10-K: National Healthcare Properties Reports Stronger 2025 Results

National Healthcare Properties, Inc. significantly reduced its net loss in 2025, turning operating income positive, driven by SHOP segment growth and strategic debt refinancing.

Summary

• Reported a net loss of $57.685 million for the year ended December 31, 2025, a substantial improvement from a net loss of $190.263 million in 2024.
• Operating income turned positive at $3.300 million in 2025, compared to an operating loss of $123.541 million in 2024.
• Revenue from tenants decreased by 3.3% to $342.279 million in 2025 from $353.794 million in 2024.
• Property operating and maintenance expenses decreased by 1.2% to $218.898 million in 2025.
• Impairment charges increased by 80.5% to $44.914 million in 2025, primarily related to seven SHOP properties ($37.9 million) and four OMF properties ($7.0 million).
• Realized a gain on sale of real estate investments of $27.800 million in 2025, up from $9.307 million in 2024, from the disposition of seven SHOPs and 18 OMFs for an aggregate contract sales price of $202.5 million.
• SHOP segment Net Operating Income (NOI) increased by 23.3% to $42.581 million in 2025, driven by positive trends in occupancy (81.9% in 2025 vs. 77.4% in 2024) and average monthly revenue per occupied room ($6,078 in 2025 vs. $5,791 in 2024).
• OMF segment NOI decreased by 17.4% to $80.800 million in 2025, primarily due to the disposition of 30 OMFs in 2024 and 2025, partially offset by favorable leasing activity and four OMF acquisitions in 2024.
• Total outstanding indebtedness was $1.0 billion as of December 31, 2025, with a total debt leverage ratio of approximately 45.1%.
• Entered into a new $400 million senior unsecured revolving credit facility and a $150 million senior unsecured term loan facility in December 2025, replacing a prior credit agreement.
• Repurchased and retired 131,629 shares of Series A Preferred Stock and 213,344 shares of Series B Preferred Stock for $5.4 million in 2025 under a $50.0 million preferred stock repurchase program, with $44.6 million remaining available.
• No cash or stock dividends were issued on common stock during the year ended December 31, 2025; all preferred stock dividends were considered 100% return of capital for tax purposes.

Sentiment

Score: 7

Explanation: StockSavvy.ai views this as a positive report, primarily due to the significant reduction in net loss and the return to positive operating income, largely driven by the successful internalization and strong performance in the SHOP segment. However, increased impairment charges and a decline in OMF NOI present areas for continued monitoring.

Positives

• Net loss significantly improved to $57.685 million in 2025 from $190.263 million in 2024, reflecting a 69.7% reduction.
• Operating income turned positive at $3.300 million in 2025, a substantial recovery from a $123.541 million operating loss in 2024.
• SHOP segment NOI increased by 23.3% to $42.581 million, driven by higher occupancy rates (81.9%) and increased revenue per occupied room ($6,078).
• Successful internalization of advisory and property management functions in September 2024 eliminated $106.650 million in termination fees and $19.203 million in operating fees to related parties in 2025.
• Generated a significant gain on sale of real estate investments of $27.800 million in 2025, nearly tripling the $9.307 million gain in 2024.
• Cash and cash equivalents increased to $57.6 million at year-end 2025 from $21.7 million in 2024, indicating improved liquidity.
• Successfully refinanced debt by entering into new $400 million Revolving Facility and $150 million Term Loan, enhancing financial flexibility.
• Initiated a preferred stock repurchase program, repurchasing $5.4 million of preferred stock in 2025, demonstrating commitment to shareholder value for preferred holders.

Negatives

• Total revenue from tenants decreased by 3.3% in 2025, primarily due to OMF dispositions.
• Impairment charges increased by 80.5% to $44.914 million in 2025, indicating a downward adjustment to the carrying value of certain properties.
• OMF segment NOI decreased by 17.4% to $80.800 million, largely due to property dispositions.
• Weighted-average interest rate on total gross borrowings increased to 5.94% in 2025 from 4.62% in 2024 (excluding non-designated caps), increasing borrowing costs.
• No cash distributions were paid on common stock in 2025, continuing a trend since mid-2020, which may concern common stockholders seeking current income.
• The company continues to experience net losses, albeit reduced, indicating ongoing profitability challenges under GAAP.

Risks

• High concentration of properties in Florida, Georgia, Pennsylvania, and Iowa, making the company susceptible to adverse economic cycles, natural disasters, and local oversupply in these states.
• Inability to acquire or dispose of properties on advantageous terms, especially in the SHOP segment, due to competition or market conditions.
• Failure to fully realize anticipated cost-savings or synergies from the Internalization, or encountering unforeseen costs associated with self-management.
• Inability to collect rent from tenants due to bankruptcy, lack of liquidity, or operational failures, leading to bad debt expenses.
• Competition from other real estate investors and healthcare providers, potentially leading to pricing pressure and lower occupancy rates.
• Lock-out provisions in mortgage loans restricting the ability to sell, dispose of, or refinance properties, or requiring specified debt levels.
• Rising operating expenses, including taxes, utilities, insurance, and labor costs, which may not be fully passed through to tenants or offset by rent increases.
• Inflation eroding the value of long-term leases with fixed or low escalation provisions, and increasing general and administrative expenses and debt interest costs.
• Physical and regulatory risks related to catastrophic weather events and climate change, potentially causing substantial damages and increased insurance premiums.
• Reliance on eligible independent contractors to manage SHOP facilities, exposing the company to operational risks, fluctuations in occupancy and fees, and increased labor costs.
• Joint venture investments carrying risks such as lack of sole decision-making authority, reliance on co-venturer financial condition, and potential disputes.
• Illiquidity of real estate investments, limiting the ability to quickly alter the portfolio or generate capital through property sales.
• Inability to secure funds for future tenant improvements or capital needs, potentially impacting property value or leasing ability.
• Inaccurate methodology for measuring tenant credit quality or property performance projections, leading to unexpected defaults or lower returns.
• Potential recharacterization of sale-leaseback transactions as financing or joint ventures, which could jeopardize REIT status or increase liabilities.
• Risks associated with public health crises (e.g., pandemics), leading to decreased demand, lower occupancy, service interruptions, and increased compliance costs.
• Negative publicity impacting brand reputation and occupancy levels.
• Heavy regulation of the healthcare industry, with new laws, changes to existing laws, or loss of licensure potentially affecting tenants' ability to pay rent or operators' profitability.
• Reductions or changes in reimbursement from third-party payors (Medicare, Medicaid) or delays in reimbursements, adversely affecting tenant/operator profitability.
• Required regulatory approvals delaying or prohibiting transfers of healthcare facilities.
• Increased level of indebtedness increasing business risks and limiting financial flexibility.
• Restrictive covenants in financing arrangements limiting strategic alternatives, reactions to business changes, or dividend payments.
• Changes in debt markets impacting access to capital, borrowing costs, and ability to refinance indebtedness.
• Elevated interest rates making it difficult to finance or refinance debt and increasing debt payments.
• Hedging strategies potentially not being successful in mitigating interest rate risks.
• Subjectivity of Estimated Per-Share NAV, which may not reflect actual fair value or trading price.
• Opting out of certain Maryland General Corporation Law (MGCL) provisions, potentially reducing protections against hostile takeovers.
• REIT share ownership restrictions and the 9.8% ownership limit in the charter inhibiting market activity or business combination opportunities.
• Failure to maintain REIT qualification, leading to U.S. federal income tax and potentially state/local tax liabilities.
• Complying with REIT requirements forcing the company to forgo or liquidate otherwise attractive investment opportunities.
• Potential recharacterization of sale-leaseback transactions causing loss of REIT status.
• Certain business activities potentially subject to a 100% prohibited transaction tax.
• TRSs being subject to corporate-level taxes and dealings with TRSs potentially subject to a 100% excise tax.
• Failure of the Operating Partnership (OP) to qualify as a partnership or disregarded entity, leading to loss of REIT status.
• Improper leasing of qualified health care properties to a TRS or managers not qualifying as eligible independent contractors, leading to loss of REIT status.
• Recharacterization of TRS leases as service contracts or joint ventures, potentially causing failure of REIT income tests.
• Elective cash/stock distributions requiring common stockholders to pay U.S. federal income taxes in excess of cash received.
• Taxation of distributions as ordinary income, potentially making REIT investments less attractive to noncorporate stockholders.
• REIT provisions limiting ability to hedge liabilities effectively and potentially incurring tax liabilities.
• Board's ability to revoke REIT qualification without stockholder approval.
• Adverse legislative or regulatory tax changes increasing tax liability or reducing operating flexibility.
• Non-U.S. stockholders being subject to U.S. federal withholding tax and income tax on dividends and stock dispositions.
• Potential characterization of dividends or gain on sale as unrelated business taxable income to tax-exempt investors.
• System failures or cyber incidents impacting business operations, leading to data breaches, financial misstatements, or reputational harm.

Future Outlook

The company expects to fund future short-term operating liquidity requirements, including preferred stock distributions, through current cash, operating activities, property dispositions, future drawdowns under the Revolving Facility, and potential new financings. The ability to pay common stock distributions depends on future cash flows and indebtedness. The company intends to continue operating as a REIT but provides no assurances of maintaining this qualification. The impact of future public health crises on operations remains uncertain and could include decreased demand, lower occupancy, service interruptions, and increased costs.

Management Comments

• We closely monitor our current and anticipated liquidity position relative to our current and anticipated demands for cash and believe that we have sufficient current liquidity to meet our financial obligations for at least the next 12 months.

Industry Context

StockSavvy.ai notes that the healthcare real estate industry, particularly senior housing and outpatient medical facilities, continues to navigate a complex regulatory environment and evolving reimbursement landscape. The company's focus on RIDEA structures for SHOPs allows participation in operational upside but also exposes it to direct operational risks, a trend seen across the sector as REITs seek closer alignment with property performance. The industry faces ongoing challenges from inflation, labor shortages, and changes in government reimbursement programs like Medicaid, as highlighted by the OBBBA's impact on enrollment requirements. The shift towards capitated, value-based, and bundled payment approaches by CMS is creating unprecedented challenges for providers, potentially diminishing the market for certain healthcare services and impacting medical properties.

Comparison to Industry Standards

• The company's SHOP segment's average unit occupancy of 81.9% in 2025 and average monthly revenue per occupied room of $6,078 should be compared against industry averages for assisted living, memory care, and independent living facilities to assess competitive positioning. For example, leading senior housing REITs like Welltower Inc. (WELL) and Ventas Inc. (VTR) often report on similar metrics, with their portfolios typically reflecting regional market dynamics and operator performance.
• The OMF segment's ending occupancy of 92.8% in 2025 is a strong indicator, comparable to high-performing medical office building portfolios held by peers such as Healthcare Realty Trust (HR) or Physicians Realty Trust (DOC), which often report occupancies in the low to mid-90s, reflecting the stable demand for outpatient services.
• The increase in weighted-average economic interest rate to 5.75% in 2025 from 5.06% in 2024 reflects broader market trends of elevated interest rates, impacting all real estate companies, including peers like Omega Healthcare Investors (OHI) or Sabra Health Care REIT (SBRA) who also manage significant debt portfolios.
• The company's total debt leverage ratio of 45.1% as of December 31, 2025, provides a benchmark for financial health against other healthcare REITs, where leverage ratios can vary based on investment strategy and market conditions, but generally aim for prudent levels to maintain credit access and flexibility.

Management Changes

Corporate Governance

Legal Proceedings

• The company is not presently subject to any material litigation, nor is any material litigation threatened against it, which, if determined unfavorably, would have a material adverse effect on its consolidated financial position, results of operations, or cash flows.

Related Party Transactions

• In 2024, the company incurred $106.650 million in termination fees to related parties (former Advisor and its parent entity) due to the internalization of management functions, with $30.3 million of this paid in January 2025 via a promissory note.
• In 2024, the company paid $19.203 million in operating fees (asset management and property management fees) to related parties, which ceased in 2025 following the internalization.
• As of December 31, 2025, Healthcare Trust Special Limited Partner, LLC (an affiliate of the former Advisor) owned 2,718 shares of common stock, and the former Advisor's parent entity held 90 Common OP Units.
• The company entered into an indemnification agreement with each of its directors and officers, and certain former directors and officers, providing for indemnification to the maximum extent permitted by Maryland law.

Stakeholder Impact

• **Shareholders (Common Stockholders)**: Experienced a significant reduction in net loss and a positive operating income, but no cash dividends were paid on common stock in 2025, continuing a multi-year trend. The preferred stock repurchase program benefits preferred shareholders. The subjective nature of the Estimated Per-Share NAV and the lack of a public trading market for common stock mean illiquidity and potential valuation discrepancies.
• **Shareholders (Preferred Stockholders)**: Received cumulative cash dividends and benefited from a preferred stock repurchase program, indicating management's commitment to returning capital to this class of shareholders.
• **Employees**: The internalization of advisory and property management functions in 2024 led to the company hiring its own dedicated workforce, providing comprehensive benefits and professional development. However, the transition of the CFO role involved severance and accelerated equity vesting.
• **Tenants/Operators**: Face ongoing challenges from a heavily regulated healthcare industry, including changes in reimbursement policies (e.g., OBBBA's impact on Medicaid), increased operating costs (labor, insurance), and competition. Their ability to meet lease obligations directly impacts the company's revenue.
• **Creditors**: The company's debt leverage ratio is 45.1%, and it successfully refinanced debt with new credit facilities. Restrictive covenants in debt agreements may limit the company's operational and financial flexibility, but compliance is reported as of December 31, 2025.

Next Steps

• The company intends to publish Estimated Per-Share NAV periodically, at least once annually, unless its common stock is listed.
• The company expects to fund future short-term operating liquidity requirements through current cash, operating activities, property dispositions, future takedowns under the Revolving Facility, and potential new financings utilizing unencumbered properties.
• The company will continue to monitor and develop its networks and information technology to prevent, detect, address, and mitigate cybersecurity risks.

Key Dates

Recommendation

The company demonstrated significant financial improvement in 2025, largely due to the successful internalization of management functions and a substantial gain from asset sales, which dramatically reduced net loss and turned operating income positive. The growth in the SHOP segment's NOI and improved occupancy rates are positive operational indicators. However, the decline in OMF NOI, increased impairment charges, and rising weighted-average interest rates present ongoing challenges. The lack of cash dividends for common stockholders and the illiquidity of common shares remain concerns. While the strategic moves are positive, the company operates in a highly regulated and competitive healthcare real estate market with inherent risks. A 'hold' recommendation is appropriate as the company navigates these dynamics, showing progress but still facing headwinds that warrant caution before a 'buy' rating.

Keywords

Healthcare REIT, Real Estate Investment Trust, Senior Housing Operating Properties, SHOP, Outpatient Medical Facilities, OMF, SEC Filing, 10-K, Financial Results, Net Loss, Operating Income, Debt Refinancing, Preferred Stock Repurchase, Internalization, REIT Qualification, Maryland General Corporation Law, Corporate Governance, Risk Factors, Dividend Policy, Asset Dispositions, Occupancy Rates, Interest Rates, Cybersecurity, Healthcare Regulation, REIT Tax