with tenant purchase options was $7.0 million and $6.9 million and $6.5 million for years ended December 31, 2022, 2021 and 2020, respectively.

We cannot reasonably estimate at this time the probability that any purchase options will be exercised in the future. Consideration to be received from the exercise of any tenant purchase option is expected to exceed our net investment in the leased property or properties.

Future Minimum Lease Payments

Future minimum lease payments to be received by us under our operating leases, including cash basis tenants, at December 31, 2022 are as follows ($ in thousands):

Year Ending December 31, Amount
2023$218,112 
2024227,086 
2025231,745 
2026236,157 
2027197,793 
Thereafter796,452 
$1,907,345 

Variable Lease Payments

Most of our existing leases contain annual escalators in rent payments. Some of our leases contain escalators that are determined annually based on a variable index or other factors that is indeterminable at the inception of the lease. The table below indicates the revenue recognized as a result of fixed and variable lease escalators ($ in thousands):

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Year Ended December 31,
202220212020
Lease payments based on fixed escalators, net of deferrals$226,873 $241,172 $272,630 
Lease payments based on variable escalators5,275 4,662 5,501 
Straight-line rent income, net of write-offs(16,681)14,603 20,411 
Escrow funds received from tenants for property operating expenses9,788 11,638 9,653 
Amortization and write-off of lease incentives(7,555)(1,026)(987)
Rental income$217,700 $271,049 $307,208 

Note 4. Mortgage and Other Notes Receivable

At December 31, 2022, our investments in mortgage notes receivable totaling $164.6 million secured by real estate and other assets of the borrower (e.g., UCC liens on personal property) related to 17 facilities and other notes receivable totaled $83.9 million, substantially all of which are guaranteed by significant parties to the notes or by cross-collateralization of properties with the same owner. At December 31, 2021, our investments in mortgage notes receivable totaled $230.9 million and other notes receivable totaled $74.2 million. These balances exclude a credit loss reserve of $15.3 million and $5.2 million at December 31, 2022 and 2021, respectively.

During the fourth quarter of 2022, we designated a mortgage note receivable of $10.0 million and a mezzanine loan of $14.5 million with affiliates of one operator/borrower as non-performing. This operator/borrower is also one of the tenants converted to cash basis of accounting for its master leases discussed in Note 3. Interest income recognized, representing cash received, from these non-performing loans was $1.4 million, $1.9 million and $2.0 million for the years ended December 31, 2022, 2021 and 2020, respectively. All other loans were on accrual status as of December 31, 2022. All of our notes were on full accrual status at December 31, 2021.

2022 Mortgage and Other Notes Receivable

Encore Senior Living

In January 2022, we entered into an agreement to fund a $28.5 million development loan with Encore Senior Living to construct a 108-unit assisted living and memory care community in Fitchburg, Wisconsin. The four-year loan agreement has an annual interest rate of 8.5% and two one-year extensions. We have a purchase option on the property once it has stabilized. The total amount funded on the note was $14.2 million as of December 31, 2022.

Capital Funding Group

In November 2022, we funded a $42.5 million senior loan to refinance a portfolio of five skilled nursing facilities located in Texas. The loan was made to affiliates of Capital Funding Group and the properties are leased by subsidiaries of The Ensign Group. The five-year loan agreement has an annual interest rate of 7.25% and two one-year extensions.

Montecito Medical Real Estate

We have a $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a fund that invests in medical real estate, including medical office buildings, throughout the United States. During the year ended December 31, 2022, we funded $8.2 million on three real estate investments. As of December 31, 2022, we have funded $20.3 million of our commitment that was used to acquire nine medical office buildings for a combined purchase price of approximately $86.7 million. For the year ended December 31, 2022 and 2021, we received interest of $1.8 million and $0.2 million, respectively. For the year ended December 31, 2022, we received principal of $0.3 million.

The loan agreement was modified in April 2022 for two subsequent real estate investments to accrue interest at an annual rate of 7.5% paid monthly in arrears and 4.5% per year in interest to be paid upon certain future events including repayments, sales of fund investments, and refinancings (the “Deferred Interest”). Prior borrowings under the loan agreement bear interest at an annual rate of 9.5% and accrue an additional 2.5% in Deferred Interest. Funds drawn in accordance with this agreement are required to be repaid on a per-investment basis five years from deployment of the funds for the applicable investment and includes two one-year extensions.

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2021 Mortgage and Other Notes Receivable

Montecito Medical Real Estate

In April 2021, the Company entered into the $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate discussed above.

Vizion Health - Brookhaven

In May 2021, we provided a $20.0 million, five year loan to Vizion Health-Brookhaven, LLC to finance the acquisition of healthcare operations, including the real and personal property of a behavioral hospital we acquired as discussed in Note 3. The loan requires monthly principal and interest payments and bears an initial annual interest rate of 8.5% with fixed annual escalators of 2.5% that began June 1, 2022. Initial principal loan repayments are equal to 90% of the excess cash flow with a monthly minimum as defined in the agreement. Principal repayments are reduced to 50% of the excess cash flow once the outstanding loan balance is reduced below $15.0 million. The loan balance as of December 31, 2022 was $18.8 million.

Navion Senior Solutions

In May 2021, we provided a ten-year corporate loan to Navion for $3.6 million. The loan requires interest-only payments at an annual interest rate of 8% until June 1, 2024, and gives us first option to provide permanent development financing for a future project.

Bickford

As part of the sale of six properties to Bickford in the second quarter of 2021 discussed in Note 3, we executed a $13.0 million second mortgage as a component of the purchase price consideration. The loan is secured by a security interest in the portfolio that is subordinate only to the first mortgage on the portfolio held by a third party. This second mortgage note receivable bears interest at a 10% annual rate and matures in April 2026. Interest income was $1.3 million and $0.9 million for the years ended December 31, 2022 and 2021, respectively.

Given the size of the Company financing provided relative to the purchase price, its subordination to the first mortgage outstanding and the ongoing negative impact of the COVID-19 pandemic and increasing cost on Bickford’s operating results, we did not include this note receivable in the determination of the gain to be recognized upon sale of the portfolio in accordance with the provisions of ASC 610-20, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets. Therefore, this note receivable is not reflected in “Mortgage and other notes receivable, net” in the Consolidated Balance Sheet as of December 31, 2022 or 2021. We will re-evaluate the collectability of this note receivable each reporting period and recognize the note receivable and related deferred gain at such time the note receivable is considered probable of collection in accordance with ASC 610-20.

Other Activity

Bickford Senior Living

As of December 31, 2022, we had two fully funded construction loans to Bickford totaling $28.9 million. The construction loans are secured by first mortgage liens on substantially all real and personal property as well as a pledge of any and all leases or agreements which may grant a right of use to the property. Usual and customary covenants extend to the agreements, including the borrower’s obligation for payment of insurance and taxes. NHI has a fair market value purchase option on the properties at stabilization of the underlying operations. On these development projects, Bickford, as borrower, is entitled to up to $2.0 million per project in incentives based on the achievement of predetermined operational milestones and, if funded, will increase NHI's future purchase price and eventual NHI lease payment.

Life Care Services - Sagewood

In December 2018, we entered into an agreement to lend LCS-Westminster Partnership IV LLP (“LCS-WP IV”), an affiliate of LCS, the manager of the facility, up to $180.0 million. The loan took the form of two notes under a master credit agreement. During the year ended December 31, 2021, LCS-WP IV repaid the fully drawn Note B principal balance of $61.2 million. As a result, we recognized the remaining Note B commitment fee of $0.4 million in “Interest income and other” during the year ended December 31, 2021.

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In the second quarter of 2022, we received repayment of a $111.3 million mortgage note receivable along with all accrued interest and a prepayment fee of $1.1 million which is reflected in “Gain on note receivable payoff” on the Consolidated Statement of Income for the year ended December 31, 2022. Interest income was $5.2 million, $10.2 million and $11.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Senior Living Communities

We provided a $20.0 million revolving line of credit whose borrowings are to be used primarily to finance construction projects within the Senior Living portfolio, including building additional units, and general working capital needs. During the year ended December 31, 2022, the revolving line of credit was amended to reset the interest rate to 8.0% per annum effective in November 2022, and reduce the availability to $15.0 million on January 1, 2025. The revolver matures in December 2029 at the time of lease maturity. The outstanding balance under the facility at December 31, 2022 and 2021, was $15.8 million and $9.6 million, respectively.

In June 2019, we provided a mortgage loan of $32.7 million to Senior Living for the acquisition of a 248-unit continuing care retirement community in Columbia, South Carolina. The financing is for a term of five years with two one-year extensions and carries an interest rate of 7.25%. Additionally, the loan conveys to NHI a purchase option at a stated minimum price of $38.3 million, subject to adjustment for market conditions.

Credit Loss Reserve

Our principal measures of credit quality, except for construction mortgages, are debt service coverage for amortizing loans and interest or fixed charge coverage for non-amortizing loans, collectively referred to as “Coverage”. A Coverage ratio provides a measure of the borrower’s ability to make scheduled principal and interest payments. The Coverage ratios presented in the following table have been calculated utilizing the most recent date for which data is available, September 30, 2022, using EBITDARM (earnings before interest, taxes, depreciation, amortization, rent and management fees) and the requisite debt service, interest service or fixed charges, as defined in the applicable loan agreement. We categorize Coverage into three levels: (i) more than 1.5x, (ii) between 1.0x and 1.5x, and (iii) less than 1.0x. We update the calculation of Coverage on a quarterly basis. Coverage is not a meaningful credit quality indicator for construction mortgages as either these developments are not generating any operating income, or they have insufficient operating income as occupancy levels necessary to stabilize the properties have not yet been achieved. We measure credit quality for these mortgages by considering the construction and stabilization timeline and the financial condition of the borrower as well as economic and market conditions. The tables below present outstanding note balances as of December 31, 2022 at amortized cost.

We consider the guidance in ASC 310-20 when determining whether a modification, extension or renewal constitutes a current period origination. The credit quality indicator as of December 31, 2022, is presented below for the amortized cost, net by year of origination of ($ in thousands):
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20222021202020192018PriorTotal
Mortgages
more than 1.5x$14,033 $— $36,524 $32,700 $— $4,028 $87,285 
between 1.0x and 1.5x— — — — 14,700 — 14,700 
less than 1.0x42,294 — 3,874 6,423 — — 52,591 
56,327 — 40,398 39,123 14,700 4,028 154,576 
Mezzanine
more than 1.5x— 18,776 — — — — 18,776 
between 1.0x and 1.5x— 23,969 — — — 8,835 32,804 
— 42,745 — — — 8,835 51,580 
Non-performing
less than 1.0x— — — — — 24,500 24,500 
— — — — — 24,500 24,500 
Revolver
more than 1.5x1,976 
between 1.0x and 1.5x15,847 
17,823 
Credit loss reserve(15,338)
$233,141 

Due to the continuing challenges in financial markets, due in part to the COVID-19 pandemic, and the potential impact on the collectability of our mortgages and other notes receivable, we forecasted a 20% increase in the probability of a default and a 20% increase in the amount of loss from a default on all loans, other than those designated as non-performing, resulting in an effective adjustment of 44%. The methodology for estimating the reserves for non-performing loans incorporates current conditions and forecasts of future economic conditions of these loans, including qualitative factors, which may differ from conditions existing in the historical period.

The allowance for expected credit losses is presented in the following table for the year ended December 31, 2022 ($ in thousands):
Balance at January 1, 2022$5,210 
Provision for expected credit losses10,628 
Write-off(500)
Balance at December 31, 2022$15,338 

Note 5. Senior Housing Operating Portfolio Formation Activities

Concurrently with the settlement of the outstanding litigation with Welltower discussed more fully in Note 9, we terminated the master lease with a Welltower-controlled subsidiary for the legacy Holiday properties effective April 1, 2022 and transitioned the operations of 15 ILFs from the Welltower-controlled tenant into two new ventures. These new ventures, consolidated by the Company, are structured to comply with REIT requirements and utilize the TRS for activities that would otherwise be non-qualifying for REIT purposes. The properties in each venture are operated by a property manager in exchange for a management fee. The equity structure of these ventures is comprised of 65% and 35% preferred and common equity interests, respectively. The Company owns 100% of the preferred equity interests in these ventures and an aggregate blended common equity interest of 89%. As of December 31, 2022, the annual fixed preferred return was approximately $10.2 million. Additionally, the managers, or related parties of the managers, own common equity interests in their respective ventures. Each venture is discussed in more detail below.

Merrill Gardens Managed Portfolio

We transferred six ILFs located in California and Washington into a consolidated venture with Merrill. Merrill contributed $10.6 million in cash for its common equity interest in the venture. The operating agreement includes additional contingent distributions to the partners based on the attainment of certain yields on investment calculated on an annual basis.
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The properties are managed by Merrill pursuant to a management agreement with an initial term through March 2032 that automatically renews on a year-to-year basis thereafter unless terminated by either party with notice. The management agreement entitles Merrill to a base management fee of 5% of net revenue and a real estate services fee of 5% of real estate costs incurred during any calendar year that exceed $1,000 times the number of units at each facility. Given certain provisions of the operating agreement, including provisions related to a Company change in control, the noncontrolling interest associated with the venture was determined to be contingently redeemable, as discussed further in Note 10.

Discovery Managed Portfolio

We transferred nine ILFs located in Arkansas, Georgia, Ohio, Oklahoma, New Jersey, and South Carolina into a consolidated venture with DSHI NHI Holiday LLC (the “Discovery member”), a related party of Discovery. The Discovery member contributed $1.1 million in cash for its common equity interest in the venture. The operating agreement includes additional contingent distributions to the partners based on the attainment of certain yields on investment calculated on an annual basis. At inception, the noncontrolling interest associated with this venture was determined to be contingently redeemable and classified as a redeemable noncontrolling interest on the Consolidated Balance Sheet. Effective in the fourth quarter of 2022, the operating agreement was amended, resulting in the noncontrolling interest no longer being contingently redeemable. The noncontrolling interest has been reclassified to “Equity” on the Consolidated Balance Sheet as of December 31, 2022.

The properties are managed by separate related parties of Discovery pursuant to management agreements with an initial term through March 2032 that automatically renews on a year-to-year basis thereafter unless terminated by either party with notice. The management agreements entitle the managers to a base management fee of 5% of net revenue.

Note 6. Equity Method Investment

Our initial $0.9 million investment in the operating company, Timber Ridge OpCo, LLC (“Timber Ridge OpCo”) held by our TRS arose in conjunction with the acquisition of a CCRC from LCS-Westminster Partnership III, LLP in January 2020. We structured our arrangement with our JV partner, LCS Timber Ridge LLC, to be compliant with the provisions of the REIT Investment Diversification and Empowerment Act of 2007. Accordingly, the TRS holds our 25% equity interest in Timber Ridge OpCo, which permits the TRS to engage in activities and share in cash flows that would otherwise be non-qualifying income under the REIT gross income test. As part of our investment, we provided Timber Ridge OpCo a revolving credit facility of up to $5.0 million of which no funds have been drawn.

We account for our investment in Timber Ridge OpCo under the equity method and decrease the carrying value of our investment for losses in the entity and distributions to NHI for cumulative amounts up to and including our basis plus any commitments to fund operations. Our commitments are currently limited to the additional $5.0 million under the revolving credit facility. As of December 31, 2022, we have recognized our share of Timber Ridge OpCo’s operating losses in excess of our initial investment. These cumulative losses of $5.0 million in excess of our original basis are included in “Accounts payable and accrued expenses” in our Consolidated Balance Sheets as of December 31, 2022 and 2021. Excess unrecognized equity method losses, including cash distributions received, for the years ended December 31, 2022 and 2021 were $4.2 million and $1.7 million, respectively. Cumulative unrecognized losses, including cash distributions received, were $5.9 million through December 31, 2022. We recognized gains of approximately $0.6 million, representing cash distributions received for the year ended December 31, 2022, and losses of approximately $1.5 million and $3.1 million related to our investment in Timber Ridge OpCo for year ended December 31, 2021 and 2020, respectively.

The Timber Ridge property is subject to early resident mortgages secured by a Deed of Trust and Indenture of Trust (the “Deed and Indenture”). As part of our acquisition, NHI-LCS JV I, LLC (“Timber Ridge PropCo”) acquired the Timber Ridge property and a subordination agreement was entered into pursuant to which the trustee acknowledged and confirmed that the security interests created under the Deed and Indenture were subordinate to any security interests granted in connection with the loan made by NHI to Timber Ridge PropCo. In addition, by terms of the resident loan assumption agreement, during the term of the lease (seven years with two renewal options), Timber Ridge OpCo is to indemnify Timber Ridge PropCo for any repayment by Timber Ridge PropCo of these liabilities under the guarantee. As a result of the subordination and resident loan assumption agreements, no liability has been recorded as of December 31, 2022. The balance secured by the Deed and Indenture was $13.6 million at December 31, 2022.

Note 7. Other Assets

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Other assets, net consist of the following ($ in thousands):
December 31, 2022December 31, 2021
SHOP accounts receivable and prepaid expenses, net of allowance of $375 and $—
$1,341 $— 
Real estate investments accounts receivable and prepaid expenses3,621 3,210 
Lease incentive payments, net3,190 9,545 
Regulatory escrows6,208 6,208 
Restricted cash2,225 2,073 
$16,585 $21,036 


Note 8. Debt

Debt consists of the following ($ in thousands):
December 31,
2022
December 31, 2021
Revolving credit facility - unsecured$42,000 $— 
Bank term loans - unsecured240,000 375,000 
Senior notes - unsecured, net of discount of $2,600 and $2,921
397,400 397,079 
Private placement notes - unsecured400,000 400,000 
Fannie Mae term loans - secured, non-recourse76,649 77,038 
Unamortized loan costs(8,538)(6,234)
$1,147,511 $1,242,883 

Aggregate principal maturities of debt as of December 31, 2022 for each of the next five years and thereafter are included in
the table below. These maturities do not include the impact of any debt incurred or repaid subsequent to December 31, 2022 ($ in thousands):

For The Year Ending December 31,Amount
2023$415,408 
202475,425 
2025125,816 
202642,000 
2027100,000 
Thereafter400,000 
1,158,649 
Less: discount(2,600)
Less: unamortized loan costs(8,538)
$1,147,511 

Unsecured revolving credit facility and bank term loans

On March 31, 2022, we entered into a new unsecured revolving credit agreement (the “2022 Credit Agreement”) providing us with a $700.0 million unsecured revolving credit facility, replacing our previous $550.0 million unsecured revolver. The 2022 Credit Agreement 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%.
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In addition, the 2022 Credit Agreement requires a facility fee equal to 0.125% to 0.30%, based on our rating. We incurred $4.5 million of deferred financing costs in connection with the 2022 Credit Agreement which are included as a component of “Debt” on the Consolidated Balance Sheet as of December 31, 2022.

Concurrently with the execution of the 2022 Credit Agreement, we amended our $300.0 million term loan, maturing in September 2023 (“2023 Term Loan”). The amendment modifies the existing covenants to align with provisions in the 2022 Credit Agreement and to accrue interest on borrowings based on SOFR (plus a credit spread adjustment) that were previously based on LIBOR, with no change to the existing applicable interest rate margins. We may also elect for the 2023 Term Loan to accrue interest at a base rate plus the applicable margin. As of December 31, 2022, we repaid $60.0 million of the 2023 Term Loan.

In March 2022, we repaid a $75.0 million term loan with a maturity in August 2022 with proceeds from the revolving credit facility. The term loan bore interest at a rate of 30-day LIBOR plus 135 basis points (“bps”), based on our current ratings. Upon repayment, we expensed approximately $0.2 million of unamortized loan costs associated with this loan which is included in “Loss on early retirement of debt” in our Consolidated Statement of Income for the year ended December 31, 2022.

In January 2021, we repaid a $100.0 million term loan that originated in July 2020 with the net proceeds from the 2031 Senior Notes offering discussed below. The term loan bore interest at a rate of 30-day LIBOR (with a 50 basis point floor) plus 185 basis points (“bps”), based on our current leverage ratios. Upon repayment, the Company expensed approximately $1.9 million of deferred financing costs associated with this loan which is included in “Loss on early retirement of debt” in our Consolidated Statement of Income for the year ended December 31, 2021.

The revolving facility fee was 25 bps per annum, and based on our current credit ratings, the facility presently provides for floating interest on the revolving credit facility and the 2023 Term Loan at SOFR CME Term Option one-month loan (plus a 10 bps spread adjustment) plus 105 bps and a blended 125 bps, respectively. At December 31, 2022, the SOFR CME Term Option one-month was 436 bps. At December 31, 2021, 30-day LIBOR was 10 bps, respectively.

At December 31, 2022, we had $658.0 million available to draw on the revolving portion of our credit facility, subject to usual and customary covenants. Among other stipulations, the unsecured credit facility agreement requires that we maintain certain financial ratios within limits set by our creditors. At December 31, 2022, we were in compliance with these ratios.

Pinnacle Bank is a participating member of our banking group. A member of NHI’s Board of Directors and chairman of the Audit Committee of the Board of Directors is also the chairman of Pinnacle Financial Partners, Inc., the holding company for Pinnacle Bank. NHI’s local banking transactions are conducted primarily through Pinnacle Bank.

2031 Senior Notes

In January 2021, we issued $400.0 million aggregate principal amount of 3.00% senior notes that mature on February 1, 2031 and pay interest semi-annually (the “2031 Senior Notes”). The 2031 Senior Notes were sold at an issue price of 99.196% of face value before the underwriters’ discount. Our net proceeds from the 2031 Senior Notes offering, after deducting underwriting discounts and expenses, were approximately $392.3 million. We used a portion of the net proceeds from the 2031 Senior Notes offering to repay a $100.0 million term loan and recognized a loss on early retirement of debt of $0.5 million for the year ended December 31, 2021, representing the unamortized loan costs expensed upon early repayment of the term loan.

The 2031 Senior Notes are subject to affirmative and negative covenants, including financial covenants. As of December 31, 2022 we were in compliance with all affirmative and negative covenants, including financial covenants for our 2031 Senior Notes borrowings.

Private Placement Notes

Our unsecured private placement notes, payable interest-only, are summarized below ($ in thousands):

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AmountInceptionMaturityFixed Rate
$125,000 January 2015January 20233.99 %
50,000 November 2015November 20233.99 %
75,000 September 2016September 20243.93 %
50,000 November 2015November 20254.33 %
100,000 January 2015January 20274.51 %
$400,000 

In January 2023, we repaid the $125.0 million of the private placement notes due January 2023 primarily with proceeds from the revolving credit facility.

Covenants pertaining to the private placement notes are generally conformed with those governing our credit facility, except for specific debt-coverage ratios that are more restrictive. Our unsecured private placement notes include a rate increase provision that is effective if any rating agency lowers our credit rating on our senior unsecured debt below investment grade and our compliance leverage increases to 50% or more.

Fannie Mae Term Loans

As of December 31, 2022, we had $60.1 million Fannie Mae term-debt financing, originating March 2015, consisting of interest-only payments at an annual rate of 3.79% and a 10-year maturity. In December 2021, we repaid two Fannie Mae term loans with a combined balance of $17.9 million, plus accrued interest of $0.1 million. The payoff included a prepayment fee of $1.5 million, which is reflected in the line item “Loss on early retirement of debt” in our Consolidated Statement of Income for the year ended December 31, 2021. The remaining mortgage loans are non-recourse and secured by eleven properties leased to Bickford.

In a December 2017 acquisition, we assumed additional Fannie Mae debt that amortizes through 2025 when a balloon payment will be due, is subject to prepayment penalties until 2024, bears interest at a nominal rate of 4.6% per annum, and has a remaining balance of $16.5 million at December 31, 2022. Collectively, these notes are secured by facilities having a net book value of $104.3 million at December 31, 2022.

Repayment of HUD mortgage loans

In the fourth quarter of 2020, we repaid ten HUD mortgage loans with a combined balance of $42.6 million, plus accrued interest of $0.2 million. The payoff included a prepayment fee of $1.6 million and the recognition of the unamortized discount and deferred financing cost of $1.2 million and $1.1 million, respectively, which are reflected in the line item “Loss on early retirement of debt” in our Consolidated Statement of Income for the year ended December 31, 2020.

Convertible senior notes

On April 1, 2021, our 3.25% senior unsecured convertible notes (the “Convertible Notes”) issued March 2014 matured. The Company paid $67.1 million, including accrued interest of $1.0 million and a $6.1 million conversion premium, to retire the Convertible Notes. The conversion premium was recorded as a reduction of “Capital in excess of par value in our Consolidated Balance Sheet as of December 31, 2021.

Interest Expense and Rate Swap Agreements

On December 31, 2021, our remaining $400.0 million interest rate swap agreements in place to hedge against fluctuations in variable interest rates applicable to our bank loans matured. The matured swaps had an average interest rate of 1.92% for the year ended December 31, 2021.

The following table summarizes interest expense ($ in thousands):
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Year Ended December 31,
202220212020
Interest expense on debt at contractual rates$42,487 $40,866 $43,458 
Losses reclassified from accumulated other
comprehensive income into interest expense— 7,286 6,330 
Capitalized interest(46)(40)(254)
Amortization of debt issuance costs, debt discount and other2,476 2,698 3,348 
Total interest expense$44,917 $50,810 $52,882 

Note 9. Commitments, Contingencies and Uncertainties

In the normal course of business, we enter into a variety of commitments, typically consisting of funding of revolving credit arrangements, construction and mezzanine loans to our operators to conduct expansions and acquisitions for their own account classified below as loan commitments, and commitments for the funding of construction for expansion or renovation to our existing properties under lease classified below as development commitments. In our leasing operations, we offer to our tenants and to sellers of newly acquired properties a variety of inducements which originate contractually as contingencies but which may become commitments upon the satisfaction of the contingent event. Contingent payments earned will be included in the respective lease bases when funded. The tables below summarize our existing, known commitments and contingencies as of December 31, 2022 according to the nature of their impact on our leasehold or loan portfolios ($ in thousands):

Asset ClassTypeTotalFundedRemaining
Loan Commitments:
Bickford Senior LivingSHOConstruction$28,900 $(28,853)$47 
Encore Senior LivingSHOConstruction50,725 (36,375)14,350 
Senior Living CommunitiesSHORevolving Credit20,000 (15,847)4,153 
Timber Ridge OpCoSHOWorking Capital5,000 — 5,000 
Watermark RetirementSHOWorking Capital5,000 (1,976)3,024 
   Montecito Medical Real EstateMOBMezzanine Loan50,000 (20,255)29,745 
$159,625 $(103,306)$56,319 

See Notes 4 and 5 to our consolidated financial statements for further details of our loan commitments. Loans funded do not include the effects of discounts or commitment fees.

The credit loss liability for unfunded loan commitments is estimated using the same methodology as for our funded mortgage and other notes receivable based on the estimated amount that we expect to fund. We applied the same economic uncertainty adjustments as discussed in Note 4.

The liability for expected credit losses on our unfunded loans reflected in “Accounts payable and accrued expense” on the Consolidated Balance Sheets as of December 31, 2022 and 2021 is presented in the following table for the year ended December 31, 2022 ($ in thousands):

Balance at December 31, 2021$955 
Provision for expected credit losses(272)
Balance at December 31, 2022$683 

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Asset ClassTypeTotalFundedRemaining
Development Commitments:
Woodland Village SHO Construction$7,515 $(7,425)$90 
Senior Living CommunitiesSHORenovation9,930 (9,930)— 
Watermark RetirementSHORenovation6,500 (5,959)541 
Navion Senior SolutionsSHORenovation3,500 (1,062)2,438 
OtherSHOVarious4,550 (1,300)3,250 
SHOPILFRenovation1,500 — 1,500 
$33,495 $(25,676)$7,819 

In addition to these commitments listed above, we have agreed to pay up to $0.8 million in additional cash consideration pending the results of an ongoing property tax appeal related to a property acquired in the second quarter of 2022. As of December 31, 2022, no amount of this consideration is expected to be paid. Discovery PropCo has committed to fund up to $2.0 million toward the purchase of condominium units located at one of the facilities of which $1.0 million had been funded as of December 31, 2022.

As of December 31, 2022, we had the following contingent lease inducement commitments which are generally based on the performance of facility operations and may or may not be met by the tenant ($ in thousands):
Asset ClassTotalFundedRemaining
Contingencies (Lease Inducements):
Timber Ridge OpCoSHO$10,000 $— $10,000 
IntegraCareSHO750 — 750 
Wingate HealthcareSHO5,000 — 5,000 
Navion Senior SolutionsSHO4,850 (2,700)2,150 
Discovery Senior LivingSHO4,000 — 4,000 
Ignite Medical ResortsSNF2,000 — 2,000 
   Sante PartnersSHO2,000 — 2,000 
$28,600 $(2,700)$25,900 

In February 2023, Timber Ridge OpCo formally requested payout of its $10.0 million lease inducement based upon the achievement of all performance conditions.

Bickford Contingent Note Arrangement

Related to the sale of six properties to Bickford in 2021 discussed further in Note 3, we reached an agreement with Bickford whereby Bickford would owe us up to $4.5 million under a contingent note arrangement. We have the one-time option to determine fair market value of the portfolio between May 1, 2023 and April 30, 2026, at which time the amount owed under the contingent note arrangement, if any, will be determined as the lesser of (i) the difference between the fair market value of the portfolio and $52.1 million, which amount represents the purchase consideration for the portfolio of $52.9 million less $0.8 million in mortgage debt repayment fees previously paid by us associated with this portfolio, and (ii) $4.5 million. Any amount due on the contingent note arrangement will accrue interest at an annual rate of 10% and will be due in five years from the determination date.

COVID-19 Pandemic Contingencies

The COVID-19 pandemic has had and may continue to have an impact on the operations of many of our tenants, managers and borrowers.

Throughout the pandemic to date, we have granted various rent concessions to tenants whose operations have been adversely affected by the pandemic. When applicable, we have elected not to apply the modification guidance under ASC 842 and have decided to account for the related concessions as variable lease payments, recorded as rental income when received.

As of December 31, 2022, aggregate pandemic-related rent concessions granted to tenants that have been accounted for as variable lease payments totaled approximately $44.3 million, of which $3.7 million were rent abatements. During the year ended December 31, 2022, we granted pandemic-related rent deferrals of $9.3 million to seven tenants, of which Bickford accounted for approximately $4.0 million. Repayments and other reductions of rent deferrals recognized in “Rental Income
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during the year ended December 31, 2022 and 2021 were $3.5 million and $0.1 million, respectively. Additionally, $4.1 million of pandemic-related rent deferrals were forgiven during the year ended December 31, 2022.

Rent deferrals accounted for as variable lease payments granted for the years ended December 31, 2021 and 2020 totaled approximately $26.4 million and $5.0 million, respectively, of which Bickford accounted for approximately $18.3 million and $3.8 million, respectively.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our managers, tenants and borrowers have indemnified, and are obligated to continue to indemnify us, against all liabilities arising from the operation of the facilities, and are further obligated to indemnify us against environmental or title problems affecting the real estate underlying such facilities. In addition, such claims may include, among other things professional liability and general liability claims, as well as regulatory proceedings related to our SHOP segment. While there may be lawsuits pending against us and certain of the owners and/or lessees of the facilities, management believes that the ultimate resolution of all such pending proceedings will have no direct material adverse effect on our financial condition, results of operations or cash flows.

Welltower Inc.

In June 2021, Welltower announced that it would acquire certain assets from the senior housing portfolio of Holiday, a privately held senior living management company, that included 17 senior living facilities governed by a master lease originally executed between a Holiday subsidiary and NHI in 2013. We received no rent due under the master lease from the tenant for these facilities after this change in tenant ownership occurred in late July 2021.

On December 20, 2021, NHI and its subsidiaries NHI-REIT of Next House, LLC, Myrtle Beach Retirement Resident LLC, and Voorhees Retirement Residence LLC filed suit against Welltower, Inc., Welltower Victory II TRS LLC, and Well Churchill Leasehold Owner LLC (collectively the “Defendants”) in the Delaware Court of Chancery (Case No. 2021-1097-MTZ). In the litigation, we contended that the Defendants repeatedly failed to honor their legal obligations to NHI. In particular, we asserted that the Defendants acquired assets from a third party, Holiday, that included leases to NHI senior living facilities and fraudulently induced NHI to consent to the assignment of the leases, and then immediately failed to pay rent or provide a promised security agreement that was intended to secure against their default, all as part of an effort to pressure NHI to agree to new conditions outside the assignment agreement or force a sale of the properties to the Defendants. The lawsuit further asserted that the Defendants owed unpaid contractual rent.

In connection with a memorandum of understanding between the parties dated March 4, 2022, NHI applied the remaining approximately $8.8 million lease deposit to past due rents in the first quarter of 2022. Also, as provided by the memorandum of understanding, Welltower transferred approximately $6.9 million to an escrow account to be released upon satisfactory transition of the facility operations and mutual dismissal of the lawsuit. NHI and certain of its subsidiaries entered into a settlement agreement dated March 31, 2022 with Defendants formalizing the terms to settle the lawsuit.

NHI and certain of its subsidiaries terminated the master lease with Well Churchill Leasehold Owner, LLC as successor in interest to NHI Master Tenant LLC, effective April 1, 2022, upon completion of the transition of the properties subject to the master lease, as follows: (i) one property was sold to a third party, (ii) one property was transitioned to an existing operator relationship and leased pursuant to an existing master lease, and (iii) the remaining 15 properties were transitioned into two new SHOP partnership ventures. See Note 5 for more information on these new ventures.

Also effective April 1, 2022, the parties agreed to dismiss the lawsuit and mutually release all claims related to or arising out of the litigation and the $6.9 million in escrowed funds were released to NHI and recognized as rental income during the year ended December 31, 2022. We recognized approximately $0.7 million as a “Loss on operations transfer, net” on the Consolidated Statements of Income for the year ended December 31, 2022. This net loss represents the amount of net working capital deficit assumed by NHI in connection with the transfer of operations following the termination of the master lease. The net working capital assumed by NHI on April 1, 2022 was comprised primarily of facility furniture, fixtures and equipment, net resident accounts receivable, accounts payable and other accrued liabilities.

Note 10. Redeemable Noncontrolling Interest

The interest held by Merrill in its SHOP venture was classified as a “Redeemable noncontrolling interest” in the mezzanine section between Total liabilities and Stockholders’ equity on our Consolidated Balance Sheet as of December 31, 2022. Certain provisions within the operating agreement of the Merrill venture provide Merrill with put rights upon certain contingent events
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that are not solely within the control of the Company. Therefore, Merrill’s noncontrolling interest was determined to be contingently redeemable. The redeemable noncontrolling interest is not currently redeemable and we concluded a contingent redemption event is not probable to occur as of December 31, 2022. Consequently, the noncontrolling interest will not be subsequently remeasured to its redemption amount until such contingent event and the related redemption are probable to occur. We will continue to reflect the attribution of gains or losses to the redeemable noncontrolling interest each period.

The Discovery member’s noncontrolling interest in its SHOP venture was also determined to be contingently redeemable at inception of the arrangement. The Discovery member’s agreement was amended in the fourth quarter of 2022 to remove the contingently redeemable feature, among other things. The noncontrolling interest is presented within the “Liabilities and Equity” section in the Consolidated Balance Sheet as of December 31, 2022.

The following table presents the change in redeemable noncontrolling interest for the year ended December 31, 2022 ($ in thousands):

Year Ended
December 31, 2022
Balance at January 1,$— 
  Initial carrying amount11,738 
  Reclassification of Discovery member noncontrolling interest(1,030)
  Net loss(843)
  Distributions(40)
Balance at December 31,$9,825 

Note 11. Equity and Dividends

Share Repurchase Plan

On April 15, 2022, the Company’s Board of Directors approved a stock repurchase plan for up to $240.0 million of the Company’s common stock (the “2022 Repurchase Plan”). During the year ended December 31, 2022, we repurchased through open market transactions 2,468,354 shares of common stock for an average price of $61.56 per share, excluding commissions. All shares received were constructively retired upon receipt, and the excess of the purchase price over the par value per share was recorded to “Cumulative dividends in excess of net income” in the Consolidated Balance Sheet.

As of December 31, 2022, we had approximately $88.4 million remaining under the 2022 Repurchase Plan.

On February 17, 2023, our Board of Directors terminated the current stock repurchase program and authorized a revised repurchase program (the “Revised Repurchase Plan”) pursuant to which we may purchase up to $160.0 million in shares of our issued and outstanding common stock, par value $0.01 per share. The Revised Repurchase Plan is effective for a period of one year and does not require us to repurchase any specific number of shares. The Revised Repurchase Plan may be suspended or discontinued at any time. Shares may be repurchased from time-to-time in open market transactions at prevailing market prices, in privately negotiated transactions or by other means in accordance with the terms of Rule 10b-18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”) and shall be made in accordance with all applicable laws and regulations in effect. The timing and number of shares repurchased, if any, will depend on a variety of factors, including price, general market and economic conditions, alternative investment opportunities and other corporate considerations.

At-the-Market (ATM) Equity Program

Our ATM equity offering sales agreement allows us to sell, from time to time, up to an aggregate sales price of $500 million of the Company’s common shares through the ATM program. No shares were issued during the year ended December 31, 2022. During the year ended December 31, 2021, we issued 661,951 common shares through the ATM program with an average price of $73.62, resulting in net proceeds after transaction costs of approximately $47.9 million.

Dividends

The following table summarizes dividends declared or paid by the Board of Directors during the years ended December 31, 2022 and 2021:

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Year Ended December 31, 2022
Date of DeclarationDate of RecordDate Paid/PayableQuarterly Dividend
February 16, 2022March 31, 2022May 6, 2022$0.90
May 6, 2022June 30, 2022August 5, 2022$0.90
August 5, 2022September 30, 2022November 4, 2022$0.90
November 6, 2022December 30, 2022January 27, 2033$0.90
Year Ended December 31, 2021
Date of DeclarationDate of RecordDate Paid/PayableQuarterly Dividend
March 12, 2021March 31, 2021May 7, 2021$1.1025
June 3, 2021June 30, 2021August 6, 2021$0.90
August 6, 2021September 30, 2021November 5, 2021$0.90
November 5, 2021December 31, 2021January 31, 2022$0.90

On February 17, 2023, the Board of Directors declared a $0.90 per share dividend to common stockholders of record on March 31, 2023, payable May 5, 2023.

Note 12. Share-Based Compensation

We recognize share-based compensation for all stock options granted over the requisite service period using the fair value of these grants as estimated at the date of grant using the Black-Scholes pricing model over the requisite service period using the market value of our publicly traded common stock on the date of grant.

Share-Based Compensation Plans

The Compensation Committee of the Board of Directors (the “Committee”) has the authority to select the participants to be granted options; to designate whether the option granted is an incentive stock option (“ISO”), a non-qualified option, or a stock appreciation right; to establish the number of shares of common stock that may be issued upon exercise of the option; to establish the vesting provision for any award; and to establish the term any award may be outstanding. The exercise price of any ISO’s granted will not be less than 100% of the fair market value of the shares of common stock on the date granted and the term of an ISO may not be more than ten years. The exercise price of any non-qualified options granted will not be less than 100% of the fair market value of the shares of common stock on the date granted unless so determined by the Committee.

The Company’s outstanding stock incentive awards have been granted under two incentive plans – the 2012 Stock Incentive Plan (“2012 Plan”) and the 2019 Stock Incentive Plan (“2019” Plan”). The individual option grant awards may vest over periods up to five years. The term of the options under the 2019 Plan is up to ten years from the date of grant. As of December 31, 2022, shares available for future grants totaled 1,422,336 under the 2019 Plan.

Compensation expense is recognized only for the awards that ultimately vest. Accordingly, forfeitures that were not expected may result in the reversal of previously recorded compensation expense. The following is a summary of share-based compensation expense, net of any forfeitures, included in “General and administrative expenses” in the Consolidated Statements of Income ($ in thousands):
December 31, 2022December 31, 2021December 31, 2020
Non-cash share-based compensation expense$8,613 $8,415 $3,061 

Determining Fair Value of Option Awards

The fair value of each option award was estimated on the grant date using the Black-Scholes option valuation model with the weighted average assumptions indicated in the following table. Each grant is valued as a single award with an expected term based upon expected employee and termination behavior. Compensation cost is recognized on the graded vesting method over the requisite service period for each separately vesting tranche of the award as though the award were, in substance, multiple awards. The expected volatility is derived using daily historical data for periods preceding the date of grant. The risk-free interest rate is the approximate yield on the United States Treasury Strips having a life equal to the expected option life on the date of grant. The expected life is an estimate of the number of years an option will be held before it is exercised.
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Stock Options

The weighted average fair value of options granted was $11.92, $14.54 and $5.57 for December 31, 2022, 2021 and 2020, respectively. The fair value of each grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:
December 31, 2022December 31, 2021December 31, 2020
Dividend yield7.0%6.7%5.1%
Expected volatility49.3%48.1%17.1%
Expected lives2.9 years2.9 years2.9 years
Risk-free interest rate1.75%0.33%1.30%

Stock Option Activity

The following tables summarize our outstanding stock options:
Weighted Average
NumberWeighted AverageRemaining
of SharesExercise PriceContractual Life (Years)
Outstanding December 31, 20191,004,014 $74.35
Options granted under 2012 Plan319,669 $90.79
Options granted under 2019 Plan272,331 $89.76
Options exercised under 2012 Plan(512,509)$72.98
Options forfeited under 2012 Plan(16,669)$81.37
Options forfeited under 2019 Plan(32,998)$90.79
Outstanding December 31, 20201,033,838 $83.54
Options granted under 2012 Plan12,500 $69.20
Options granted under 2019 Plan639,500 $69.20
Options exercised under 2012 Plan(20,000)$60.52
Options forfeited under 2019 Plan(13,333)$90.79
Outstanding December 31, 20211,652,505 $78.10
Options granted under 2019 Plan718,000 $53.62
Options exercised under 2019 Plan(56,832)$53.41
Options forfeited (23,000)$62.33
Options expired(74,498)$77.93
Options outstanding, December 31, 20222,216,175 $70.972.81
Exercisable at December 31, 20221,701,155 $74.782.50
Remaining
GrantNumberExerciseContractual
Dateof SharesPriceLife in Years
2/20/201888,170 $64.33 0.14
2/21/2019306,837 $79.96 1.14
2/21/2020523,500 $90.79 2.15
5/1/20207,500 $53.76 2.33
2/25/2021639,000 $69.20 3.16
2/25/2022626,168 $53.41 4.16
6/1/202225,000 $59.43 4.42
Options outstanding, December 31, 20222,216,175 

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Including outstanding stock options, our stockholders have authorized an additional 3,638,511 shares of common stock that may be issued under the share-based compensation plans.

The following table summarizes our outstanding non-vested stock options:
Number of SharesWeighted Average Grant Date Fair Value
Non-vested December 31, 2021482,514 $7.51
Options granted under 2019 Plan718,000 $11.77
Options vested under 2012 Plan(76,670)$6.16
Options vested under 2019 Plan(594,490)$11.83
Non-vested options forfeited under 2019 Plan(14,334)$12.47
Non-vested December 31, 2022515,020 $12.51

As of December 31, 2022, unrecognized compensation expense totaling $1.7 million associated with unvested stock options is expected to be recognized over the following periods: 2023 - $1.5 million and 2024 - $0.2 million. Share-based compensation expense is included in “General and administrative expense” in the Consolidated Statements of Income.

At December 31, 2022, there was no material intrinsic value of stock options outstanding and exercisable. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2022, 2021 and 2020 was $0.1 million or $6.13 per share; $0.2 million or $9.27 per share, and $8.1 million or $15.84 per share, respectively.

Note 13. Earnings Per Common Share

The weighted average number of common shares outstanding during the reporting period is used to calculate basic earnings per common share. Diluted earnings per common share assume the exercise of stock options and the conversion of our convertible debt prior to its retirement using the treasury stock method, to the extent dilutive. Dilution resulting from the conversion option within our convertible debt that was repaid in April 2021 was determined by computing an average of incremental shares included in the three months ended March 31, 2021 diluted EPS computation. If our average stock price for the period is higher than the conversion price of our convertible debt, the conversion feature is considered dilutive.

The following table summarizes the average number of common shares and the net income used in the calculation of basic and diluted earnings per common share ($ in thousands, except share and per share amounts):
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Year Ended December 31,
202220212020
Net income attributable to common stockholders$66,403 $111,804 $185,126 
BASIC:
Weighted average common shares outstanding44,774,708 45,714,221 44,696,285 
DILUTED:
Weighted average common shares outstanding44,774,708 45,714,221 44,696,285 
Stock options 19,528 4,823 1,719 
Convertible debt— 10,453 — 
Weighted average dilutive common shares outstanding44,794,236 45,729,497 44,698,004 
Net income attributable to common stockholders - basic$1.48 $2.45 $4.14 
Net income attributable to common stockholders - diluted$1.48 $2.44 $4.14 
Incremental anti-dilutive shares excluded:
Net share effect of stock options with an exercise price in excess of the
average market price for our common shares564,803 383,716 390,596 
Regular dividends declared per common share$3.60 $3.8025 $4.41 

Note 14. Fair Value of Financial Instruments

Carrying amounts and fair values of financial instruments that are not carried at fair value at December 31, 2022 and December 31, 2021 in the Consolidated Balance Sheets are as follows ($ in thousands):
Carrying AmountFair Value Measurement
2022202120222021
Level 2
Variable rate debt$277,699 $373,682 $282,000 $375,000 
Fixed rate debt$869,812 $869,201 $773,994 $858,124 
Level 3
Mortgage and other notes receivable, net$233,141 $299,952 $227,611 $314,821 

Fixed rate debt. Fixed rate debt is classified as Level 2 and its value is based on quoted prices for similar instruments or calculated utilizing model derived valuations in which significant inputs are observable in active markets.

Mortgage and other notes receivable. The fair value of mortgage and other notes receivable is based on credit risk and discount rates that are not observable in the marketplace and therefore represents a Level 3 measurement.

Carrying amounts of cash and cash equivalents and restricted cash, accounts receivable and accounts payable approximate fair value due to their short-term nature. The fair values of our borrowings under our revolving credit facility and other variable rate debt are reasonably estimated at their notional amounts at December 31, 2022 and 2021, due to the predominance of floating interest rates, which generally reflect market conditions.

Note 15. Income Taxes

Beginning with our inception in 1991, we have elected to be taxed as a REIT under the Internal Revenue Code. We have recorded state income tax expense of $0.1 million related to a Texas franchise tax that has attributes of an income tax for each of the years ended December 31, 2022, 2021, and 2020. Some of our leases require taxes to be reimbursed by our tenants. State income taxes are combined in “Franchise, excise and other taxes” in our Consolidated Statements of Income.

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The Company has a deferred tax asset, which is fully reserved through a valuation allowance, of $1.5 million and $1.6 million as of December 31, 2022 and 2021, respectively. The deferred tax asset is primarily a result of net operating losses from its participation in the operations of a joint venture during the years 2012 through 2016, and income generated by entities that are structured as TRSs under provisions of the Internal Revenue Code. See Notes 5 and 6 for a discussion of SHOP ventures and Timber Ridge OpCo.

The Company made state income tax payments of $0.1 million for each of the years ended December 31, 2022, 2021, and 2020.

Dividend payments to common stockholders for the last three years are characterized for tax purposes as follows on a per share basis:
(Unaudited)December 31, 2022December 31, 2021December 31, 2020
Ordinary income$2.61966 $2.87799 $3.50400 
Capital gain— 0.43890 0.10999 
Return of capital0.98034 0.48562 0.79603 
Dividends paid per common share$3.60 $3.8025 $4.41 

Note 16. Segment Reporting

We evaluate our business and make resource allocations on our two operating segments: Real Estate Investments and SHOP. Our Real Estate Investments segment includes real estate investments and mortgage and other notes receivables in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities and a hospital. Under the Real Estate Investments segment, we invest in seniors housing and health-care real estate through acquisition and financing of primarily single- tenant properties. Properties acquired are primarily leased under triple-net leases, and we are not involved in the management of the property. SHOP includes multi-tenant independent living facilities. The SHOP properties and related operations are controlled by the Company and are operated by property managers in exchange for a management fee (reference Note 5).

We formed the SHOP segment effective April 1, 2022 upon termination of the triple-net lease for the legacy Holiday portfolio at which time the operations and properties of 15 ILFs were transferred into two separate ventures, as discussed further in Notes 5 and 8. The results associated with the prior triple-net lease structure for these properties are included in the Real Estate Investments segment and the results from operating these SHOP properties after the transition are included in our new SHOP segment. There is no impact to the prior year’s presentation.

Our chief operating decision maker evaluates performance based upon segment NOI. We define NOI as total revenues, less tenant reimbursements and property operating expenses. We use NOI to make decisions about resource allocations and to assess the property level performance of our properties. There were no intersegment transactions for the year ended December 31, 2022. Capital expenditures for the year ended December 31, 2022 were approximately $30.8 million for the Real Estate Investments segment and $3.3 million for the SHOP segment.

Non-segment revenue consists mainly of other income. Non-segment assets consist of corporate assets including cash, deferred loan expenses and corporate offices and equipment among others. Non-property specific revenues and expenses are not allocated to individual segments in determining NOI.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies (see Note 2). The results of operations for all acquisitions described in Notes 3 and 4 are included in our consolidated results of operations from the acquisition dates and are components of the appropriate segments.

Summary information for the reportable segments during the year ended December 31, 2022 is as follows ($ in thousands):

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For the year ended December 31, 2022:Real Estate InvestmentsSHOPNon-segment/CorporateTotal
Rental income$217,700 $— $— $217,700 
Resident fees and services— 35,796 — 35,796 
Interest income and other24,383 — 315 24,698 
   Total revenues242,083 35,796 315 278,194 
Senior housing operating expenses— 28,193 — 28,193 
Taxes and insurance on leased properties9,788 — — 9,788 
   NOI 232,295 7,603 315 240,213 
Depreciation64,407 6,408 65 70,880 
Interest3,089 — 41,828 44,917 
Legal — — 2,555 2,555 
Franchise, excise and other taxes— — 844 844 
General and administrative— — 22,768 22,768 
Loan and realty losses61,911 — — 61,911 
Gains on sales of real estate, net(28,342)— — (28,342)
Loss on operations transfer, net710 — — 710 
Gain on note receivable payoff(1,113)— — (1,113)
Loss on early retirement of debt— — 151 151 
Gains from equity method investment(569)— — (569)
    Net income$132,202 $1,195 $(67,896)$65,501 
Total assets$2,225,176 $274,135 $8,113 $2,507,424 


ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Control and Procedures. As of December 31, 2022, an evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operation of management’s disclosure controls and procedures (as defined in rules 13a-15(e) and 15d-15(e) under the Exchange Act) to ensure information required to be disclosed in our filings under the Exchange Act, is (i) recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC; and (ii) accumulated and communicated to our management, including our CEO and our CFO, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can only provide reasonable assurance of achieving desired control objectives, and management is necessarily required to apply its judgment when evaluating the cost-benefit relationship of potential controls and procedures. Based upon the evaluation, the CEO and CFO concluded that the design and operation of these disclosure controls and procedures were effective as of December 31, 2022.

There were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in management’s evaluation during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of National Health Investors, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States. The Company’s internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles in the United States, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2022 using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on that assessment, management concluded that the Company’s internal control over financial reporting was effective as of December 31, 2022. The Company’s independent registered public accounting firm, BDO USA, LLP, has issued an attestation report on the effectiveness of the Company’s internal control over financial reporting included herein.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Directors and Stockholders
National Health Investors, Inc.
Murfreesboro, Tennessee

Opinion on Internal Control over Financial Reporting

We have audited National Health Investors, Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, cash flows, and equity for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedules and our report dated February 21, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Item 9A, Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ BDO USA, LLP

Nashville, Tennessee
February 21, 2023
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ITEM 9B. OTHER INFORMATION.

On February 17, 2023, the Company’s Board of Directors approved an amendment and restatement of the Company’s Bylaws (the “Amended and Restated Bylaws”), effective immediately. The Amended and Restated Bylaws include the following changes, among other things:

Confirm procedures relating to stockholder meetings, including with respect to the Company’s ability to cancel, reschedule or postpone such meetings, proxies, determination of the record date, inspectors of election, powers of the presiding officer to regulate conduct at such meetings and participation in such meetings solely or in part by means of remote communication;
Confirm procedures relating to meetings of the Board of Directors, including with respect to quorum and voting requirements, and participation in such meetings solely or in part by means of remote communication;
Require stockholders calling a special meeting to pay the costs of preparing and mailing the related notice to stockholders;
Require that any stockholder soliciting proxies from other stockholders use a proxy card color other than white (white is reserved for exclusive use by the Board of Directors);
Update the timing for notice of, and enhance procedures and disclosure requirements relating to, stockholder nominations of directors, including to address new Rule 14a-19, relating to use of universal proxies in contested director elections;
Add an advance notice provision for, and detail procedure and disclosure requirements relating to, the submission of stockholder proposals made in connection with an annual meeting of stockholders;
Clarify the independence requirements for directors and update provisions regarding the size and composition of committees of the Board of Directors;
Update provisions regarding the Chairperson of the Board of Directors and the Company’s officers;
Update the stock certificate, stock transfer and lost certificate provisions to expressly contemplate uncertificated shares and to allow more flexibility in replacing lost certificates;
Remove certain superfluous provisions originating from when the Company was managed by a third party;
Conform stockholder inspection rights to reflect the rights conferred under Maryland law;
Remove the provision requiring specific reports and other statements to be delivered to stockholders (as these requirements are driven by applicable law);
Update the voting standard for stockholders to amend the bylaws to a majority of votes cast, consistent with Maryland law;
Add new provisions relating to:
Advancement of expenses to directors and officers party to a proceeding for which indemnification may be available;
Reliance by directors and officers on certain information, opinions, reports or statements prepared or presented by an officer or employee of the Company, or by a lawyer, CPA or other person meeting specific requirements;
Ratification by the Board of Directors or stockholders of (i) any action or inaction by the Company or an officer to the extent the Board of Directors or the stockholders could have originally authorized the matter, and (ii) any action or inaction questioned in any stockholders’ derivative or other proceeding on certain enumerated grounds which, if so ratified, would have the same force and effect as if the questioned action or inaction had been originally duly authorized; and
Authority of Board of Directors to act in emergency circumstances that would otherwise prevent a quorum from being achieved;
Allow notices to directors, officers and stockholders to be delivered electronically, and contemplate the “householding” of materials delivered to stockholders;
Update various other provisions to conform to provisions of Maryland law; and
Make various other updates, including technical, ministerial, modernizing, clarifying, refining and conforming changes, and including changes in furtherance of gender neutrality.

The foregoing summary and description does not purport to be complete and is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws, a copy of which is filed as Exhibit 3.5 to this Annual Report on Form 10-K and incorporated herein by reference.

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS.

Not Applicable.
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PART III.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Incorporated by reference from the information in our definitive proxy statement for the 2023 annual meeting of stockholders, which we will file within 120 days of the end of the fiscal year to which this report relates.

ITEM 11.  EXECUTIVE COMPENSATION.

Incorporated by reference from the information in our definitive proxy statement for the 2023 annual meeting of stockholders, which we will file within 120 days of the end of the fiscal year to which this report relates.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Incorporated by reference from the information in our definitive proxy statement for the 2023 annual meeting of stockholders, which we will file within 120 days of the end of the fiscal year to which this report relates.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Incorporated by reference from the information in our definitive proxy statement for the 2023 annual meeting of stockholders, which we will file within 120 days of the end of the fiscal year to which this report relates.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Incorporated by reference from the information in our definitive proxy statement for the 2023 annual meeting of stockholders, which we will file within 120 days of the end of the fiscal year to which this report relates.

PART IV.

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)    (1)    Financial Statements

    The following financial statements are included in Item 8 of this Annual Report on Form 10-K and are filed as part of this report:

Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Nashville, TN; PCAOB ID#243)
Consolidated Balance Sheets – At December 31, 2022 and 2021
Consolidated Statements of Income – Years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Comprehensive Income – Years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Cash Flows – Years ended December 31, 2022, 2021, and 2020
Consolidated Statements of Equity – Years ended December 31, 2022, 2021, and 2020
Notes to Consolidated Financial Statements

    (2)    Financial Statement Schedules

The Financial Statement Schedules are included here following the signature page.

    (3)    Exhibits

    Exhibits required as part of this report are listed in the Exhibit Index.

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NATIONAL HEALTH INVESTORS, INC.
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2022
Description
3.1
Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form S-3 Registration Statement No. 333-192322)
3.2
Articles of Amendment to Articles of Incorporation of National Health Investors, Inc. dated as of June 8, 1994. (incorporated by reference to Exhibit 3.2 to Form S-3 Registration Statement No. 333-194653)
3.3
Amendment to Articles of Incorporation dated May 1, 2009 (incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement filed March 23, 2009)
3.4
Amendment to Articles of Incorporation approved by stockholders on May 2, 2014 (incorporated by reference to Exhibit 3.3 to Form 10-Q filed August 4, 2014)
3.5
3.6
Amendment to Articles of Incorporation approved by stockholders on May 6, 2020 (incorporated by reference to Exhibit 3.6 to the Company’s Form 10-Q filed August 10, 2020)
4.1
Form of Common Stock Certificate (incorporated by reference to Exhibit 39 to Form S-11 Registration Statement No. 33-41863, filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T)
4.2
4.3
4.4
Indenture dated as of January 26, 2021, among National Health Investors, Inc. and Regions Bank, as trustee (incorporated by reference to Exhibit 4.1 to Form 8-K filed January 26, 2021)
4.5
4.6
4.7
Description of Securities (filed herewith)
10.1

10.2
Amendment No. 5 to the Company’s Master Agreement to Lease with NHC (incorporated by reference to Exhibit 10.2 to Form 10-K filed March 10, 2006)
10.3
Amendment No. 6 to the Company’s Master Agreement to Lease with NHC (incorporated by reference to Exhibit 10.1 to Form 10-Q dated November 4, 2013)
10.4
Amended and Restated Amendment No. 6 to the Company’s Master Agreement to Lease with NHC (incorporated by reference to Exhibit 10.4 to Form 10-K filed February 18, 2014)
*10.5
2012 Stock Option Plan (incorporated by reference to Appendix A to the Company’s Definitive Proxy Statement filed March 23, 2012)
10.6
Excepted Holder Agreement - W. Andrew Adams (incorporated by reference to Exhibit 10.6 to Form 10-K filed February 24, 2009)
10.7
10.8
Extension of Master Agreement to Lease dated December 28, 2012 (incorporated by reference to Exhibit 10.22 to Form 10-K filed February 15, 2013)
10.9
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10.10
10.11
10.12
Amendment No. 7 to Master Agreement to Lease with NHC (Incorporated by reference to Exhibit 10.32 to Form 10-K filed February 14, 2014)
10.13
$225 million Note Purchase Agreement dated January 13, 2015 with Prudential Capital Group and certain of its affiliates (Incorporated by reference to Exhibit 10.32 to Form 10-K filed February 17, 2015)
*10.14
First amendment to 2012 Stock Incentive Plan (Incorporated by reference to Appendix A to Definitive Proxy Statement filed March 20, 2015)
10.15
Construction and Term Loan Agreement dated February 10, 2015 between the Company and LCS-Westminster Partnership (Incorporated by reference to Exhibit 10.21 to Form 10-K filed February 16, 2018)
10.16
10.17
10.18
*10.19
10.20
10.21
NHI PropCo, LLC Membership Interest Purchase Agreement (Incorporated by reference to Exhibit 10.1 to Form 10-Q filed November 7, 2016)
10.22
$75,000,000 of 8-year notes with a coupon of 3.93% issued to a private placement lender (Incorporated by reference to Exhibit 10.2 to Form 10-Q filed November 7, 2016)
10.23
10.24
Fifth Amendment to Note Purchase Agreement dated January 13, 2015, made and entered into as of August 8, 2017 (Incorporated by reference to Exhibit 99.2 to Form 8-K filed August 14, 2017)
*10.25
Second Amendment to 2012 Stock Incentive Plan (Incorporated by reference to Appendix A to Proxy Statement filed March 20, 2018)
10.26
10.27
10.28
Construction and Term Loan Agreement dated December 21, 2018 between the Company and LCS-Westminster Partnership IV, LLP (Incorporated by reference to Exhibit 10.36 to Form 10-K filed February 19, 2018)
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*10.29
National Health Investors, Inc. 2019 Stock Incentive Plan (Incorporated by reference to Appendix A to Definitive Proxy Statement filed March 19, 2019)
10.30
10.31
10.32
10.33
10.34
First Amendment dated August 15, 2016 to Note Purchase Agreement dated November 3, 2015 (incorporated by reference to Exhibit 10.1 to Form 10-Q filed August 8, 2022)
10.35
Second Amendment dated September 30, 2016 to Note Purchase Agreement dated November 3, 2015 (incorporated by reference to Exhibit 10.2 to Form 10-Q filed August 8, 2022)
10.36
Fourth Amendment dated June 29, 2022 to Note Purchase Agreement dated November 3, 2015 (incorporated by reference to Exhibit 10.3 to Form 10-Q filed August 8, 2022)
10.37
Sixth Amendment dated June 29, 2022 to Note Purchase Agreement dated January 13, 2015 (incorporated by reference to Exhibit 10.4 to Form 10-Q filed August 8, 2022)
10.38
10.39
10.40
Amendment No. 10 to Master Lease Agreement to Lease with NHC) (incorporated by reference to Exhibit 10.1 to Form 8-K filed September 8, 2022)
21
Subsidiaries (filed herewith)
23.1
31.1
31.2
32
101.INSInline XBRL Instance Document
101.SCHInline XBRL Taxonomy Extension Schema Document
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document
101.LABInline XBRL Taxonomy Extension Label Linkbase Document
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document
104Cover Page Interactive Data File (embedded within the Inline XBRL document).



* Indicates management contract or compensatory plan or arrangement.

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ITEM 16. SUMMARY

None.
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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL HEALTH INVESTORS, INC.
BY:/s/ D. Eric Mendelsohn
D. Eric Mendelsohn
DATE: February 21, 2023President, Chief Executive Officer and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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SignatureTitleDate
/s/ D. Eric MendelsohnPresident, Chief Executive Officer and DirectorFebruary 21, 2023
D. Eric Mendelsohn(Principal Executive Officer)
/s/ John L. SpaidChief Financial OfficerFebruary 21, 2023
John L. Spaid(Principal Financial Officer)
/s/ David L. TravisChief Accounting OfficerFebruary 21, 2023
David L. Travis(Principal Accounting Officer)
/s/ W. Andrew AdamsChairman of the BoardFebruary 21, 2023
W. Andrew Adams
/s/ James R. JobeDirectorFebruary 21, 2023
James R. Jobe
/s/ Robert A. McCabe, Jr.DirectorFebruary 21, 2023
Robert A. McCabe, Jr.
/s/ Robert T. WebbDirectorFebruary 21, 2023
Robert T. Webb
/s/ Charlotte A. SwaffordDirectorFebruary 21, 2023
Charlotte A. Swafford
/s/ Robert G. AdamsDirectorFebruary 21, 2023
Robert G. Adams
/s/ Tracy M. J. ColdenDirectorFebruary 21, 2023
Tracy M. J. Colden

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Real Estate Investments
Skilled Nursing Facilities
Anniston, AL$— $70 $4,477 $— $70 $4,477 $4,547 $3,730 10/17/1991
Moulton, AL— 25 688 — 25 688 713 688 10/17/1991
Avondale, AZ— 453 6,678 — 453 6,678 7,131 4,489 8/13/1996
Brooksville, FL— 1,217 16,166 — 1,217 16,166 17,383 5,220 2/1/2010
Crystal River, FL— 912 12,117 — 912 12,117 13,029 3,913 2/1/2010
Dade City, FL— 605 8,042 — 605 8,042 8,647 2,597 2/1/2010
Hudson, FL (2 facilities)— 1,290 22,392 — 1,290 22,392 23,682 12,840 Various
Merritt Island, FL— 701 8,869 — 701 8,869 9,570 7,722 10/17/1991
New Port Richey, FL— 228 3,023 — 228 3,023 3,251 976 2/1/2010
Plant City, FL— 405 8,777 — 405 8,777 9,182 7,572 10/17/1991
Stuart, FL— 787 9,048 — 787 9,048 9,835 8,023 10/17/1991
Trenton, FL— 851 11,312 — 851 11,312 12,163 3,653 2/1/2010
Glasgow, KY— 33 2,110 — 33 2,110 2,143 2,066 10/17/1991
Desloge, MO— 178 3,804 — 178 3,804 3,982 3,804 10/17/1991
Joplin, MO— 175 4,034 — 175 4,034 4,209 3,283 10/17/1991
Kennett, MO— 180 4,928 — 180 4,928 5,108 4,799 10/17/1991
Maryland Heights, MO— 150 4,790 — 150 4,790 4,940 4,668 10/17/1991
St. Charles, MO— 420 5,512 — 420 5,512 5,932 5,512 10/17/1991
Albany, OR— 190 10,415 — 190 10,415 10,605 2,700 3/31/2014
Creswell, OR— 470 8,946 — 470 8,946 9,416 2,216 3/31/2014
Forest Grove, OR— 540 11,848 — 540 11,848 12,388 2,981 3/31/2014
Anderson, SC— 308 4,643 — 308 4,643 4,951 4,494 10/17/1991
Greenwood, SC— 174 3,457 174 3,457 3,631 3,268 10/17/1991
Laurens, SC— 42 3,426 — 42 3,426 3,468 3,149 10/17/1991
Orangeburg, SC— 300 3,714 — 300 3,714 4,014 1,386 9/25/2008
Athens, TN— 38 1,463 — 38 1,463 1,501 1,370 10/17/1991
Chattanooga, TN— 143 2,309 — 143 2,309 2,452 2,297 10/17/1991
Dickson, TN— 90 3,541 — 90 3,541 3,631 3,254 10/17/1991
Franklin, TN— 47 1,130 — 47 1,130 1,177 1,130 10/17/1991
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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Hendersonville, TN— 363 3,837 — 363 3,837 4,200 3,360 10/17/1991
Johnson City, TN— 85 1,918 — 85 1,918 2,003 1,917 10/17/1991
Lewisburg, TN (2 facilities)— 46 994 — 46 994 1,040 994 10/17/1991
McMinnville, TN— 73 3,618 — 73 3,618 3,691 3,235 10/17/1991
Milan, TN— 41 1,826 — 41 1,826 1,867 1,704 10/17/1991
Pulaski, TN— 53 3,921 — 53 3,921 3,974 3,500 10/17/1991
Lawrenceburg, TN— 98 2,900 — 98 2,900 2,998 2,469 10/17/1991
Dunlap, TN— 35 3,679 — 35 3,679 3,714 3,146 10/17/1991
Smithville, TN— 35 3,816 — 35 3,816 3,851 3,358 10/18/1991
Somerville, TN— 26 677 — 26 677 703 678 10/19/1991
Sparta, TN— 80 1,602 — 80 1,602 1,682 1,536 10/20/1991
Austin, TX— 606 9,895 — 606 9,895 10,501 1,966 4/1/2016
Canton, TX— 420 12,330 — 420 12,330 12,750 3,701 4/18/2013
Corinth, TX— 1,075 13,935 — 1,075 13,935 15,010 4,400 4/18/2013
Ennis, TX— 986 9,025 — 986 9,025 10,011 3,099 10/31/2011
Euless, TX— 1,241 12,629 — 1,241 12,629 13,870 2,727 4/1/2016
Fort Worth, TX— 1,380 14,370 — 1,380 14,370 15,750 2,255 5/10/2018
Garland, TX— 1,440 14,310 — 1,440 14,310 15,750 2,241 5/10/2018
Gladewater, TX— 70 17,840 — 70 17,840 17,910 3,368 4/1/2016
Greenville, TX— 1,800 13,948 — 1,800 13,948 15,748 4,544 10/31/2011
Houston, TX (3 facilities)— 2,808 42,511 — 2,808 42,511 45,319 14,469 Various
Katy, TX— 610 13,893 — 610 13,893 14,503 2,789 4/1/2016
Kyle, TX— 1,096 12,279 — 1,096 12,279 13,375 4,056 6/11/2012
Marble Falls, TX— 480 14,989 — 480 14,989 15,469 2,932 4/1/2016
McAllen, TX— 1,175 8,259 — 1,175 8,259 9,434 1,817 4/1/2016
New Braunfels, TX— 1,430 13,666 — 1,430 13,666 15,096 2,709 2/24/2017
San Antonio, TX (3 facilities)— 2,370 40,054 — 2,370 40,054 42,424 10,660 Various
Waxahachie, TX— 1,330 14,349 — 1,330 14,349 15,679 2,399 1/17/2018
Bristol, VA— 176 2,511 — 176 2,511 2,687 2,511 10/17/1991
Oak Creek, WI— 2,000 14,903 7,403 2,000 22,306 24,306 2,150 12/7/2018
— 34,450 516,143 7,403 34,450 523,546 557,996 214,490 
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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Assisted Living Facilities
Rainbow City, AL— 670 11,330 — 670 11,330 12,000 2,929 10/31/2013
Sacramento, CA— 660 10,840 — 660 10,840 11,500 2,681 6/1/2014
Pueblo West, CO— 169 7,431 — 169 7,431 7,600 761 7/23/2019
Greensboro, GA— 672 4,849 631 672 5,480 6,152 1,560 9/15/2011
Ames, IA3,193 360 4,670 — 360 4,670 5,030 1,252 6/28/2013
Burlington, IA3,901 200 8,374 — 200 8,374 8,574 2,253 6/28/2013
Cedar Falls, IA— 260 4,700 30 260 4,730 4,990 1,303 6/28/2013
Ft. Dodge, IA4,008 100 7,208 — 100 7,208 7,308 1,899 6/28/2013
Iowa City, IA— 297 2,725 33 297 2,758 3,055 975 6/30/2010
Marshalltown, IA5,714 240 6,208 — 240 6,208 6,448 1,662 6/28/2013
Urbandale, IA8,113 540 4,292 — 540 4,292 4,832 1,192 6/28/2013
Caldwell, ID— 320 9,353 — 320 9,353 9,673 2,311 3/31/2014
Aurora, IL— 1,195 11,713 — 1,195 11,713 12,908 2,337 5/9/2017
Bolingbrook, IL— 1,290 14,677 — 1,290 14,677 15,967 2,370 3/16/2017
Bourbonnais, IL7,974 170 16,594 — 170 16,594 16,764 4,314 6/28/2013
Crystal Lake, IL (2 facilities)— 1,060 30,043 170 1,060 30,213 31,273 5,106 Various
Gurnee, IL— 1,244 13,856 — 1,244 13,856 15,100 1,370 9/10/2019
Moline, IL3,896 250 5,630 — 250 5,630 5,880 1,523 6/28/2013
Oswego, IL— 390 20,957 212 390 21,169 21,559 3,701 6/1/2016
Quincy, IL6,055 360 12,403 — 360 12,403 12,763 3,261 6/28/2013
Rockford, IL6,412 390 12,575 — 390 12,575 12,965 3,339 6/28/2013
South Barrington, IL— 1,610 13,456 — 1,610 13,456 — 15,066 2,218 3/16/2017
St. Charles, IL— 820 22,188 252 820 22,440 23,260 3,961 6/1/2016
Tinley Park, IL— 1,622 11,354 — 1,622 11,354 12,976 2,418 6/23/2016
Attica, IN— 284 7,891 — 284 7,891 8,175 636 5/1/2020
Carmel, IN— 463 7,055 — 463 7,055 7,518 2,167 11/12/2014
Crawfordsville, IN— 300 3,134 — 300 3,134 3,434 849 6/28/2013
Crown Point, IN— 574 7,336 353 574 7,689 8,263 2,268 10/30/2013
Greenwood, IN— 791 7,020 227 791 7,247 8,038 2,239 11/7/2013
Linton, IN— 60 6,015 — 60 6,015 6,075 486 5/1/2020
Bastrop, LA— 325 2,456 — 325 2,456 2,781 822 4/30/2011
Bossier City, LA— 500 3,344 — 500 3,344 3,844 1,152 4/30/2011
120

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Minden, LA— 280 1,698 — 280 1,698 1,978 566 4/30/2011
West Monroe, LA— 770 5,627 — 770 5,627 6,397 1,818 4/30/2011
Battle Creek, MI— 398 3,093 197 398 3,290 3,688 1,280 10/19/2009
Lansing, MI— 1,020 9,684 174 1,020 9,858 10,878 1,712 10/19/2009
Okemos, MI— 340 8,082 — 340 8,082 8,422 2,924 11/19/2009
Shelby, MI— 1,588 13,512 — 1,588 13,512 15,100 1,199 1/27/2020
Champlin, MN— 980 4,475 — 980 4,475 5,455 1,553 3/10/2010
Hugo, MN— 400 3,945 113 400 4,058 4,458 1,332 3/10/2010
Maplewood, MN— 1,700 6,544 — 1,700 6,544 8,244 2,272 3/10/2010
North Branch, MN— 595 3,053 — 595 3,053 3,648 1,090 3/10/2010
Mahtomedi, MN— 515 8,825 — 515 8,825 9,340 750 12/27/2019
Charlotte, NC— 650 17,663 2,000 650 19,663 20,313 4,055 7/1/2015
Durham, NC— 860 7,752 — 860 7,752 8,612 989 12/15/2017
Hendersonville, NC (2 facilities)— 3,120 12,980 — 3,120 12,980 16,100 2,272 3/16/2017
Lincoln, NE8,418 380 10,904 — 380 10,904 11,284 2,828 6/28/2013
Omaha, NE (2 facilities)2,455 1,110 15,437 851 1,110 16,288 17,398 3,623 Various
Lancaster, OH— 530 20,530 — 530 20,530 21,060 4,670 7/31/2015
Middletown, OH— 940 15,548 — 940 15,548 16,488 3,649 10/31/2014
Rocky River, OH650 4,189 — 650 4,189 4,839 839 4/30/2018
Worthington, OH— — 18,869 1,476 — 20,345 — 20,345 3,286 4/30/2018
McMinnville, OR— 390 9,183 — 390 9,183 9,573 1,702 8/31/2016
Portland, OR— 930 25,270 — 930 25,270 26,200 3,937 8/31/2015
Erie, PA— 1,030 15,206 921 1,030 16,127 — 17,157 1,987 4/30/2018
Reading, PA— 1,027 11,179 — 1,027 11,179 12,206 1,201 5/31/2019
Manchester, TN— 534 6,068 — 534 6,068 6,602 320 6/3/2021
Fredericksburg, VA— 1,615 9,271 — 1,615 9,271 10,886 1,926 9/20/2016
Midlothian, VA— 1,646 8,635 — 1,646 8,635 10,281 1,852 10/31/2016
Suffolk, VA— 1,022 9,320 — 1,022 9,320 10,342 1,742 3/25/2016
Virginia Beach, VA— 2,052 15,148 — 2,052 15,148 17,200 35 11/10/2022
Bellevue, WI— 504 11,796 — 504 11,796 12,300 825 9/30/2020
Oshkosh, WI— 542 12,758 542 12,758 13,300 243 4/29/2022
60,139 46,304 637,921 7,640 46,304 645,561 691,865 125,792 
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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Independent Living Facilities
Vero Beach, FL— 550 37,450 1,293 550 350 38,743 39,293 4,232 2/1/2019
Columbus, IN— 348 6,124 — 348 6,124 6,472 635 5/31/2019
St. Charles, MO— 344 3,181 — 344 3,181 3,525 2,723 10/17/1991
Tulsa, OK16,510 1,980 32,620 502 1,980 33,122 35,102 4,756 12/1/2017
Chattanooga, TN— 1,567 1,568 1,577 1,437 10/17/1991
Johnson City, TN— 55 4,077 — 55 4,077 4,132 3,294 10/17/1991
Chehalis, WA— 1,980 7,710 7,445 1,980 15,155 17,135 2,246 1/15/2016
16,510 5,266 92,729 9,241 5,266 101,970 107,236 19,323 
Senior Living Campuses
Loma Linda, CA— 1,200 10,800 7,326 1,200 18,126 19,326 4,628 9/28/2012
Maitland, FL— 2,317 9,161 491 2,317 9,652 11,969 6,920 8/6/1996
Michigan City, IN— 974 22,667 — 974 22,667 23,641 2,325 5/31/2019
Portage, IN— 661 21,959 — 661 21,959 22,620 2,257 5/31/2019
Needham, MA— 5,500 45,157 1,451 5,500 46,608 52,108 5,756 1/15/2019
Salisbury, MD— 1,876 44,084 471 1,876 44,555 46,431 4,751 5/31/2019
Roscommon, MI— 44 6,005 44 6,006 6,050 1,357 8/31/2015
Mt. Airy, NC— 1,370 7,470 150 1,370 7,620 8,990 1,791 12/17/2014
McMinnville, OR— 410 26,667 — 410 26,667 27,077 4,657 8/31/2016
Silverdale, WA— 1,750 23,860 2,167 1,750 26,027 27,777 7,367 8/16/2012
— 16,102 217,830 12,057 16,102 229,887 245,989 41,809 
122

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Entrance-Fee Communities
Bridgeport, CT— 4,320 23,494 5,566 4,320 29,060 33,380 5,626 6/2/2016
North Branford, CT— 7,724 64,430 — 7,724 64,430 72,154 11,370 11/3/2016
Southbury, CT— 10,320 17,143 5,880 10,320 23,023 33,343 4,115 6/2/2016
Fernandina Beach, FL— 1,430 63,420 1,522 1,430 64,942 66,372 14,456 12/17/2014
St. Simons Island, GA— 8,770 38,070 963 8,770 39,033 47,803 8,889 12/17/2014
Winston-Salem, NC— 8,700 73,920 507 8,700 74,427 83,127 16,548 12/17/2014
Greenville, SC— 5,850 90,760 — 5,850 90,760 96,610 19,876 12/17/2014
Myrtle Beach, SC— 3,910 82,140 542 3,910 82,682 86,592 18,534 12/17/2014
Pawleys Island, SC— 1,480 38,620 460 1,480 39,080 40,560 9,069 12/17/2014
Spartanburg, SC— 900 49,190 1,021 900 50,211 51,111 11,282 12/17/2014
Issaquah, WA— 4,370 130,522 — 4,370 130,522 134,892 10,931 01/31/2020
— 57,774 671,709 16,461 57,774 688,170 745,944 130,696 
Hospitals
Tulsa, OK— 1,470 38,780 — 1,470 38,780 40,250 1,649 5/28/2021
— 1,470 38,780 — 1,470 38,780 40,250 1,649 
Total real estate investments properties76,649 161,366 2,175,112 52,802 161,366 2,227,914 2,389,280 533,759 
Senior Housing Operating
Independent Living Facilities
Fort Smith, AR— 590 22,447 229 590 22,676 23,266 5,460 4/01/2022
Rogers, AR— 1,470 25,282 135 1,470 25,417 26,887 6,140 4/01/2022
Fresno, CA— 420 10,899 100 420 10,999 11,419 2,752 4/01/2022
Modesto, CA— 1,170 22,673 193 1,170 22,866 24,036 5,450 4/01/2022
Pinole, CA— 1,020 18,066 276 1,020 18,342 19,362 4,385 4/01/2022
Roseville, CA— 630 31,343 240 630 31,583 32,213 7,538 4/01/2022
West Covina, CA— 940 20,280 757 940 21,037 21,977 4,907 4/01/2022
Athens, GA— 910 31,940 243 910 32,183 33,093 7,693 4/01/2022
Columbus, GA— 570 8,639 264 570 8,903 9,473 2,217 4/01/2022
Voorhees, NJ— 670 23,710 539 670 24,249 24,919 5,692 4/01/2022
Gahanna, OH— 920 22,919 182 920 23,101 24,021 5,604 4/01/2022
123

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2022
($ in thousands)
Costs
Initial Cost to Company(C)
CapitalizedDate
Buildings &Subsequent toBuildings &AccumulatedAcquired/
Encumbrances(A)
LandImprovementsAcquisitionLandImprovements
Total(D)
Depreciation(B)
Constructed
Broken Arrow, OK— 2,660 18,477 186 2,660 18,663 21,323 4,559 4/01/2022
Greenville, SC— 560 16,547 383 560 16,930 17,490 4,078 4/01/2022
Myrtle Beach, SC— 1,310 26,229 323 1,310 26,552 27,862 6,315 4/01/2022
Vancouver, WA— 1,030 19,183 513 1,030 19,696 20,726 4,714 4/01/2022
Total senior housing operating properties— 14,870 318,634 4,563 14,870 323,197 338,067 77,504 
Corporate office— 1,291 677 583 1,291 1,260 2,551 425 
$76,649 $177,527 $2,494,423 $57,948 $177,527 $2,552,371 $2,729,898 $611,688 


NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION

(A) See the notes to the consolidated financial statements.
(B) Depreciation is calculated using estimated useful lives up to 40 years for all completed facilities.
(C) Subsequent to NHC’s transfer of the original real estate properties in 1991, we purchased from NHC $33.9 million of additions to those properties. As the additions were purchased from NHC rather than developed by us, the $33.9 million has been included as Initial Cost to Company.
(D) At December 31, 2022, the tax basis of the Company’s net real estate assets was $2.2 billion.
124

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021, AND 2020
($ in thousands)
December 31,
202220212020
Investment in Real Estate:
Balance at beginning of period$2,894,548 $3,265,070 $3,074,846 
Additions through cash expenditures10,993 50,346 116,724 
Change in accounts payable related to investments in real estate construction(69)(388)(784)
Change in other assets related to investments in real estate200 — 348 
Operating equipment received in lease termination1,287 — — 
Additions through non-controlling interest— — 10,778 
Real estate acquired in exchange for non-cash rental income3,000 
Real estate acquired in exchange for mortgage notes receivable23,071 — 63,220 
Sale of properties for cash(104,691)(276,429)(62)
Properties classified as held for sale(84,761)(137,651)— 
Property reclassified as held for use 7,851 
Impairment of property(21,531)(6,400)— 
Balance at end of period$2,729,898 $2,894,548 $3,265,070 
Accumulated Depreciation:
Balance at beginning of period$576,668 $597,638 $514,453 
Addition charged to costs and expenses70,880 80,798 83,150 
Amortization of right-of-use asset36 36 — 
Sale of properties(25,643)(70,063)35 
Properties classified as held for sale(11,092)(31,741)— 
Property reclassified as held for use839 — — 
Balance at end of period$611,688 $576,668 $597,638 

125

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
December 31, 2022
MonthlyAmount Subject To
InterestMaturityPaymentPriorOriginalCarryingDelinquent Principal
RateDateTermsLiensFace AmountAmountor Interest
($ in thousands)
First Mortgages:
Skilled nursing facilities:
Lexington, VA8.0%2032-12-31$21,000$3,089 $1,428 
Brookneal, VA8.0%2031-12-31$21,000$2,780 $1,368 
Laurel Fork, VA8.0%2030-12-31$20,000$2,672 $1,231 
Austin/San Antonio, TX7.25%2027-11-30Interest Only$42,500 $42,296 
Assisted living facilities:
Oviedo, FL8.25%2025-07-31Interest Only$10,000 $10,000 
Indianapolis, IN7.0%2022-12-31Interest Only$6,423 $6,423 
Wabash/Lafayette, IN7.0%2025-12-31Interest Only$4,000 $3,873 
Entrance-fee communities:
Columbia, SC7.25%2024-12-31Interest Only$32,700 $32,700 
Construction Loans:
Canton, MI9.0%2023-12-31Interest Only$14,700 $14,700 
Chesapeake, VA9.0%2025-12-31Interest Only$14,200 $14,153 
Fitchburg, WI8.50%2026-01-28Interest Only$28,525 $14,033 
Sussex, WI8.50%2024-12-31Interest Only$22,200 $22,371 
$164,576 $— 

At December 31, 2022, the tax basis of our mortgage loans on real estate was $180.1 million. Balloon payments on our interest only mortgage receivables are equivalent to the carrying amounts listed above except for unamortized commitment fees of $313.5 thousand.

See the notes to our consolidated financial statements for more information on our mortgage loan receivables.
126

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NATIONAL HEALTH INVESTORS, INC.
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
FOR THE YEARS ENDED DECEMBER 31, 2022, 2021, AND 2020
($ in thousands)
December 31,
202220212020
Reconciliation of mortgage loans on real estate
Balance at beginning of period$230,927 $259,491 $294,120 
Additions:
New mortgage loans67,978 33,160 55,059 
Amortization of loan discount and commitment fees907 741 806 
Total Additions68,885 33,901 55,865 
Deductions:
Loan commitment fees received497 — 222 
Mortgage notes receivable related to investments in real estate23,071 — 63,220 
Collection of principal, less recoveries of previous write-downs111,668 62,465 27,052 
Total Deductions135,236 62,465 90,494 
Balance at end of period$164,576 $230,927 $259,491 


127

AMENDED AND RESTATED
BYLAWS
OF
NATIONAL HEALTH INVESTORS, INC.

As adopted February 17, 2023








i




AMENDED AND RESTATED BYLAWS
OF
NATIONAL HEALTH INVESTORS, INC.
TABLE OF CONTENTS
Page
ARTICLE I MEETINGS OF STOCKHOLDERS                         1
1.01.    PLACE; REMOTE COMMUNICATION                          1
1.02.    ANNUAL MEETING                                     1
1.03.    SPECIAL MEETINGS                                     1
1.04.    NOTICE                                             2
1.05.    SCOPE OF NOTICE                                         2
1.06.    QUORUM                                             2
1.07.    VOTING                                             3
1.08.    PROXIES                                             3
1.09.    CONDUCT OF MEETINGS                                     3
1.10.    TABULATION OF VOTES                                    4
1.11.    INFORMAL ACTION BY STOCKHOLDERS                         5
1.12.    VOTING BY BALLOT                                     5
1.13.    ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND PROPOSALS 5
ARTICLE II DIRECTORS                                     15
2.01.    GENERAL POWERS                                     15
2.02.    OUTSIDE ACTIVITIES                                     15
2.03.    OUTSIDE MANAGEMENT                                     16
2.04.    NUMBER, TENURE, QUALIFICATION, NOMINATION AND ELECTION         16
2.05.    ANNUAL AND REGULAR MEETINGS                             18
2.06.    SPECIAL MEETINGS                                     18
2.07.    NOTICE                                             18
2.08.    QUORUM                                             18
2.09.    VOTING                                             19
2.10.    CONDUCT OF MEETINGS                                     19
2.11.    RESIGNATIONS                                         19
2.12.    VACANCIES                                             20
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2.13.    INFORMAL ACTION BY DIRECTORS                             20
2.14.    COMPENSATION                                         20
2.15.    RELIANCE                                         20
2.16.    RATIFICATION                                     20
2.17.    EMERGENCY PROVISIONS                             21
ARTICLE III COMMITTEES                                     21
3.01.    NUMBER, TENURE AND QUALIFICATION                         21
3.02.    DELEGATION OF POWER                                     21
3.03.    QUORUM AND VOTING                                     21
3.04.    CONDUCT OF MEETINGS                                     22
3.05.    INFORMAL ACTION BY COMMITTEES                             22
ARTICLE IV OFFICERS                                         22
4.01.    ENUMERATION; POWER AND DUTIES                             22
4.02.    ELECTION OR APPOINTMENT; TERM                             23
4.03.    REMOVAL                                             23
4.04.    RESIGNATION                                         23
4.05.    VACANCIES                                             23
4.06.    CHAIRPERSON OF THE BOARD                                 23
4.07.    CHIEF EXECUTIVE OFFICER                                 24
4.08.    PRESIDENT                                         24
4.09.    VICE PRESIDENTS                                         24
4.10.    SECRETARY                                             24
4.11.    TREASURER                                             25
4.12.    ASSISTANT SECRETARIES AND ASSISTANT TREASURERS                  25
4.13.    COMPENSATION                                     25
ARTICLE V SHARES OF STOCK                                  25
5.01.    CERTIFICATES OF STOCK                                      25
5.02.    STOCK LEDGER                                          26
5.03.    RECORDING TRANSFERS OF STOCK                              26
5.04.    LOST CERTIFICATE                                      26
5.05.    CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE              27
ARTICLE VI DIVIDENDS AND DISTRIBUTIONS                          27
6.01.    DECLARATION                                          27
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6.02.    CONTINGENCIES                                         27
ARTICLE VII INDEMNIFICATION                                  28
7.01.    INDEMNIFICATION OF OFFICERS                              28
7.02.    ADVANCEMENT OF EXPENSES                                  28
7.03. NON-EXCLUSIVITY OF INDEMNIFICATION RIGHTS                 28
7.04. INSURANCE                                         28
ARTICLE VIII NOTICES                                          29
8.01.    NOTICES                                              29
8.02.    SECRETARY TO GIVE NOTICE                                  29
8.03.    WAIVER OF NOTICE                                      29
ARTICLE IX MISCELLANEOUS                                      30
9.01.    BOOKS AND RECORDS                                      30
9.02.    INSPECTION OF BYLAWS AND CORPORATE RECORDS                  30
9.03.    CONTRACTS                                              30
9.04.    CHECKS, DRAFTS, ETC                                      30
9.05.    DEPOSITS                                              30
9.06.    FISCAL YEAR                                          31
9.07.    CONFLICT WITH APPLICABLE LAW OR ARTICLES                 31
9.08.    INVALID OR UNENFORCEABLE                             31
ARTICLE X AMENDMENT OF BYLAWS                              31
10.01.    BY DIRECTORS                                          31
10.02.    BY STOCKHOLDERS                                      31
10.03.    EXCEPTION FOR INDEMNIFICATION                              31



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ARTICLE I

MEETINGS OF STOCKHOLDERS

1.01. PLACE; REMOTE COMMUNICATION.

1.01.1 Meetings of the holders (the “Stockholders”) of the issued and outstanding capital stock (the “Stock”) of National Health Investors, Inc. (the “Corporation”) shall be held at any place, either within or without the State of Maryland, as shall be fixed by the Board of Directors. The Board of Directors may determine, in its discretion, that any meeting of the Stockholders may be held partially or solely by remote communication in accordance with Section 1.01.2 hereof, without designating a place for a physical assembly of the Stockholders.

1.01.2 The Board of Directors may authorize Stockholders not physically present at any meeting of Stockholders to participate in the meeting by remote communication, videoconference, teleconference, or other available technology, subject to any guidelines and procedures adopted by the Board of Directors, so long as all persons participating in the meeting can hear each other at the same time, and participation in a meeting in accordance herewith and therewith shall constitute presence in person at such meeting for all purposes. At a meeting in which Stockholders can participate by remote communication, the Corporation shall implement reasonable measures to: (a) verify that each person deemed present and permitted to vote at the meeting by remote communication is a Stockholder or proxy holder; and (b) allow Stockholders and proxy holders participating by remote communication to either read or hear the proceedings as they take place and to participate in the meeting and vote on matters submitted to the Stockholders. The Corporation shall maintain a record of the vote or other action taken by Stockholders or proxy holders at the meeting by remote communication.

1.02.    ANNUAL MEETING. An annual meeting of the Stockholders for the election of directors of the Corporation (the “Directors”) and the transaction of any business within the powers of the Corporation shall be held each year on the date and at the time as shall be designated by the Board of Directors. The Corporation may postpone, reschedule, or cancel any annual meeting of Stockholders previously scheduled.

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1.03.    SPECIAL MEETINGS. The Chairperson of the Board (if any), the President or a majority of the Board of Directors may call special meetings of the Stockholders. Special meetings of the Stockholders shall also be called by the Secretary upon the written request of the holders of Shares entitled to cast not less than 25% of all the votes entitled to be cast at such meeting. Such request shall state the purpose or purposes of such meeting and the matters proposed to be acted on thereat. Following the receipt of any such request, the Secretary shall inform such requesting Stockholders of the reasonably estimated costs of preparing and mailing a notice with respect to the proposed meeting and, upon payment to the Corporation of such costs, the Secretary shall prepare such notice and provide it to each Stockholder entitled to vote at such meeting or entitled to notice by statute. The Secretary shall not be required to call a special meeting requested by Stockholders in accordance with this Section unless the applicable Stockholders pay such costs to the Corporation. The date, time, place (if any) and record date for any such special meeting, including a meeting called at the request of Stockholders, shall be established by the Board of Directors or Officer calling the same. The Corporation may postpone, reschedule, or cancel any special meeting of Stockholders previously scheduled by the Board of Directors.

1.04.    NOTICE. Not less than ten (10) nor more than ninety (90) days before the date of each meeting of Stockholders, notice of such meeting shall be given in writing or by electronic transmission, in accordance with Section 8.01, to each Stockholder entitled to vote or entitled to notice by statute, stating the time and date of the meeting, the place of the meeting (if any), if remote communication is authorized for the meeting, the information required for Stockholders and proxy holders to participate, be considered present, and vote at the meeting, and, in the case of a special meeting or as otherwise may be required by statute, the purpose or purposes for which the meeting is called.

1.05.    SCOPE OF MEETING. No business shall be transacted at a special meeting of Stockholders except as specifically designated in the notice for such meeting. Subject to the requirements of Section 1.13, any business of the Corporation may be transacted at the annual meeting without being specifically designated in the notice, except such business as is required by statute to be stated in such notice.
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1.06.    QUORUM. At each meeting of Stockholders for the transaction of any business, a quorum must be present to approve any matter that properly comes before such meeting. At any meeting of Stockholders, the presence in person or by proxy of Stockholders entitled to cast a majority of all the votes entitled to be cast at the meeting shall constitute a quorum; but this Section shall not affect any requirement under any statute or the Articles of Incorporation of the Corporation (the “Articles”) for the vote necessary for the adoption of any measure. If, however, a quorum is not present at any meeting of the Stockholders, the Stockholders present in person or by proxy shall have the power to adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum is present and the meeting so adjourned may be reconvened without further notice. At any reconvened meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally notified. The Stockholders present at a meeting which has been duly called and convened and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough Stockholders to leave less than a quorum.

1.07.    VOTING. A majority of the votes cast at a meeting of Stockholders duly called and at which a quorum is present shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, unless more than a majority of the votes cast is specifically required by statute, the Articles or these Bylaws. Unless otherwise provided in the Articles, each outstanding share of Stock (a “Share”), regardless of class or series, shall be entitled to one vote upon each matter submitted to a vote at a meeting of Stockholders. Shares of its own Stock directly or indirectly owned by the Corporation shall not be voted in any meeting and shall not be counted in determining the total number of outstanding Shares entitled to vote at any given time, but Shares of its own Stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding Shares at any given time.

1.08.    PROXIES. A Stockholder may vote the Shares owned of record by him or her, either in person or by proxy executed in writing by the Stockholder or by his or her duly authorized attorney in fact. Any such proxy or evidence of authorization of such proxy shall be
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filed with the Secretary of the Corporation before or at the meeting. Any copy, communication by electronic transmission, or other reliable written reproduction may be substituted for the Stockholder’s original written proxy for any purpose for which the original proxy could have been used if such copy, communication by electronic transmission, or other reproduction is a complete reproduction of the entire original written proxy. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. A proxy shall be revocable unless the proxy states that the proxy is irrevocable and is coupled with an interest sufficient to support an irrevocable power. Any Stockholder directly or indirectly soliciting proxies from other Stockholders must use a proxy card color other than white, which shall be reserved for the exclusive use of the Board of Directors.

1.09.    CONDUCT OF MEETINGS. The Chairperson of the Board (if any) or, in the absence of the Chairperson of the Board, the President or any Vice President or, in the absence of the Chairperson of the Board, the President and all Vice Presidents (if any), a presiding officer elected at the meeting, shall preside over meetings of the Stockholders (the “Presiding Officer”). The Secretary of the Corporation or, in the absence of the Secretary, any Assistant Secretary, or, in the absence of the Secretary and all Assistant Secretaries (if any), the person appointed by the Presiding Officer of the meeting shall act as secretary of such meeting. The Board of Directors may determine the rules and regulations for the conduct of meetings of the Stockholders as it shall deem appropriate. Except as otherwise determined by the Board of Directors, the Presiding Officer shall have the right and authority to convene and (for any or no reason) to conclude, recess and/or adjourn a meeting, to prescribe such rules, regulations and procedures and to do all such acts, as, in the judgment of such Presiding Officer, are necessary, appropriate or convenient for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or the Presiding Officer of the meeting, may include, without limitation, the following: (a) the establishment of an agenda for the meeting; (b) rules and procedures for maintaining order at the meeting and the safety of those present at the meeting; (c) limitations on attendance at or participation in the meeting to Stockholders of record of the Corporation, their duly authorized and constituted proxies or such other persons as the Presiding Officer shall determine; (d) restrictions on entry to the meeting after the time fixed for the commencement thereof; (e) limitations on the time allotted to questions or comments by participants; (f) the
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determination of when the polls shall open and close for any given matter to be voted on at the meeting; (g) removal of any Stockholders or any other individual who refuses to comply with meeting rules, regulations or procedures; (h) determining whether any Stockholder or any proxy may be excluded from any Stockholders’ meeting based upon any determination by the Presiding Officer in his or her sole discretion that any such person has unduly disrupted or is likely to disrupt the proceedings thereat and specifying the circumstances in which any person may make a statement or ask questions at any Stockholders’ meetings; (i) restrictions on the use of audio and video recording devices, cell phones and other electronic devices; (j) rules, regulations and procedures for compliance with any federal, state or local laws or regulations, including those concerning safety, health or security; (k) procedures (if any) requiring attendees to provide the Corporation advance notice of their intent to attend the meeting; and (l) rules, regulations or procedures regarding the participation by means of remote communication, if any, of Stockholders and proxies not physically present at a meeting. The Presiding Officer of a Stockholder meeting, in addition to making any other determinations that may be appropriate to the conduct of the meeting, shall determine and declare to the meeting that a matter or business was not properly brought before the meeting or is not a proper matter for Stockholder action under applicable law, and, if the Presiding Officer should so determine, the Presiding Officer shall so declare to the meeting and any such matter of business not properly brought before the meeting shall not be transacted or considered. Polls for all matters before the meeting will be deemed to be closed upon final adjournment of the meeting.

1.10.    TABULATION OF VOTES. The Board of Directors or the Presiding Officer of the meeting may appoint, before or at the meeting, one or more inspectors for the meeting (or any adjournment or postponement thereof) and any successor to the inspector. Except as otherwise provided by the Presiding Officer of the meeting, the inspectors, if any, shall (a) determine the number of Shares represented at the meeting, in person or by proxy, and the existence of a quorum, (b) determine the validity and effect of proxies, (c) receive and tabulate all votes, ballots or consents, (d) report such tabulation to the Presiding Officer of the meeting, (e) hear and determine all challenges and questions arising in connection with the right to vote or the validity of any proxies of ballots, (f) perform such tasks as may be required by applicable law and (g) do such acts as are proper to fairly conduct the election or vote. Each such report shall be
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in writing and signed by the inspector or by a majority of the inspectors if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority of the inspectors shall be the report of the inspectors. No Director or candidate for election as a Director shall act as inspector of an election of Directors. Inspectors need not be Stockholders. The report of the inspector or inspectors on the number of Shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. Upon request of the Presiding Officer or any Stockholder entitled to vote thereat, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them.

1.11.    INFORMAL ACTION BY STOCKHOLDERS. An action required or permitted to be taken at a meeting of Stockholders may be taken without a meeting if a consent in writing or by electronic transmission, setting forth such action, is provided by each Stockholder entitled to vote on the subject matter thereof and filed with the records of Stockholders meetings, and any other Stockholders entitled to notice of a meeting of Stockholders (but not to vote thereat) have waived in writing any rights which they may have to dissent from such action, and such consents and waivers are filed with the minutes of proceedings of the Stockholders. Such consents and waivers may be signed by different Stockholders on separate counterparts.

1.12.    VOTING BY BALLOT. Voting on any question or in any election may be viva voce unless the Presiding Officer shall order or any Stockholder shall demand that voting be by ballot.

1.13.    ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS AND PROPOSALS.

1.13.1 Nominations of individuals for election to the Board of Directors or the proposal of other business to be considered by the Stockholders may be made at an annual meeting of Stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto) with respect to such annual meeting given by or at the direction of the Board of Directors (or any duly authorized committee thereof), (b) if otherwise properly brought before such annual meeting by or at the direction of the Board of Directors (or any duly authorized
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committee thereof) or (c) by any Stockholder of the Corporation who is a Stockholder of record on the date of the giving of notice by the Stockholder as provided for in this Section 1.13 through the date of such annual meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the procedures and other requirements set forth in this Section 1.13. For the avoidance of doubt, compliance with the foregoing clause (c) shall be the exclusive means for a Stockholder to make nominations or to propose any other business at an annual meeting of Stockholders (other than a proposal included in the Corporation’s proxy materials pursuant to and in compliance with Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “Exchange Act”)).

1.13.2 In addition to any other applicable requirements for nominations or other business to be properly brought before an annual meeting by a Stockholder pursuant to clause (c) of Section 1.13.1 above, the Stockholder must have given timely notice thereof in writing to the Secretary of the Corporation and any such other business must otherwise be a proper matter for action by the Stockholders. To be timely, a Stockholder’s notice shall set forth all information required under this Section 1.13 and shall be delivered to, or mailed and received at, the principal executive offices of the Corporation by, (a) with respect to nominations of individuals for election to the Board of Directors only, at the annual meeting of Stockholders occurring in 2023, not less than sixty (60) days nor more than one hundred and fifty (150) days prior to the anniversary of the last annual meeting of Stockholders, and (b) with respect to any nomination or other business to be properly brought before an annual meeting of Stockholders for each succeeding annual meeting of Stockholders beginning in 2024, not less than ninety (90) days nor more than one hundred and twenty (120) days prior to the anniversary of the last annual meeting of Stockholders; provided, however, that if the date of the annual meeting is more than thirty (30) days before or sixty (60) days after such anniversary date, or if no annual meeting was held in the preceding year, a Stockholder’s notice must be delivered or mailed and received by no earlier than one hundred and twenty (120) days prior to such annual meeting and no later than the later of ninety (90) days prior to such annual meeting or the tenth (10th) day following the date on which public disclosure of the date of the annual meeting is first made by the Corporation. The adjournment, recess, postponement or rescheduling of an annual meeting (or the public disclosure thereof) shall not commence a new time period or an extension of the time for the giving of a Stockholder’s notice as described in this Section 1.13.

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1.13.3 To be in proper written form, the notice of any Stockholder giving notice under this Section 1.13 (each, a “Noticing Party”) must set forth:

(a) as to each person whom such Noticing Party proposes to nominate for election or reelection as a Director (each, a “Proposed Nominee”), if any (i) the name, age, business address and residence address of such Proposed Nominee; (ii) the principal occupation and employment of such Proposed Nominee; (iii) a written questionnaire with respect to the background and qualification of such Proposed Nominee, completed by such Proposed Nominee in the form required by the Corporation (which form such Noticing Party shall request in writing from the Secretary prior to submitting notice and which the Secretary shall provide to such Noticing Party within ten (10) days after receiving such request); (iv) a written representation and agreement completed by such Proposed Nominee in the form required by the Corporation (which form such Noticing Party shall request in writing from the Secretary prior to submitting notice and which the Secretary shall provide to such Noticing Party within ten (10) days after receiving such request) providing that such Proposed Nominee: (A) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such Proposed Nominee, if elected as a Director of the Corporation, will act or vote on any issue or question (a “Voting Commitment”) that has not been disclosed to the Corporation or any Voting Commitment that could limit or interfere with such Proposed Nominee’s ability to comply, if elected as a Director of the Corporation, with such Proposed Nominee’s fiduciary duties under applicable law; (B) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the Corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a Director or nominee that has not been disclosed to the Corporation; (C) will, if elected as a Director of the Corporation, comply with all applicable rules of the New York Stock Exchange or other securities exchange upon which the Corporation’s securities are listed, the Articles, these Bylaws and all applicable publicly disclosed corporate governance, ethics, conflict of interest, confidentiality and stock ownership and trading policies and other guidelines and policies of the Corporation generally applicable to Directors, and all applicable fiduciary duties under state law; (D) consents to being named as a nominee in a proxy statement and form of proxy for the meeting and to serving a full term as a Director of the Corporation, if elected; and (E)
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will provide facts, statements and other information in all communications with the Corporation and its Stockholders that are or will be true and correct in all material respects and that do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; (v) a description of all direct and indirect compensation and other material monetary agreements, arrangements and understandings, written or oral, during the past three (3) years, and any other material relationships, between or among such Proposed Nominee, on the one hand, and such Noticing Party or any Stockholder Associated Person (as defined below), on the other hand, including, without limitation, all information that would be required to be disclosed pursuant to Item 404 promulgated under Regulation S-K as if such Noticing Party and any Stockholder Associated Person were the “registrant” for purposes of such rule and the Proposed Nominee were a Director or executive officer of such registrant; and (vi) all other information relating to such Proposed Nominee or such Proposed Nominee’s associates that would be required to be disclosed in a proxy statement or other filing required to be made by such Noticing Party or any Stockholder Associated Person in connection with the solicitation of proxies for the election of Directors in a contested election or otherwise required pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder (collectively, the “Proxy Rules”);

(b) as to any other business that such Noticing Party proposes to bring before the meeting: (i) a reasonably brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting; (ii) the text of the proposal or business (including the complete text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend the Articles or these Bylaws, the language of the proposed amendment); and (iii) all other information relating to such business that would be required to be disclosed in a proxy statement or other filing required to be made by such Noticing Party or any Stockholder Associated Person in connection with the solicitation of proxies in support of such proposed business by such Noticing Party or any Stockholder Associated Person pursuant to the Proxy Rules;

(c) as to such Noticing Party, any Proposed Nominee, and any other Stockholder Associated Persons: (i) the name and address of such Noticing Party, any
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Proposed Nominee, and any other Stockholder Associated Person (including, as applicable, as they appear on the Corporation’s books and records); (ii) the class, series and number of Shares of each class or series of Stock (if any) of the Corporation that are, directly or indirectly, owned beneficially and/or of record by such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person and the date or dates such Shares were acquired and the investment intent of such acquisition; (iii) the name of each nominee holder for, and number of, any securities of the Corporation owned beneficially but not of record by such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person and any pledge by such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person with respect to any of such securities; (iv) any Short Interest (as defined below) held by or involving such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person; (v) a complete and accurate description of all agreements, arrangements or understandings, written or oral, (including any derivative or short positions, profit interests, hedging transactions, options, warrants, convertible securities, stock appreciation or similar rights and borrowed or loaned shares) that have been entered into by, or on behalf of, such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person, the effect or intent of which is to mitigate loss, manage risk or benefit from changes in the price of any securities of the Corporation, or maintain, increase or decrease the voting power of such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person with respect to securities of the Corporation, whether or not such instrument or right shall be subject to settlement in underlying Shares of Stock of the Corporation (any of the foregoing, a “Derivative Instrument”); (vi) any substantial interest, direct or indirect (including any existing or prospective commercial, business or contractual relationship with the Corporation), by security holdings or otherwise, of such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person in the Corporation or any affiliate thereof, other than an interest arising from the ownership of securities of the Corporation where such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person receives no extra or special benefit not shared on a pro rata basis by all other holders of the same class or series; (vii) a complete and accurate description of all agreements, arrangements or understandings, written or oral, (A) between or among such Noticing Party and any of the Stockholder Associated Persons or (B) between or among such Noticing Party or any Stockholder Associated Person and any other person or entity (naming each such person or entity) or any
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Proposed Nominee, including, without limitation, (x) any proxy, contract, arrangement, understanding or relationship pursuant to which such Noticing Party or any Stockholder Associated Person has a right to vote any security of the Corporation, (y) any understanding, written or oral, that such Noticing Party or any Stockholder Associated Person may have reached with any Stockholder of the Corporation (including the name of such Stockholder) with respect to how such Stockholder will vote such Stockholder’s Shares in the Corporation at any meeting of the Corporation’s Stockholders or take other action in support of any Proposed Nominee or other business, or other action to be taken, by such Noticing Party or any Stockholder Associated Person and (z) any other agreements that would be required to be disclosed by such Noticing Party, any Proposed Nominee, any other Stockholder Associated Person or any other person or entity pursuant to Item 5 or Item 6 of a Schedule 13D pursuant to Section 13 of the Exchange Act and the rules and regulations promulgated thereunder (regardless of whether the requirement to file a Schedule 13D is applicable to such Noticing Party, any Proposed Nominee, any other Stockholder Associated Person or any other person or entity); (viii) any rights to dividends on the Shares of the Corporation owned beneficially by such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person that are separated or separable from the underlying Shares of the Corporation; (ix) any proportionate interest in Shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership, limited liability company or similar entity in which such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person is (A) a general partner or, directly or indirectly, beneficially owns an interest in a general partner of such general or limited partnership or (B) the manager, managing member or, directly or indirectly, beneficially owns an interest in the manager or managing member of such limited liability company or similar entity; (x) any significant equity interests or any Derivative Instruments or Short Interests in any principal competitor of the Corporation held by such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person; (xi) any direct or indirect interest of such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person in any contract with the Corporation, any affiliate of the Corporation or any principal competitor of the Corporation (including, without limitation, any employment agreement, collective bargaining agreement or consulting agreement); (xii) a description of any material interest of such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person in the business proposed by such Noticing Party, if any, or the election
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of any Proposed Nominee; (xiii) a complete and accurate description of any performance-related fees (other than an asset-based fee) to which such Noticing Party, any Proposed Nominee, or any other Stockholder Associated Person may be entitled as a result of any increase or decrease in the value of the Corporation’s securities or any Derivative Instruments, including, without limitation, any such interests held by members of any Proposed Nominee’s or any other Stockholder Associated Person’s immediate family sharing the same household; and (xiv) all other information relating to such Noticing Party or any Stockholder Associated Person, or such Noticing Party’s or any Stockholder Associated Person’s associates, that would be required to be disclosed in a proxy statement or other filing in connection with the solicitation of proxies in support of the business proposed by such Noticing Party, if any, or for the election of any Proposed Nominee in a contested election or otherwise pursuant to the Proxy Rules;

(d) a representation that such Noticing Party (or a Qualified Representative (as defined below) of such Noticing Party) intends to appear in person at the meeting to bring such business before the meeting or nominate any Proposed Nominees, as applicable, and an acknowledgment that, if such Noticing Party (or a Qualified Representative (as defined below) of such Noticing Party) does not appear to present such business or Proposed Nominees, as applicable, at such meeting, the Corporation need not present such business or Proposed Nominees for a vote at such meeting, notwithstanding that proxies in respect of such vote may have been received by the Corporation;

(e) a complete and accurate description of any pending or, to such Noticing Party’s knowledge, threatened legal proceeding in which such Noticing Party, any Proposed Nominee or any other Stockholder Associated Person is a party or participant involving the Corporation or, to such Noticing Party’s knowledge, any Officer, affiliate or associate of the Corporation;

(f) a representation from such Noticing Party as to whether such Noticing Party or any Stockholder Associated Person intends or is part of a group that intends (i) to deliver a proxy statement and/or form of proxy to a number of holders of the Corporation’s voting shares reasonably believed by such Noticing Party to be sufficient to approve or adopt the business to be proposed or elect the Proposed Nominees, as
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applicable, (ii) to engage in a solicitation (within the meaning of Exchange Act Rule 14a-1(l)) with respect to the nomination or other business, as applicable, and if so, the name of each participant (as defined in Item 4 of Schedule 14A under the Exchange Act) in such solicitation, and/or (iii) to solicit proxies in support of Director nominees other than the Corporation’s Director nominees in accordance with Rule 14a-19 under the Exchange Act (including Rule 14a-19(a)(2) and Rule 14a-19(a)(3)); and

(g) a description of any agreement, arrangement or understanding, written or oral, the effect or intent of which is to increase or decrease the voting power of such Noticing Party or any Stockholder Associated Person with respect to any Shares of the Stock of the Corporation, without regard to whether such agreement, arrangement or understanding is required to be reported on a Schedule 13D in accordance with the Exchange Act.

In addition to the information required above, the Corporation may require any Noticing Party to furnish such other information as the Corporation may reasonably require to determine the eligibility or suitability of a Proposed Nominee to serve as a Director of the Corporation or that could be material to a reasonable Stockholder’s understanding of the independence, or lack thereof, of such Proposed Nominee, under the listing standards of New York Stock Exchange or other securities exchange upon which the Corporation’s securities are listed, any applicable rules of the Securities and Exchange Commission, any publicly disclosed standards used by the Board of Directors in selecting nominees for election as a Director and for determining and disclosing the independence of the Corporation’s Directors, including those applicable to a Director’s service on any of the committees of the Board of Directors, or the requirements of any other laws or regulations applicable to the Corporation. If requested by the Corporation, any supplemental information required under this paragraph shall be provided by a Noticing Party within ten (10) days after it has been requested by the Corporation.

1.13.4 Only such business shall be conducted at a special meeting of Stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting (or any supplement thereto). Nominations of persons for election to the Board of Directors may be made at a special meeting of Stockholders at which Directors are to be elected pursuant to the Corporation’s notice of meeting (or any supplement thereto) (a) by or at the direction of the Board of Directors (or any duly authorized committee thereof) or (b) provided
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that one or more Directors are to be elected at such meeting pursuant to the Corporation’s notice of meeting, by any Stockholder of the Corporation who (i) is a Stockholder of record on the date of the giving of the notice provided for in this Section 1.13.4 through the date of such special meeting, (ii) is entitled to vote at such special meeting and upon such election and (iii) complies with all applicable procedures and other requirements set forth in Section 1.13. In addition to any other applicable requirements, for Director nominations to be properly brought before a special meeting by a Stockholder pursuant to the foregoing clause (b), such Stockholder must have given timely notice thereof in proper written form to the Secretary. To be timely, such notice must be received by the Secretary at the principal executive offices of the Corporation not more than one hundred and twenty (120) days prior to such special meeting and not less than the later of (A) ninety (90) days prior to such special meeting and (B) the tenth (10th) day following the day on which public disclosure of the date of the meeting is first made by the Corporation. In no event shall an adjournment, recess, postponement or rescheduling of a special meeting (or the public disclosure thereof) commence a new time period (or extend any time period) for the giving of a Stockholder’s notice as described above. To be in proper written form, such notice shall include all information required pursuant to Section 1.13.3 above.

1.13.5 Notwithstanding anything to the contrary in these Bylaws, unless otherwise required by applicable law, if any Noticing Party or any Stockholder Associated Person (a) provides notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act and (b) subsequently fails to comply with the requirements of Rule 14a-19(a)(2) or Rule 14a-19(a)(3) promulgated under the Exchange Act (or fails to timely provide documentation reasonably satisfactory to the Corporation that such Noticing Party or Stockholder Associated Person has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act in accordance with the following sentence), then such nomination shall be disregarded and no vote on such nominee proposed by such Noticing Party or Stockholder Associated Person shall occur, notwithstanding that the nomination is set forth in the notice of meeting or other proxy materials and notwithstanding that proxies or votes in respect of the election of such Proposed Nominee may have been received by the Corporation (which proxies and votes shall be disregarded). Upon request by the Corporation, any Noticing Party or any Stockholder Associated Person that has provided notice pursuant to Rule 14a-19(b) promulgated under the Exchange Act shall deliver to the Corporation, no later than five (5) business days prior to the applicable meeting, documentation reasonably satisfactory to the Corporation demonstrating that it has met the requirements of Rule 14a-19(a)(3) promulgated under the Exchange Act.
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1.13.6 In the event that the notice or any other information or communications provided by any Noticing Party, Stockholder Associated Person or Proposed Nominee as required by this Section 1.13 shall not be true, correct and complete in all material respects (including omitting a material fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading), such notice or other information may be deemed not to have been provided in accordance with this Section 1.13. Any such Noticing Party, Stockholder Associated Person or Proposed Nominee shall (a) notify the Corporation of any inaccuracy or change (within two business days of becoming aware of such inaccuracy or change) in any such information and (b) promptly update and supplement the information previously provided to the Corporation pursuant to this Section 1.13, if necessary, so that the information provided or required to be provided shall be true and correct (and not misleading) as of the record date for the meeting and as of the date that is ten (10) business days prior to the meeting or any adjournment, recess, postponement or rescheduling thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation. Upon written request of the Secretary on behalf of the Board of Directors (or a duly authorized committee thereof), any Noticing Party, Stockholder Associated Person or Proposed Nominee shall provide, within five (5) business days after delivery of such request (or such other period as may be specified in such request), (i) written verification, reasonably satisfactory to the Board of Directors, any committee thereof or any authorized Officer of the Corporation, to demonstrate the accuracy of any information submitted by such Noticing Party, Stockholder Associated Person or Proposed Nominee pursuant to this Section 1.13 and (ii) a written affirmation of any information submitted by such Noticing Party, Stockholder Associated Person or Proposed Nominee pursuant to this Section 1.13 as of an earlier date. If a Noticing Party, Stockholder Associated Person or Proposed Nominee fails to provide such written verification or affirmation within such period, the information as to which written verification or affirmation was requested may be deemed not to have been provided in accordance with this Section 1.13.

1.13.7 No person shall be eligible for election as a Director of the Corporation unless the person is nominated by a Stockholder in accordance with the procedures set forth in this Section 1.13 or the person is nominated by the Board of Directors, and no business shall be conducted at a meeting of Stockholders of the Corporation except business brought by a Stockholder in accordance with the procedures set forth in this Section 1.13 or by the Board of
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Directors. The number of nominees a Stockholder may nominate for election at a meeting may not exceed the number of Directors to be elected at such meeting by the class of Stockholders for which such noticing Stockholder is entitled to vote, and no Stockholder shall be entitled to make additional or substitute nominations following the expiration of the time periods set forth in Section 1.13.2 or Section 1.13.4, as applicable. Except as otherwise provided by law, the Presiding Officer of a meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures and other requirements set forth in these Bylaws, and, if the Presiding Officer of the meeting determines that any proposed nomination or business was not properly brought before the meeting, the Presiding Officer shall declare to the meeting that such nomination shall be disregarded or such business shall not be transacted, and no vote shall be taken with respect to such nomination or proposed business, in each case, notwithstanding that proxies with respect to such vote may have been received by the Corporation. For the avoidance of doubt, unless required by applicable law, a nomination for Director by a Stockholder giving notice under this Section 1.13 is not properly brought before a meeting of the Stockholders in accordance with these Bylaws if the Board of Directors or the Presiding Officer determines that (a) such Noticing Party, Stockholder Associated Person or Proposed Nominee has breached any of its agreements, representations or warranties set forth in the notice given by such Stockholder or otherwise submitted pursuant to this Section 1.13, (b) any of the information in such Stockholder’s notice or otherwise submitted by such Noticing Party, Stockholder Associated Person or Proposed Nominee was not, when provided, true, correct and complete in all material respects, or (c) any such Noticing Party, Stockholder Associated Person or Proposed Nominee otherwise fails to comply with its obligations pursuant to these Bylaws. Notwithstanding the foregoing provisions of this Section 1.13, unless otherwise required by law, if the Noticing Party (or a Qualified Representative of the Noticing Party) proposing a nominee for Director or business to be conducted at a meeting does not appear at the meeting of Stockholders of the Corporation to present such nomination or propose such business, such proposed nomination shall be disregarded or such proposed business shall not be transacted, as applicable, and no vote shall be taken with respect to such nomination or proposed business, notwithstanding that proxies with respect to such vote may have been received by the Corporation.

As a condition to serving on the Board of Directors, each Proposed Nominee shall submit to interviews with the Board of Directors or a committee thereof, if requested by the Board of Directors, and each Proposed Nominee shall make himself or herself available for any such
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interviews on or prior to the later of (i) ten (10) days following any reasonable request therefor from the Board of Directors (or any committee thereof) and (ii) the thirtieth (30th) day prior to such Proposed Nominee’s election to the Board of Directors.

1.13.8 In addition to complying with the foregoing provisions of this Section 1.13, a Stockholder shall also comply with all applicable requirements of state law and the Exchange Act with respect to the matters set forth in this Section 1.13. Nothing in this Section 1.13 shall be deemed to affect any rights of (a) Stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act or (b) Stockholders to request inclusion of nominees in the Corporation’s proxy statement pursuant to the Proxy Rules. Except as otherwise required by law, nothing in this Section 1.13 shall obligate the Corporation or the Board of Directors to include in any proxy statement or other Stockholder communication distributed on behalf of the Corporation or the Board of Directors information with respect to any nominee for Director or any proposal submitted by a Stockholder.

1.13.9 For purposes of these Bylaws, (a) “affiliate” and “associate” each shall have the respective meanings set forth in Rule 12b-2 under the Exchange Act; (b) “beneficial owner” or “beneficially owned” shall have the meaning set forth for such terms in Section 13(d) of the Exchange Act; (c) “public disclosure” shall mean disclosure in a press release reported by a national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act; (d) a “Qualified Representative” of a Noticing Party means (i) a duly authorized Officer, manager or partner of such Noticing Party or (ii) a person authorized by a writing executed by such Noticing Party (or a reliable reproduction or electronic transmission of the writing) delivered by such Noticing Party to the Corporation prior to the making of any nomination or proposal at a Stockholder meeting stating that such person is authorized to act for such Noticing Party as proxy at the meeting of Stockholders, which writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, must be produced at the meeting of Stockholders; (e) “Short Interest” shall mean any agreement, arrangement, understanding, relationship or otherwise, including, without limitation, any repurchase or similar so-called “stock borrowing” agreement or arrangement, involving any Noticing Party or any Stockholder Associated Person of any Noticing Party directly or indirectly, the purpose or effect of which is to mitigate loss to, reduce the economic risk (of ownership or otherwise) of any class or series of Shares of the Corporation by, manage the risk of share price changes for, or increase or decrease
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the voting power of, such Noticing Party or any Stockholder Associated Person of any Noticing Party with respect to any class or series of Shares of the Corporation, or which provides, directly or indirectly, the opportunity to profit or share in any profit derived from any decrease in the price or value of any class or series of Shares of the Corporation; and (f) “Stockholder Associated Person” shall mean, with respect to any Noticing Party, (i) any member of the immediate family of such Noticing Party sharing the same household, (ii) any person who is a member of a “group” (as such term is used in Rule 13d-5 under the Exchange Act (or any successor provision at law)) with or otherwise acting in concert with such Noticing Party or Stockholder Associated Person with respect to the Stock of the Corporation, (iii) any beneficial owner of Shares of Stock of the Corporation owned of record by such Noticing Party or Stockholder Associated Person (other than a Stockholder that is a depositary), (iv) any affiliate or associate of such Noticing Party or any Stockholder Associated Person, and (v) any Proposed Nominee.

ARTICLE II    

DIRECTORS

2.01.    GENERAL POWERS. The business and affairs of the Corporation shall be managed by its Board of Directors, except as conferred on or reserved to the Stockholders by law, the Articles, or these Bylaws.

2.02.    OUTSIDE ACTIVITIES. The Board of Directors and its members are required to spend only such time managing the business and affairs of the Corporation as is necessary to carry out their duties in accordance with Section 2-405.1 of the Maryland General Corporation Law. The Board of Directors, each Director, and the agents, Officers and employees of the Corporation or the agents of the Board of Directors or of any Director may engage with or for others in business activities of the types conducted by the Corporation; none of them has an obligation to notify or present to the Corporation or each other any investment opportunity that may come to such person’s attention even though such investment might be within the scope of the Corporation’s purposes or various investment objectives. Any interest (including any interest described in Section 2-419(a) of the Maryland General Corporation Law) that a Director has in any investment opportunity presented to the Corporation must be disclosed by such Director to
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the Board of Directors (and, if voting thereon, to the Stockholders or to any committee of the Board of Directors) within ten (10) days after the later of the date upon which such Director becomes aware of such interest or the date upon which the Director becomes aware that the Corporation is considering such investment opportunity; provided, that if the date upon which the Corporation, its Board of Directors (or a committee thereof) or its Stockholders is scheduled to take action on such investment opportunity is less than ten (10) days after the Director first becomes aware of the interest or that the Corporation is considering such investment opportunity, the Director shall make such required disclosures as early as practicable before the scheduled action. If such interest comes to the interested Director’s attention after a vote to take such investment opportunity, the voting body shall reconsider such investment opportunity if not already consummated or implemented.

2.03.    OUTSIDE MANAGEMENT. The Board of Directors may delegate some or all of the duties of management of the assets and the administration of the Corporation’s day-to-day business operations to one or more advisors pursuant to a written contract or contracts (each, an “Advisory Agreement”), approved by the Board of Directors. The terms of any such Advisory Agreement shall be such terms as are approved by the Board of Directors.

2.04.    NUMBER, TENURE, QUALIFICATION, NOMINATION AND ELECTION.

2.04.1  The number of Directors of the Corporation shall be that number set forth in the Articles, unless a majority of the Board of Directors establishes some other number not less than three (3) nor more than nine (9); provided, that no decrease in the number of Directors shall have the effect of shortening the term of any incumbent Director. The Board of Directors shall be divided into such classes as are set forth in the Articles, with the number of Directors of each class being as equal as practicable. Each Director shall hold office for the term for which he or she is elected and until his or her successor is duly elected and qualifies, or until his or her earlier resignation or removal. At least a majority of the Directors shall at all times (except temporarily pending the filling of a vacancy as hereinafter provided) be persons who meet the requirements of an “independent director” under the rules of the New York Stock Exchange or
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other national securities exchange on which the Shares of the Corporation are then listed (“Independent Directors”).
2.04.2  Except as provided in Section 6.3 of the Articles and Section 2.12 hereof, each Director shall be elected by the vote of a majority of the votes cast with respect to the Director’s election at any meeting for the election of Directors at which a quorum is present, subject to the rights of the holders of any series of preferred stock to elect Directors in accordance with the terms thereof. For purposes of this paragraph, a majority of the votes cast means that the number of votes cast “for” a Director nominee must exceed the number of votes cast “against.” The votes cast shall exclude abstentions and broker non-votes with respect to that Director’s election. Notwithstanding the foregoing, in the event of a contested election of Directors, Directors shall be elected by the vote of a plurality of the votes cast at any meeting for the election of Directors at which a quorum is present. For purposes of these Bylaws, a contested election shall mean any election of Directors in which the number of nominees exceeds the number of Directors to be elected as of the deadline for the notice of Director nominations for such meeting pursuant to Section 1.13 of these Bylaws. If the Directors are to be elected by a plurality of the votes cast pursuant to the provisions of this Section 2.04.2, Stockholders shall not be permitted to vote “against” any one or more of the nominees for Director but shall only be permitted to vote “for” one or more nominees or withhold their votes with respect to one or more nominees. The Articles do not authorize Stockholders to cumulate their votes in any election of Directors of the Corporation.

If, in any election of Directors of the Corporation which is not a contested election, an incumbent Director is not elected due to a failure to receive a majority of the votes cast as described above and his or her successor is not otherwise elected and qualified, the Director shall promptly tender his or her resignation to the Board of Directors, subject to acceptance thereof by the Board of Directors, for consideration by the Nominating and Corporate Governance Committee of the Board of Directors. The Nominating and Corporate Governance Committee shall consider the resignation and make a recommendation to the Board of Directors as to whether to accept or reject the tendered resignation, or whether other action should be taken. The Board of Directors shall act on the tendered resignation, taking into account the Nominating and Corporate Governance Committee’s recommendation, and publicly disclose (by a press release, a filing with the Securities and Exchange Commission or other broadly disseminated means of
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communication (a “Public Announcement”)) its decision regarding the tendered resignation and the rationale behind the decision within ninety (90) days from the date of the certification of the election results. The Nominating and Corporate Governance Committee in making its recommendation, and the Board of Directors in making its decision, may each consider any factors or other information that it considers appropriate and relevant. Any Director who failed to be re-elected by receiving a majority of the votes cast by Stockholders at a meeting for the election of Directors at which a quorum is present shall not participate in either the Nominating and Corporate Governance Committee’s or Board of Directors’ consideration or other action regarding whether to accept the resignation. However, if each member of the Nominating and Corporate Governance Committee failed to receive a majority of the votes cast at the same election, then the Independent Directors who did not fail to receive a majority of the votes cast shall appoint a committee amongst themselves to consider the resignations and recommend to the Board of Directors whether to accept them.

If an incumbent Director resignation pursuant to the foregoing paragraph is not accepted by the Board of Directors, such Director shall continue to serve until the next annual meeting and until his or her successor is duly elected, or his or her earlier resignation or removal. If a Director’s resignation is accepted by the Board of Directors, or if a nominee for Director is not elected and the nominee is not an incumbent Director, then the Board of Directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 6.3 of the Articles and Section 2.12 hereof or may decrease the size of the Board of Directors pursuant to the provisions of Section 2.04.1 hereof.

2.05.    ANNUAL AND REGULAR MEETINGS. An annual meeting of the Board of Directors may be held immediately after and at the same place as the annual meeting of Stockholders, or at such other time and place, either within or without the State of Maryland, as is determined by the Board of Directors, and no other notice shall be necessary. The Board of Directors may provide the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Directors without other notice. Any annual or other regular meeting of the Board of Directors may be held partially or solely by remote communication without designating a place for a physical assembly of the Board of Directors.

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2.06.    SPECIAL MEETINGS. Special meetings of the Board of Directors may be called by or at the request of the Chairperson of the Board (if any), the President or a majority of the Directors then in office. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Directors called by them. The Board of Directors may provide the time and place, either within or without the State of Maryland, for the holding of special meetings of the Board of Directors without other notice. Any special meeting of the Board of Directors may be held partially or solely by remote communication without designating a place for a physical assembly of the Board of Directors.

2.07.    NOTICE. Notice of any special meeting to be provided herein shall be given in writing or by electronic transmission, in accordance with Section 8.01, to each Director at his or her business or residence or his or her business or personal e-mail address at least twenty-four (24) hours, or by mail at least five (5) days, prior to the meeting. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Directors need be specified in the notice, unless specifically required by statute or these Bylaws.

2.08.    QUORUM. A majority of the Directors then in office shall constitute a quorum for transaction of business at any meeting of the Board of Directors; provided, however, that a quorum for transaction of business with respect to any matter in which any Director (or affiliate of such Director) has any interest shall consist of a majority of the Directors then in office excluding the Directors with an interest (or whose affiliate has an interest) in such matter. The Directors present at a meeting which has been duly called and at which a quorum has been established may continue to transact business until adjournment, notwithstanding the withdrawal from the meeting of enough Directors to leave fewer than required to establish a quorum. The Directors at a meeting in which a quorum is not present may adjourn the meeting until a time and place as may be determined by a majority vote of the Directors present at that meeting, and no further notice need be given other than by announcement at said meeting which shall be so adjourned.

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2.09.    VOTING. Except as otherwise required by law or by the Articles, the act of a majority of Directors present at a meeting at which a quorum is present shall constitute the act of the Board of Directors, unless a greater proportion is required by statute, the Articles, or these Bylaws, and if enough Directors have withdrawn from a meeting to leave fewer than required to establish a quorum, but the meeting is not adjourned, the act of a majority of that number of Directors necessary to constitute a quorum at such meeting shall constitute the act of the Board of Directors unless a greater proportion is required by statute, the Articles, or these Bylaws; provided, that in any event, no act relating to any matter in which any Director (or affiliate of such Director) has any interest shall be the act of the Board unless a majority of the Directors on the Board without any such interest vote for such act.

2.10.    CONDUCT OF MEETINGS. All meetings of the Board of Directors shall be called to order and presided over by the Chairperson of the Board (if any), or in the absence of the Chairperson of the Board, by the President (if a member of the Board of Directors), or, in the absence of the Chairperson of the Board and the President, by a member of the Board of Directors selected by the members present. The Secretary of the Corporation shall act as secretary at all meetings of the Board of Directors or, in the absence at any meeting of the Secretary, any Assistant Secretary, or, in the absence of the Secretary and all Assistant Secretaries (if any), the person appointed by the presiding officer of the meeting, shall act as secretary of such meeting. Members of the Board of Directors not physically present at a meeting of the Board of Directors may participate in the meeting by conference telephone or similar communications equipment by remote communication, videoconference, teleconference, or other available technology if all Directors participating in the meeting can hear each other at the same time, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for all purposes.

2.11.    RESIGNATIONS. Any Director may resign from the Board of Directors or any committee thereof at any time. Such resignation shall be made in writing and shall take effect at the time specified therein, or if no time be specified, at the time of the receipt of notice of such resignation by the President or the Secretary. The acceptance of a resignation shall not be
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necessary to make it effective unless otherwise stated in the resignation or as otherwise provided in these Bylaws, including Section 2.04.2 hereof.

2.12.    VACANCIES. A vacancy which arises through the death, resignation or removal of a Director or as a result of an increase by the Board of Directors in the number of Directors may be filled pursuant to the provisions of Section 6.3 of the Articles by a vote of the entire Board of Directors, and a Director so elected by the Board of Directors to fill a vacancy shall serve until the next annual meeting of Stockholders and until his or her successor shall be duly elected and qualified. At the annual meeting of Stockholders, a Director shall be elected to fill the vacancy for the remainder of the present term of office of the class to which the Director is elected.

2.13.    INFORMAL ACTION BY DIRECTORS. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting, if a consent to such action in writing or by electronic transmission is given by each Director and such consent is filed with the minutes of the Board of Directors. Consents may be signed by different Directors on separate counterparts.

2.14.    COMPENSATION. Compensation for services and reimbursement for expenses incurred in connection with attendance at each meeting of the Board of Directors, or of any committee thereof, may be allowed to any Director by resolution of the Board of Directors. A Director shall not be precluded from serving the Corporation in any other capacity and receiving compensation for services in that capacity.

2.15.    RELIANCE. Each Director and Officer of the Corporation shall, in the performance of his or her duties with respect to the Corporation, be entitled to rely on any information, opinion, report or statement, including any financial statement or other financial data, prepared or presented by an Officer or employee of the Corporation whom the Director or Officer reasonably believes to be reliable and competent in the matters presented; by a lawyer, certified public accountant or other person, as to a matter which the Director or Officer reasonably believes to be within the person’s professional or expert competence; or, with respect to a Director, by a committee of the Board of Directors on which the Director does not serve, as
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to a matter within its designated authority, if the Director reasonably believes the committee to merit confidence.

2.16.    RATIFICATION. The Board of Directors or the Stockholders may ratify and make binding on the Corporation any action or inaction by the Corporation or its Officers to the extent that the Board of Directors or the Stockholders could have originally authorized the matter. Moreover, any action or inaction questioned in any Stockholders’ derivative proceeding or any other proceeding on the ground of lack of authority, defective or irregular execution, adverse interest of a Director, Officer or Stockholder, non-disclosure, miscomputation, the application of improper principles or practices of accounting or otherwise, may be ratified, before or after judgment, by the Board of Directors or by the Stockholders, and, if so ratified, shall have the same force and effect as if the questioned action or inaction had been originally duly authorized, and such ratification shall be binding upon the Corporation and its Stockholders and shall constitute a bar to any claim or execution of any judgment in respect of such questioned action or inaction.

2.17.    EMERGENCY PROVISIONS. Notwithstanding any other provision in the Articles or these Bylaws, this Section 2.17 shall apply during the existence of any catastrophe, or other similar emergency condition, as a result of which a quorum of the Board of Directors under Article II of these Bylaws cannot readily be obtained (an “Emergency”). During any Emergency, unless otherwise provided by the Board of Directors, (a) a meeting of the Board of Directors or a committee thereof may be called by any Director or Officer by any means feasible under the circumstances; (b) notice of any meeting of the Board of Directors during such an Emergency may be given less than twenty four (24) hours prior to the meeting to as many Directors and by such means as may be feasible at the time, including publication, television or radio; and (c) the number of Directors necessary to constitute a quorum shall be one-third (1/3) of the entire Board of Directors.

ARTICLE III

COMMITTEES

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3.01.    NUMBER, TENURE AND QUALIFICATION. The Board of Directors may appoint from among its members an Executive Committee and other committees, composed of one or more Directors, to serve at the pleasure of the Board of Directors. Subject to the provisions hereof, the Board of Directors shall have the power at any time to change the membership or size of any committee (including the removal of any member of such committee), to fill any vacancy, to designate an alternate member to replace any absent or disqualified member or to dissolve any such committee.

3.02.    DELEGATION OF POWER. The Board of Directors may delegate to these committees any of the powers of the Board of Directors to manage the business and affairs of the Corporation, except those powers which the Board of Directors is specifically prohibited from delegating pursuant to Section 2-411 of the Maryland General Corporation Law.

3.03.    QUORUM AND VOTING. A majority of the members of any committee shall constitute a quorum for the transaction of business by such committee, and the act of a majority of the committee members at a meeting at which a quorum is present shall constitute the act of the committee, except that no act relating to any matter in which any Director (or affiliate of such Director) who is not an Independent Director has any interest shall be the act of any committee unless a majority of the Independent Directors on the committee vote for such act.

3.04.    CONDUCT OF MEETINGS. Each committee shall designate a presiding officer of such committee, and if not present at a particular meeting, the committee members present shall select a presiding officer for such meeting. Members of any committee not physically present at a meeting of such committee may participate in the meeting by conference telephone or similar communications equipment by remote communication, videoconference, teleconference, or other available technology if all Directors participating in the meeting can hear each other at the same time, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting for all purposes. Each committee shall keep minutes of its meetings, and report the results of any proceedings at the next succeeding annual or regular meeting of the Board of Directors.

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3.05.    INFORMAL ACTION BY COMMITTEES. Any action required or permitted to be taken at any meeting of a committee of the Board of Directors may be taken without a meeting, if a consent to such action in writing or by electronic transmission is given by each member of the committee and such consent is filed with the minutes of proceedings of such committee. Consents may be signed by different members on separate counterparts.

ARTICLE IV

OFFICERS

4.01.    ENUMERATION; POWER AND DUTIES. The officers of the Corporation (the “Officers”) shall include a President, a Treasurer and a Secretary, and may also include a Chairperson of the Board (provided the Board of Directors may designate the Chairperson of the Board position to be non-executive, in which case such Chairperson would not be an Officer of the Corporation), Chief Executive Officer, one or more Vice Presidents, Assistant Treasurers, Assistant Secretaries and other Officers as the Board of Directors may from time to time elect or appoint. The powers and duties of the Officers of the Corporation shall be as provided in these Bylaws or otherwise as provided from time to time by resolution of the Board of Directors or by direction of an Officer authorized by the Board of Directors to prescribe the duties of other Officers. In the absence of such delegation of powers and duties, the respective Officers shall have the powers and shall discharge the duties customarily and usually held and performed by like officers of corporations similar in organization and business purposes to the Corporation subject to the control of the Board of Directors.

4.02.    ELECTION OR APPOINTMENT; TERM. The President, Treasurer and Secretary of the Corporation shall be elected annually by the Board of Directors. The Board of Directors may elect or appoint such other Officers as it determines at any time, except that the President or Chief Executive Officer may from time to time appoint one or more Vice Presidents, Assistant Treasurer and Assistant Secretaries or other Officers. Each Officer shall hold office for the term determined by the Board of Directors and until his or her successor is duly elected and qualifies or until his or her earlier death, resignation, disqualification or removal in the manner hereinafter provided, or until the office to which he or she is elected (if other than that of
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President, Treasurer or Secretary) is terminated by the Board of Directors. Any two or more offices, except President and Vice President, may be held by the same person. Election or appointment of an Officer or agent shall not of itself create contract rights between the Corporation and such Officer or agent.

4.03.    REMOVAL. Any Officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interests of the Corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. The fact that a person is elected or appointed to an office, whether or not for a specified term, shall not by itself create any contract rights or constitute any undertaking or evidence of any employment obligation of the Corporation to that person.

4.04.    RESIGNATION. Any Officer of the Corporation may resign at any time by delivering his or her resignation in writing to the Board of Directors, the Chairperson of the Board, the President, the Chief Executive Officer or the Secretary. Any resignation shall take effect immediately upon its receipt or at such later time specified in the resignation. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Corporation.

4.05.    VACANCIES. A vacancy in any office may be filled by the Board of Directors for the unexpired portion of the term.

4.06.    CHAIRPERSON OF THE BOARD. The Board of Directors may designate from among its members a Chairperson who shall not, solely by reason of these Bylaws, be an Officer of the Corporation. The Board of Directors may designate the Chairperson of the Board as an executive or non-executive Chairperson. The Chairperson of the Board may sign and execute all authorized deeds, mortgages, bonds, contracts or other instruments in the name of the Corporation except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other Officer or agent of the Corporation or shall be required by law to be otherwise signed or executed.
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4.07.    CHIEF EXECUTIVE OFFICER. The Board of Directors may elect or appoint a Chief Executive Officer. The Chief Executive Officer shall have general responsibility for implementation of the policies of the Corporation, as determined by the Board of Directors, and for the management of the business and affairs of the Corporation. The Chief Executive Officer may sign and execute any deed, mortgage, bond, contract or other instruments on behalf of the Corporation except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other Officer or agent of the Corporation or shall be required by law to be otherwise signed or executed. In general, the Chief Executive Officer shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time.

4.08.    PRESIDENT. Unless the Board of Directors shall otherwise determine in favor of the Chairperson of the Board, the Chief Executive Officer or any other Officer of the Corporation, the President shall be the chief executive officer and general manager of the Corporation and shall have active, general supervision and executive management over the business and affairs of the Corporation. The President may sign and execute any deed, mortgage, bond, contract or other instruments on behalf of the Corporation except in cases where the execution thereof shall be expressly delegated by the Board of Directors or by these Bylaws to some other Officer or agent of the Corporation or shall be required by law to be otherwise signed or executed. In general, the President shall perform all duties incident to the office of President and such other duties as may be prescribed by the Board of Directors from time to time.

4.09.    VICE PRESIDENTS. In the absence of the President or in the event of a vacancy in such office, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties of the President and when so acting shall have all the powers of and be subject to all the restrictions upon the President. Every Vice President shall perform such other duties as from time to time may be assigned to him or her by the President or the Board of Directors.

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4.10.    SECRETARY. The Secretary shall (a) keep the minutes of the proceedings of the Stockholders and the Board of Directors; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the corporate records of the Corporation; (d) unless a transfer agent is appointed, keep a register of the post office address of each Stockholder that shall be furnished to the Secretary by such Stockholder and have general charge of the stock ledger of the Corporation (the “Stock Ledger”); (e) when authorized by the Board of Directors or the President, attest to or witness all documents requiring the same; (f) perform all duties as from time to time may be assigned to him or her by the President or by the Board of Directors; and (g) perform all the duties generally incident to the office of secretary of a corporation.

4.11.    TREASURER. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositaries as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, the President or the Chief Executive Officer, taking proper vouchers for such disbursements, and shall render to the President and the Board of Directors an account of all his or her transactions as Treasurer and of the financial condition of the Corporation at any time. In general, the Treasurer shall perform all duties incident to the office of Treasurer and such other duties as may be prescribed by the Board of Directors from time to time. The Board of Directors may engage a custodian to perform some or all of the duties of the Treasurer, and if a custodian is so engaged then the Treasurer shall be relieved of the responsibilities set forth herein to the extent delegated to such custodian and, unless the Board of Directors otherwise determines, shall have general supervision over the activities of such custodian. The custodian shall not be an Officer of the Corporation.

4.12.    ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. Assistant Secretaries and Assistant Treasurers (if any) (a) shall have the power to perform and shall perform all the duties of the Secretary and the Treasurer, respectively, in such respective
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Officer’s absence and (b) shall perform such duties as shall be assigned to him or her by the Secretary or the Treasurer, respectively, or by the President or the Board of Directors.

4.13.    COMPENSATION. The compensation, if any, of the Officers shall be fixed from time to time by or under the authority of the Board of Directors. No Officer shall be prevented from receiving such compensation, if any, by reason of the fact that he or she is also a Director of the Corporation.

ARTICLE V

SHARES OF STOCK

5.01.    CERTIFICATES OF STOCK. Except as may be otherwise provided by the Board of Directors or required by the Articles, Stockholders of the Corporation are not entitled to certificates representing the Shares held by them. In the event that the Corporation issues Shares represented by certificates, such certificates shall be in such form as prescribed by the Board of Directors or a duly authorized Officer, shall contain the statements and information required by the Maryland General Corporation Law and shall be signed by the Officers of the Corporation in the manner permitted by the Maryland General Corporation Law. In the event that the Corporation issues Shares without certificates, on request by a Stockholder, the Corporation shall provide to such record holder a written statement of the information required by the Maryland General Corporation Law to be included on stock certificates. There shall be no differences in the rights and obligations of Stockholders based on whether or not their Shares are represented by certificates.

5.02.    STOCK LEDGER. The Corporation shall maintain at its principal office in Murfreesboro, Tennessee (or any subsequent address selected by the Board of Directors) or at the office of its counsel, accountants or transfer agent, an original or duplicate Stock Ledger containing the names and addresses of all the Stockholders and the number of Shares of each class or series held by each Stockholder.

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5.03.    RECORDING TRANSFERS OF STOCK. All transfers of Shares shall be made on the books of the Corporation, by the holder of the Shares, in person or by such holder’s attorney, in such manner as the Board of Directors or any Officer of the Corporation may prescribe and, if such Shares are certificated, upon surrender of certificates duly endorsed. The issuance of a new certificate upon the transfer of certificated Shares is subject to the determination of either the Board of Directors or any Officer of the Corporation that such Shares shall no longer be represented by certificates. Upon the transfer of uncertificated Shares, to the extent then required by the Maryland General Corporation Law, the Corporation shall provide to record holders of such Shares a written statement of the information required by the Maryland General Corporation Law to be included on stock certificates.

The Corporation shall be entitled to treat the holder of record of any Share as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such Share or on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Maryland. Nothing herein shall impose upon the Corporation, the Board of Directors or Officers or their agents and representatives a duty, or limit their rights, to inquire as to the actual ownership of Shares.

Notwithstanding the foregoing, transfers of Shares of any class or series of Stock will be subject in all respects to the Articles and all of the terms and conditions contained therein.

5.04.    LOST CERTIFICATE. The Board of Directors or any Officer may direct a new certificate to be issued in the place of any certificate theretofore issued by the Corporation alleged to have been stolen, lost or destroyed upon the making of an affidavit of that fact by the person claiming the certificate of Stock to be stolen, lost, destroyed or mutilated; provided, however, if such Shares have ceased to be certificated, no new certificate shall be issued unless (a) requested in writing by such Stockholder and (b) any of the Board of Directors, the Chairperson of the Board, the President or the Chief Executive Officer has determined such certificates may be issued. Unless otherwise determined by the Board of Directors or an Officer, as a condition precedent to the issuance of a new certificate or certificates, the owner of such stolen, lost, destroyed or mutilated certificate or his or her legal representative shall give a bond,
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with sufficient surety, to the Corporation to indemnify it against any loss or claim which may arise with respect to the certificate alleged to have been lost, stolen, or destroyed or the issuance of such new certificate or certificates.

5.05.    CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE.

5.05.1  The Board of Directors may fix, in advance, a date as the record date for the purpose of determining Stockholders entitled to notice of, or to vote at, any meeting of Stockholders, or Stockholders entitled to receive payment of any dividend or the allotment of any rights, or in order to make a determination of Stockholders for any other proper purpose. Such date, in any case, shall be not more than ninety (90) days, and in case of a meeting of Stockholders not less than ten (10) days, prior to the date on which the meeting or particular action requiring such determination of Stockholders is to be held or taken.

5.05.2  When a determination of Stockholders entitled to vote at any meeting of Stockholders has been made as provided in this Section, such determination shall apply to any adjournment or postponement thereof, except where the Board of Directors fixes a new record date for the adjourned or postponed meeting, and provided, however, that the Board of Directors must fix a new record date if the meeting is adjourned or postponed more than one hundred and twenty (120) days after the record date fixed for the original meeting of Stockholders.

ARTICLE VI

DIVIDENDS AND DISTRIBUTIONS

6.01.    DECLARATION. Dividends and other distributions upon the Stock may be authorized by the Board of Directors as set forth in the applicable provisions of the Articles and any applicable law. Dividends and other distributions upon the Stock may be paid in cash, property or Stock of the Corporation, subject to the provisions of law and of the Articles.

6.02.    CONTINGENCIES. Before payment of any dividends or other distributions upon the Stock, there may be set aside (but there is no duty to set aside) out of any funds of the
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Corporation available for dividends or other distributions such sum or sums as the Board of Directors may from time to time, in its absolute discretion, think proper as a reserve fund to meet contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Corporation or for such other purpose as the Board of Directors shall determine to be in the best interest of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE VII

INDEMNIFICATION

7.01.    INDEMNIFICATION OF OFFICERS. Unless the Directors otherwise determine prospectively in the case of any one or more specified Officers, any person elected or appointed by the Directors as an Officer of the Corporation shall be entitled to indemnification by the Corporation on account of matters resulting in his or her capacity as an Officer to the full extent permitted by the Articles.

7.02.    ADVANCEMENT OF EXPENSES. Reasonable expenses incurred by a Director or an Officer who is a party to a proceeding may be paid or reimbursed by the Corporation in advance of the final disposition of the proceeding to the fullest extent permitted under the Maryland General Corporation Law upon receipt by the Corporation of (a) a written affirmation by the Director or the Officer of such person’s good faith belief that the standard of conduct necessary for indemnification by the Corporation as authorized in the Articles or these Bylaws, or under Maryland law, has been met; and (b) a written undertaking by or on behalf of the Director or the Officer to repay the amount if it shall ultimately be determined that the standard of conduct has not been met.

7.03.    NON-EXCLUSIVITY OF INDEMNIFICATION RIGHTS. The rights to indemnification and advancement of expenses set forth in the Articles or in these Bylaws are in addition to all rights which any indemnified person may be entitled as a matter of law, by a resolution of the Stockholders or Board of Directors, under any other agreement with the
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Corporation, or otherwise, and shall inure to the benefit of the heirs and personal representatives of each indemnified person.

7.04.    INSURANCE. The Corporation shall have power to purchase and maintain insurance on behalf of any person entitled to indemnification or whom the Corporation may indemnify under ARTICLE TWELFTH of the Articles or under Maryland law against any liability, whether or not the Corporation would have the power to indemnify him or her against such liability.


ARTICLE VIII

NOTICES

8.01.    NOTICES. Whenever notice is required to be given pursuant to these Bylaws, it may be communicated in person (including by personal delivery); by facsimile, e-mail or other form of wire or wireless communication; or by private carrier or mail, by depositing the same in the U.S. mail, with postage thereon paid, addressed, if to the Corporation, at the principal office of the Corporation, 222 Robert Rose Drive, Murfreesboro, Tennessee 37129 (or any subsequent address selected by the Board of Directors notice of which is given to the Stockholders), attention President, or if to a Stockholder, Director or Officer, at the address of such person as it appears on the books of the Corporation, or in the case of electronic transmission to any address or number of the Stockholder, Director or Officer at which the Stockholder, Director or Officer receives electronic transmissions. Unless otherwise specified, (a) notice sent by mail shall be deemed to be given when deposited in the U.S. mail, and (b) notice sent by electronic transmission shall be deemed to be given when transmitted to the Stockholder, Director or Officer. The Corporation may give a single notice to all Stockholders who share an address, which single notice shall be effective as to any Stockholder at such address, unless the Corporation has received a request from a Stockholder at such address in writing or by electronic transmission that a single notice not be given.

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8.02.    SECRETARY TO GIVE NOTICE. All notices required by law or these Bylaws to be given by the Corporation shall be given by the Secretary of the Corporation. If the Secretary and Assistant Secretary are absent or refuse or neglect to act, the notice may be given by any person directed to do so by the President or, with respect to any meeting called pursuant to these Bylaws upon the request of any Stockholders or Directors, by any person directed to do so by the Stockholders or Directors upon whose request the meeting is called.

8.03.    WAIVER OF NOTICE. Whenever any notice is required to be given pursuant to the Articles or Bylaws of the Corporation or pursuant to applicable law, a waiver thereof in writing or by electronic transmission by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Such waiver shall be filed with the records of the meeting. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. A person’s participation or attendance at a meeting in person or by proxy shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened.

ARTICLE IX

MISCELLANEOUS

9.01.    BOOKS AND RECORDS. The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its Stockholders and Board of Directors and of any executive or other committee when exercising any of the powers or authority of the Board of Directors. The books and records of the Corporation may be in written form or in any other form that can be converted within a reasonable time into written form for visual inspection.

9.02.    INSPECTION OF BYLAWS AND CORPORATE RECORDS. To the extent required under Section 2-512 of the Maryland General Corporation Law, these Bylaws, the minutes of proceedings of the Stockholders, the annual statements of affairs and any
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Stockholders’ or voting trust agreements on record shall be open to inspection during usual business hours upon demand made in writing or by electronic transmission on the Corporation by any Stockholder, holder of a voting trust certificate or any agent thereof.

9.03.    CONTRACTS. In addition to the provisions of these Bylaws relating to the authority of any specified Officer, the Board of Directors may authorize any Officer or Officers, or agent or agents, to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document shall be valid and binding upon the Corporation when duly authorized or ratified, generally or specifically, by action of the Board of Directors and executed by an authorized person.

9.04.    CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such Officers or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors.

9.05.    DEPOSITS. All funds of the Corporation not otherwise employed shall be deposited or invested from time to time to the credit of the Corporation as the Board of Directors, the President, the Treasurer, the Chief Executive Officer, the Chief Financial Officer or any other Officer designed by the Board of Directors may select.

9.06.    FISCAL YEAR. The Board of Directors shall have the power, from time to time, to fix the fiscal year of the Corporation by a duly adopted resolution, and, in the absence of such resolution, the fiscal year shall be the period ending December 31.

9.07.    CONFLICT WITH APPLICABLE LAW OR ARTICLES. Unless the context requires otherwise, the general provisions, rules of construction, and definitions of the Maryland General Corporation Law shall govern the construction of these Bylaws. These Bylaws are adopted subject to any applicable law and the Articles. Whenever these Bylaws may conflict with any applicable law or the Articles, such conflict shall be resolved in favor of such law or the Articles.
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9.08.    INVALID OR UNENFORCEABLE. If any one or more of the provisions of these Bylaws, or the applicability of any provision to a specific situation, shall be held invalid or unenforceable, the provision shall be modified to the minimum extent necessary to make it or its application valid and enforceable, and the validity and enforceability of all other provisions of these Bylaws and all other applications of any provision shall not be affected thereby.

ARTICLE X

AMENDMENT OF BYLAWS

10.01.   BY DIRECTORS. To the fullest extent permitted by the Maryland General Corporation Law, the Board of Directors shall have the power, at any annual or regular meeting, or at any special meeting if notice thereof be included in the notice of such special meeting, to amend, alter or repeal any Bylaws of the Corporation or to make new Bylaws.

10.02.   BY STOCKHOLDERS. The Stockholders shall have the power, at any annual meeting, or at any special meeting if notice thereof be included in the notice of such special meeting, with the approval of holders of at least a majority of the votes cast at such meeting, to amend, alter or repeal any Bylaws of the Corporation and to make new Bylaws.

10.03.   EXCEPTION FOR INDEMNIFICATION. Notwithstanding the foregoing, no amendment or repeal of any Articles provision, Bylaws provision or provision of any resolution of the Board of Directors or other contractual obligation of the Corporation affording indemnification by the Corporation to any person shall be effective so as to deprive such person from the right to indemnification on account of all matters occurring or arising prior to such amendment or repeal without the consent of such indemnified person.

34864402.6
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Exhibit 4.7

DESCRIPTION OF SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
The following description of the capital stock of National Health Investors, Inc. (the “Company,” “us,” “our” or “we”) is a summary of the rights of our common stock and certain provisions of Maryland General Corporation Law and our articles of incorporation (our “articles”) and amended and restated bylaws (our “bylaws”), as currently in effect. This description is a summary, does not purport to be complete and is qualified in its entirety by reference to the provisions of our articles and bylaws, copies of which are filed as exhibits to our Annual Report on Form 10-K and are incorporated by reference herein, and to the applicable provisions of Maryland and U.S. federal law. We encourage you to read our articles and bylaws, and the applicable provisions of Maryland and U.S. federal law for additional information.
Authorized Capital
Our articles authorize us to issue up to 110,000,000 shares of capital stock, consisting of 100,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share.
Voting Rights. With respect to all matters upon which stockholders are entitled to vote, except as required by applicable law, the holders of our common stock will be entitled to one vote in person or by proxy for each share of our common stock outstanding in the name of such stockholder on the record of stockholders. The holders of our outstanding common stock do not have the right to cumulate their votes with respect to the election of directors or any other matters. Generally, all matters to be voted on by our stockholders must be approved by a majority of the votes cast on such matter (or by a plurality of the votes cast in the case of an election of directors where the number of candidates nominated for election exceeds the number of directors to be elected) at a meeting of stockholders at which a quorum is present.
Dividends. Subject to applicable law and rights, if any, of the holders of any outstanding class or series of preferred stock having a preference over our common stock with respect to the payment of dividends, dividends may be declared and paid on our common stock from time to time and in amounts as our board of directors may determine.
Liquidation Rights. Upon our liquidation or dissolution or the winding up of our business, whether voluntarily or involuntarily, the holders of our common stock will be entitled to share ratably in all assets available for distribution after payment or provision for the payment of our debt and liabilities and to holders of preferred stock then outstanding of any amount required to be paid to them.
Other Provisions. The holders of our common stock will not be entitled to any preemptive, subscription or redemption rights, and will not be entitled to the benefit of any sinking fund. All outstanding shares of our common stock are fully paid and nonassessable.
Miscellaneous. The transfer agent and registrar for our common stock is Computershare Trust Company, N.A. Our common stock is listed on the New York Stock Exchange under the symbol “NHI.”
Preferred Stock
Our board of directors is authorized to issue preferred stock in one or more series and, with respect to each series, to determine the number of shares constituting any series, and the preferences, conversion and other rights, voting powers, restrictions and limitations as to dividends, qualifications and terms and conditions of redemption.
We have no plans to issue any preferred stock or other new class of stock. Our preferred stock and the variety of characteristics available for it offers us flexibility in financing and acquisition transactions. An issuance of stock could dilute the book value or adversely affect the relative voting power of our common stock. The issuance of such shares could be used to discourage unsolicited business combinations, for example, by providing for class voting rights which would enable the holder to block such a transaction. Although our board of directors is required when issuing such stock to act based on its judgment as to the best interests of our stockholders, our board of directors could act in a manner which would discourage or prevent a transaction some stockholders might believe is in the Company’s best interests or in which stockholders could or would receive a premium for their shares over the



market price. Our board of directors has authority to classify or reclassify authorized but unissued shares of stock by setting or changing the preferences, conversion and other rights, voting powers, restrictions and limitations as to dividends, qualifications, and terms and conditions of redemption of stock.
Restrictions on Ownership and Transfer
Our articles contain certain limitations on the number of shares of our stock that any one stockholder may own, which limitations are designed to ensure that the Company maintains its status as a real estate investment trust, or REIT. Our articles provide that any transfer that would cause the Company to be beneficially owned by fewer than 100 persons or would cause the Company to be “closely held” under the Internal Revenue Code of 1986, as amended (the “Code”) would be void. In addition, our articles provide that no person (as defined in the Code) may own directly or indirectly 9.9 percent or more of our common stock (as adjusted downward in accordance with our articles to take into account shares beneficially owned by “Excepted Holders” (as such term is defined in our articles)). These limitations are referred to below as the “ownership limits.” For purposes of the ownership limits, shares are beneficially owned by the person who is the actual owner or who is treated as the owner of such shares, directly, indirectly or constructively under the Code. The beneficial ownership of shares of common or preferred stock in excess of the ownership limits and any attempted transfer in violation of the ownership limits is void.
Our board of directors has broad powers to prohibit and rescind any attempted transfer in violation of the ownership limits. Our articles provide that any shares owned in violation of the ownership limits will be automatically converted into shares of Excess Stock (as defined in our articles) effective as of the day before the transaction giving rise to the conversion. Upon conversion, shares of Excess Stock will be deemed to be contributed into a trust held for the sole benefit of a tax exempt charitable organization designated by our board of directors. Shares of Excess Stock will carry the same voting rights and rights to distributions and dividends as the shares from which they were converted. However, any distributions or dividends paid on the shares of Excess Stock will be held in the trust and all voting rights with respect to the shares of Excess Stock may be exercised only by the trustee. The trustee may sell shares of Excess Stock provided that any such sale would not result in a violation of the ownership limits. From the proceeds of such sale, the trustee is required to distribute to the record owner of such shares the lesser of (i) the price paid by the record owner for such shares (or, if no consideration was paid by such record owner, the average closing price for such shares for the ten trading days immediately preceding the date the record owner acquired such shares) or (ii) the proceeds receive by the trustee. All remaining proceeds will be distributed to the charitable beneficiary.
Our board of directors has the power to permit persons to own shares in excess of the ownership limits described above (thereby causing such persons to become Excepted Holders) provided that our board of directors believes that our REIT status will not be jeopardized and any such persons enter into Excepted Holder agreements with the Company. The ownership limit with respect to each Excepted Holder will be as set forth in such Excepted Holder’s agreement with the Company.
Effective April 29, 2008, we entered into Excepted Holder agreements with W. Andrew Adams and certain members of his family. These written agreements are intended to restate and replace the parties’ prior verbal agreement. A separate agreement was entered into with each of the spouse and children of Dr. Carl E. Adams and others within Mr. W. Andrew Adams’ family. We needed to enter into such an agreement with each family member because of the complicated ownership attribution rules under the Code. These agreements permit the “Excepted Holders” to own stock in excess of 9.9% up to the limit specifically provided in the individual agreement and not lose rights with respect to such shares. However, if the stockholder’s stock ownership exceeds the limit then such shares in excess of the limit become Excess Stock. The purpose of these agreements is to ensure that the Company does not violate the prohibition against a REIT being closely held.
Based on the Excepted Holder agreements currently outstanding, the ownership limit of our outstanding common stock for all other stockholders who are not Excepted Holders is approximately 7.5%. This ownership limit may change if we enter into additional Excepted Holder agreements. Our articles give our board of directors broad powers to prohibit and rescind any attempted transfer in violation of the ownership limit.
Upon demand of the Company, each stockholder must disclose to the Company such information with respect to direct and indirect ownership of stock owned (or deemed to be owned after applying the rules applicable to REITs under the Code) as our board of directors deems reasonably necessary in order that the Company may fully
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comply with the REIT provisions of the Code. Proposed transferees of stock must also satisfy our board of directors, upon demand, that such transferees will not cause the Company to fall out of compliance with such provisions.
Anti-Takeover Effect of Certain Provisions of our Articles and Bylaws
Classified board of directors. Our articles divide our board of directors into three classes. Moreover, no director may be removed prior to the expiration of his or her term except for cause. These provisions in our articles may tend to discourage a third party from making a tender offer or otherwise attempting to obtain control of our company and may maintain the incumbency of our board of directors, because this structure generally increases the difficulty of, or may delay, replacing a majority of the directors.
Meetings of stockholders. Under our bylaws, annual meetings of stockholders are to be held on the date and at the time determined by our board of directors. Special meetings of stockholders may be called by a majority of the directors then in office, the chairperson of our board of directors or our president. Additionally, subject to the provisions of our bylaws, special meetings of the stockholders will be called by our secretary upon the written request of stockholders entitled to cast not less than 25% of the votes entitled to be cast at such meeting. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting. Our bylaws provide and Maryland law permits that any action required or permitted to be taken at a meeting of stockholders may be taken without a meeting by unanimous written consent, if that consent sets forth such action and is provided by each stockholder entitled to vote on the matter.
Filling of board vacancies. Vacancies on our board of directors and newly created directorships resulting from any increase in the authorized number of directors may be filled by a vote of the entire board of directors. Each person so appointed will hold office until the next annual meeting of stockholders and until his or her successor has been duly elected and qualified, or until his or her earlier resignation, removal or disqualification.
Amendment of the bylaws. To the fullest extent permitted by the Maryland General Corporation Law, our board of directors has the power at any annual, regular or special meeting (with appropriate notice), to amend, alter or repeal any of our bylaws and to make new bylaws. Our stockholders have the power at any annual or special meeting (with appropriate notice), with the approval of holders of at least a majority of the votes cast at such meeting, to amend, alter or repeal any bylaws of the Company and to make new bylaws.
Advance notice of director nominations and other stockholder proposals. Our bylaws include advance notice provisions specifying procedures, informational requirements and time limitations with respect to stockholder proposals and stockholder nominations of individuals for election to our board of directors at a meeting of stockholders. Failure to comply with these advance notice provisions can result in a stockholder’s director nomination or proposal of other business to not be considered at a meeting of stockholders.
Our bylaws provide that, with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of other business to be considered by stockholders may be made only (i) pursuant to our notice of the meeting, (ii) by or at the direction of our board of directors or (iii) by a stockholder who is a stockholder of record on the date of the giving of notice required by our bylaws through the date of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on such other business and who has complied with the advance notice provisions set forth in our bylaws.
With respect to a special meeting of stockholders, only the business specified in our notice of meeting may be brought before the meeting. Nominations of individuals for election to our board of directors may be made only at a special meeting of stockholders at which directors are to be elected pursuant to our notice of meeting (i) by or at the direction of our board of directors or (ii) by a stockholder who is a stockholder of record on the date of the giving of notice required by our bylaws through the date of the meeting, who is entitled to vote at the meeting in such election and who has complied with the advance notice provisions set forth in our bylaws.
The purpose of these advance notice procedures is to afford our board of directors a meaningful opportunity to consider the qualifications of the proposed nominees and the advisability of any other proposed business and, to the extent considered necessary by our board of directors, to inform stockholders and make recommendations regarding the nominations or business, as well as to permit a more orderly procedure for conducting our stockholder meetings. Although our bylaws do not give our board of directors the power to disapprove timely stockholder nominations for the election of directors or proposals recommending certain action, they may have the effect of
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precluding a contest for the election of directors or the consideration of stockholder proposals if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of directors to our board of directors or to approve its own proposal without regard to whether consideration of such nominees or proposals might be harmful or beneficial to us and our stockholders.
Ownership limitations. Primarily to protect us against the risk of losing our status as a REIT, our articles contain provisions that limit the ownership by any person of shares of any class or series of our capital stock. These provisions may have the effect of inhibiting or impeding a change in control.
Anti-Takeover Effect of Maryland Law
In addition to certain provisions of our articles and bylaws discussed above, Maryland has adopted a series of statutes which can have an anti-takeover effect and may delay or prevent a takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in a premium over the market price for our capital stock.
The Maryland General Corporation Law. The Maryland General Corporation Law applies to all Maryland corporations. It imposes a five-year standstill on transactions such as mergers, share exchanges, sales of assets, liquidations and other interested party transactions between Maryland corporations and “interested stockholders” and their associates or affiliates, unless the business combination is approved by the board of directors before the interested stockholder goes above a 10% ownership threshold. Thereafter, the transaction either requires a two-thirds vote of the stockholders other than the interested stockholder and an 80% vote of all stockholders or satisfaction of minimum price standards.
Control Share Acquisitions. The provisions of the Maryland Control Share Acquisition Act provide that a holder of control shares of a Maryland corporation acquired in a control share acquisition has no voting rights with respect to those shares except to the extent approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror, by officers or by directors who are employees of the corporation are excluded from shares entitled to vote on the matter. Control shares are voting shares of stock which, if aggregated with all other shares of stock owned by the acquiror or in respect of which the acquiror is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiror to exercise voting power in electing directors within one of the following ranges of voting power:
one-tenth or more but less than one-third;
one-third or more but less than a majority; or
majority or more of all voting power.
Control shares do not include shares that the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. A control share acquisition means, subject to certain exceptions, the acquisition of issued and outstanding control shares.
A person who has made or proposes to make a control share acquisition may compel the board of directors of the corporation to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the meeting. If no request for a meeting is made, the corporation may itself present the question at any stockholders’ meeting.
If voting rights are not approved at the meeting or if the acquiring person does not deliver an acquiring person statement as required by the statute, then the corporation may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. The right of the corporation to redeem control shares is subject to certain conditions and limitations. Fair value is determined, without regard to the absence of voting rights for the control shares, as of the date of the last control share acquisition by the acquiror or, if a meeting of stockholders at which the voting rights of the shares are considered and not approved, as of the date of that meeting. If voting rights for control shares are approved at a stockholders’ meeting and the acquiror becomes entitled to vote a majority of the shares entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares as determined for purposes of appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition.
4



The control share acquisition statute does not apply to (i) shares acquired in a merger, consolidation or share exchange if the corporation is a party to the transaction or (ii) acquisitions approved or exempted by the articles or bylaws of the corporation. Our articles provide that the voting rights of shares of our stock held by a person identified by our board of directors as a “Current Excepted Holder” and their affiliates are not be governed by the control share provisions of the Maryland General Corporation Law.

35150282.3
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AMENDMENT NO. 8 TO MASTER AGREEMENT TO LEASE

This Amendment No. 8 (hereinafter "Amendment No. 8" or "8th Amendment") is made to that certain Master Agreement to Lease between National Health Investors, Inc. ("Landlord" or "NHI") and National HealthCare Corporation (f/k/a National HealthCare L.P.) ("Tenant" or "NHC'') dated October 17, 1991, as amended, ("Master Lease"), and is entered into the 30th day of October, 2020.

Background

Pursuant to the terms of the Master Lease, NHC has leased certain licensed nursing centers, assisted living or retirement facilities (hereinafter "Leased Properties" or "Leased Property") as identified on Exhibit "A" to said Master Lease; and

WHEREAS, Exhibit "A" to the Master Lease included property identified as NHC of Maryland Heights, P.O. Box 2244, 2900 Fee Fee Rd., Maryland Heights, MO 63043 (the "Maryland Heights Property"); and

WHEREAS, NHC, by and through its affiliate, Maryland Heights Properties, LLC, has purchased or will purchase 2.47 acres of the Maryland Heights Property, the same being described on Exhibit "A" attached hereto and in Plat Book 368, page 441, in the Office of the Recorder of Deeds for St. Louis County, MO (the "Purchased Property"); and

WHEREAS, Landlord and Tenant wish to amend the Master Lease for the sole purpose of excluding the Purchased Property from the Master Lease.

Amendments

NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, the Parties do
hereby amend the Master Lease as follows:

1.Modification of "Leased Property". As of the date the sale of the Purchased Property closes, the phrase "Leased Property," as found and used in the Master Lease, shall no longer include the Purchased Property.

2.Partial Release of Right of First Refusal and Option to Purchase. Any right of first refusal and/or option to purchase in the Master Lease shall be and hereby is deleted solely as to the Purchased Property. Any right of first refusal and/or option to purchase as to any of the remaining Leased Properties, or portions thereof, or any other property leased by Tenant from Landlord shall remain in full force and effect and unchanged.

3.Release of Non-Compete. Any non-compete covenant in the Master Lease shall be and hereby is void as to is application to the Purchased Property, the Maryland Heights Property and any improvements existing or to be made thereon.



4.Remainder of Master Lease Unchanged. Any provision(s) of the Master Lease not modified or amended by this Amendment No. 8 shall remain in full force and effect. ·

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.



SIGNATURE PAGE TO AMENDMENT NO. 8 TO
MASTER AGREEMENT TO LEASE


TENANT:
NATIONAL HEALTHCARE CORPORATION, a Delaware corporation
By:/s/Stephen F. Flatt
Title:
Stephen F. Flatt,
Chief Executive Officer
Date:October 29, 2020
LANDLORD:
NATIONAL HEALTH INVESTORS, INC., a Maryland corporation
By:/s/Kristi Gaines
Title:
Kristi Gaines,
Chief Credit Officer
Date:October 30, 2020





Exhibit A to 8th Amendment to Master Lease

LEGAL DESCRIPTION

LOT 2 OF "NHI/NHC MARYLAND HEIGHTS 2 LOT SUBDIVISION" ACCORDING TO THE PLAT THEREOF RECORDED IN PLAT BOOK 368, PAGE 441 OF THE ST. LOUIS COUNTY, MISSOURI, RECORDS.

ALSO BEING DESCRIBED AS:

A TRACT OF LAND BEING PART OF LOT 2 OF THE PARTITION OF BENJAMIN W. HAWKINS ESTATE, IN SECTION 14, TOWNSHIP46NORTH, RANGE 5 EAST OF THE 5th P.M., ST. LOUIS COUNTY, MISSOURI, AND BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS;

COMMENCING AT THE N.W. CORNER OF LOT 7 OF AYRSHIRE SUBDIVISION, AS RECORDED IN PLAT BOOK 13, PAGE 31 OF THE ST. LOUIS COUNTY RECORDS, THENCE NORTH 59 DEGREES 19 MINUTES 22 SECONDS WEST ALONG THE SOUTH RIGHT OF WAY LINE OF AYRSHIRE AVENUE (50 FEET WIDE), A DISTANCE OF 69.55 FEET TO THE POINT OF BEGINNING OF THE TRACT OF LAND HEREIN DESCRIBED; THENCE LEAVING SAID SOUTH RIGHT OF WAY LINE, SOUTH 02 DEGREES 50 MINUTES 28 SECONDS EAST, 27.62 FEET TO A POINT; THENCE SOUTH 20 DEGREES 04 MINUTES 06 SECONDS WEST, 68.36 FEET TO A POINT; THENCE SOUTH 37 DEGREES 00 MINUTES 22 SECONDS WEST, 199.65 FEET TO A POINT; THENCE NORTH 55 DEGREES 04 MINUTES 19 SECONDS WEST, 119.96 FEET TO A POINT; THENCE NORTH 61 DEGREES 29 MINUTES 14 SECONDS WEST, 75.09 FEET TO A POINT; THENCE NORTH 55 DEGREES 42 MINUTES 37 SECONDS WEST, 41.57 FEET TO A POINT; THENCE NORTH 77 DEGREES 36 MINUTES 49 SECONDS WEST, 87.16 FEET TO A POINT; THENCE NORTH 53 DEGREES 43 MINUTES 10 SECONDS WEST, 57.85 FEET TO A POINT; THENCE NORTH 36 DEGREES 16 MINUTES 50 SECONDS EAST, 303.13 FEET TO A POINT ON THE SOUTH RIGHT OF WAY LINE OF AYRSHIRE AVENUE (50 FEET WIDE); THENCE ALONG SAID SOUTH RIGHT OF WAY LINE, SOUTH 59 DEGREES 19 MINUTES 22 SECONDS EAST, 341.06 FEET TO THE POINT OF BEGINNING.

THE ABOVE DESCRIBED TRACT OF LAND CONTAINS 107,417 SQUARE FEET OR 2.47 ACRES MORE OR LESS.



















US_Active\115526749\V-7


AMENDMENT NO. 9 TO MASTER AGREEMENT TO LEASE

This Amendment No. 9 (hereinafter “Amendment No. 9” or “9th Amendment”) is made to that certain Master Agreement to Lease between National Health Investors, Inc. (“Landlord” or “NHI”) and National HealthCare Corporation (f/k/a National HealthCare L.P.) (“Tenant” or “NHC”) dated October 17, 1991, as amended, (“Master Lease”), and is entered into the 29th day of March, 2021.

Background

Pursuant to the terms of the Master Lease, NHC has leased certain licensed nursing centers, assisted living or retirement facilities (hereinafter “Leased Properties” or “Leased Property”) as identified on Exhibit “A” to said Master Lease; and

WHEREAS, a third party has purchased or will purchase property located in Greenwood, South Carolina, the same being described on Exhibit “A” attached hereto (the “Purchased Property”); and

WHEREAS, Landlord and Tenant wish to amend the Master Lease for the sole purpose of excluding the Purchased Property from the Leased Property governed by the Master Lease.

Amendments

NOW, THEREFORE, IN CONSIDERATION OF THE PREMISES, the Parties do hereby
amend the Master Lease as follows:

1.Modification of “Leased Property”. As of the date the sale of the Purchased Property closes, the phrase “Leased Property,” as found and used in the Master Lease, shall no longer include the Purchased Property.

2.Partial Release of Right of First Refusal and Option to Purchase. Any right of first refusal and/or option to purchase in the Master Lease shall be and hereby is deleted solely as to the Purchased Property. Any right of first refusal and/or option to purchase as to any of the remaining Leased Properties, or portions thereof, or any other property leased by Tenant from Landlord shall remain in full force and effect and unchanged.

3.Release of Non-Compete. Any non-compete covenant in the Master Lease shall be and hereby is void as to its application to the Purchased Property and any improvements existing or to be made thereon.

4.Remainder of Master Lease Unchanged. Any provision(s) of the Master Lease not modified or amended by this Amendment No. 9 shall remain in full force and effect.

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURE PAGE FOLLOWS.





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US_Active\117746718\V-1



SIGNATURE PAGE TO AMENDMENT NO. 9 TO MASTER AGREEMENT TO LEASE

TENANT:
NATIONAL HEALTHCARE CORPORATION, a Delaware corporation
By:/s/Stephen F. Flatt
Title:
Stephen F. Flatt,
Chief Executive Officer
Date:April 9, 2021
LANDLORD:
NATIONAL HEALTH INVESTORS, INC., a Maryland corporation
By:/s/Kristi Gaines
Title:
Kristi Gaines,
Chief Credit Officer
Date:March 29, 2021
2


Exhibit A to 9th Amendment to Master Lease LEGAL DESCRIPTION
ALL that certain piece, parcel or tract of land situate, lying and being in the City of Greenwood, County of Greenwood, State of South Carolina, being shown and designated as Parcel A on plat showing property as surveyed at the request of Abney Mills, Prepared by W. E. Gilbert Associates, Inc., Engineers, dated November 9, 1981, and recorded in Plat Book 37, at Page 135, in the Office of the Clerk of court for Greenwood County. According to said plat of survey the within Parcel A contains 3.89 acres, more or less, and reference should be made to the aforementioned plat for a metes and bounds description.


ALSO all of the Grantor’s right, title and interest, if any, in and to the property shown on the aforementioned plat as “C. & W. C. Industrial Siding (now abandoned)” which traverses said Parcel A referenced above.







































US_Active\117746718\V-1


Exhibit 21
Subsidiary Entity List
Entity Name
Ownership1
Tax Treatment
NHI/REIT, Inc.100%Corporation
Florida Holdings IV, LLC100%DE
Inchin Along, LLC100%DE
NHI REIT of Alabama, L.P.100%Partnership
NHI-REIT of Arizona, Limited Partnership100%Partnership
NHI-REIT of California, LP100%Partnership
NHI/REIT of Florida, L.P.100%Partnership
NHI-REIT of Georgia, L.P.100%Partnership
NHI-REIT of Idaho, L.P.100%Partnership
NHI-REIT of Missouri, LP100%Partnership
NHI-REIT of South Carolina, L.P.100%Partnership
NHI-REIT of Virginia, L.P.100%Partnership
NHI/Anderson, LLC100%DE
NHI/Laurens, LLC100%DE
Texas NHI Investors, LLC100%DE
NHI-REIT of Oregon, LLC100%DE
NHI-REIT of Florida, LLC100%DE
NHI-REIT of Maryland, LLC100%DE
NHI-REIT of Minnesota, LLC100%DE
NHI-REIT of Tennessee, LLC100%DE
NHI Selah Properties, LLC100%DE
NHI-REIT of Northeast, LLC100%DE
NHI-REIT of Wisconsin, LLC100%DE
NHI-REIT of Ohio, LLC100%DE
NHI-REIT of Washington, LLC100%DE
NHI-REIT of Next House, LLC80%DE
NHI-SS TRS, LLC100%Corporation
NHI-Bickford RE, LLC100%DE
Care YBE Subsidiary LLC100%DE
Myrtle Beach Retirement Residence, LLC100%DE
Voorhees Retirement Residence, LLC100%DE
NHI-REIT of Axel, LLC100%DE
NHI-REIT of Michigan, LLC100%DE
NHI-REIT of Seaside, LLC100%DE
NHI-REIT of Bickford, LLC100%DE
NHI-REIT of Evergreen, LLC100%DE
NHI-REIT of North Carolina, LLC100%DE
NHI-REIT of TX-IL, LLC100%DE
NHI-REIT of CCWH, LLC100%DE
NHI-REIT of Colorado, LLC100%DE



NHI-REIT of DSL PropCo, LLC97.5%Partnership
NHI-LCS JV I, LLC80%Partnership
NHI-LCS TRS, LLC100%DE
NHI-REIT of Indiana, LLC100%DE
Timber Ridge OpCo, LLC25%Partnership
NHI-REIT of Oklahoma, LLC100%DE
NHI Propco Member LLC100%DE
NHI-REIT of DSL PropCo II, LLC100%DE
NHI-Discovery I TRS, LLC100%DE
NHI-Merrill I TRS, LLC100%DE

1Ownership: 100% means that National Health Investors, Inc. owns the reflected percentage of the entity through itself or its subsidiaries.


EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


National Health Investors, Inc.
Murfreesboro, Tennessee

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-237278) and Form S-8 (No. 333-186854, No. 333-206273, No. 333-226629, and No. 333-233129) of National Health Investors, Inc. of our reports dated February 21, 2023, relating to the consolidated financial statements and financial statement schedules and the effectiveness of National Health Investors, Inc.’s internal control over financial reporting, which appear in this Form 10-K.

/s/ BDO USA, LLP

Nashville, Tennessee
February 21, 2023









Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, D. Eric Mendelsohn, certify that:

1.I have reviewed this annual report on Form 10-K of the registrant, National Health Investors, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions) :
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:February 21, 2023/s/ D. Eric Mendelsohn
 D. Eric Mendelsohn
 President, Chief Executive Officer and Director
(Principal Executive Officer)


Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002


I, John L. Spaid, certify that:

1.I have reviewed this annual report on Form 10-K of the registrant, National Health Investors, Inc.;
2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions) :
a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:February 21, 2023/s/ John L. Spaid
 John L. Spaid
 Chief Financial Officer
 (Principal Financial Officer)



Exhibit 32
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


The undersigned hereby certify, pursuant to 18 U.S.C. Section 1350, as added by Section 906 of the Sarbanes-Oxley Act of 2002, that, to the undersigned's best knowledge and belief, the annual report on Form 10-K for National Health Investors, Inc. ("Issuer") for the year ended December 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the "Report"):

(a)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(b)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Issuer.
Date:February 21, 2023/s/ D. Eric Mendelsohn
 D. Eric Mendelsohn
 President, Chief Executive Officer and Director
 (Principal Executive Officer)
 
 
 
Date:February 21, 2023/s/ John L. Spaid
 John L. Spaid
 Chief Financial Officer
 (Principal Financial Officer)