UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended

~~September 30, 2020~~March 31, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

_____________

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
Murfreesboro	Tennessee	37129
(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 Class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	NHI	New York Stock Exchange

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 definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

There were ~~44,729,157~~45,850,599 shares of common stock outstanding of the registrant as of ~~November 2, 2020.~~May 3, 2021.

Table of Contents


			Page
Part I. Financial Information

Item 1. Financial Statements			3

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.			2824

Item 3. Quantitative and Qualitative Disclosures About Market Risk.			5546

Item 4. Controls and Procedures.			5647

Part II. Other Information

Item 1. Legal Proceedings			5749

Item 1A. Risk Factors			5749



Item 6. Exhibits			5950

Signatures			6051

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share amounts)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(unaudited)					(unaudited)
Assets:	Assets:					Assets:
Real estate properties:	Real estate properties:					Real estate properties:
Land	Land	$	220,423	$	213,617	Land	$	220,361	$	220,361
Buildings and improvements	Buildings and improvements	3,041,613		2,836,673		Buildings and improvements	3,042,763		3,041,616
Construction in progress	Construction in progress	2,528		24,556		Construction in progress	3,131		3,093
		3,264,564		3,074,846			3,266,255		3,265,070
Less accumulated depreciation	Less accumulated depreciation	(576,605)		(514,453)		Less accumulated depreciation	(618,299)		(597,638)
Real estate properties, net	Real estate properties, net	2,687,959		2,560,393		Real estate properties, net	2,647,956		2,667,432
Mortgage and other notes receivable, net of credit loss reserve of $4,907 and $0		287,282		340,143
Mortgage and other notes receivable, net of reserve of $4,856 and $4,946, respectively						Mortgage and other notes receivable, net of reserve of $4,856 and $4,946, respectively	301,318		292,427
Cash and cash equivalents	Cash and cash equivalents	42,198		5,215		Cash and cash equivalents	113,375		43,344
Straight-line rent receivable	Straight-line rent receivable	92,418		86,044		Straight-line rent receivable	98,354		95,703
Assets held for sale, net		0		18,420

Other assets	Other assets	29,416		32,020		Other assets	22,270		21,583
Total Assets	Total Assets	$	3,139,273	$	3,042,235	Total Assets	$	3,183,273	$	3,120,489

Liabilities and Stockholders’ Equity:	Liabilities and Stockholders’ Equity:					Liabilities and Stockholders’ Equity:
Debt	Debt	$	1,528,968	$	1,440,465	Debt	$	1,524,725	$	1,499,285
Accounts payable and accrued expenses	Accounts payable and accrued expenses	32,144		26,313		Accounts payable and accrued expenses	23,673		25,189
Dividends payable	Dividends payable	49,314		46,817		Dividends payable	50,550		49,818
Lease deposit liabilities	Lease deposit liabilities	10,638		10,638		Lease deposit liabilities	10,638		10,638
Deferred income	Deferred income	14,207		19,750		Deferred income	10,972		12,614
Total Liabilities	Total Liabilities	1,635,271		1,543,983		Total Liabilities	1,620,558		1,597,544

Commitments and Contingencies	Commitments and Contingencies					Commitments and Contingencies	0		0

National Health Investors, Inc. Stockholders' Equity:	National Health Investors, Inc. Stockholders' Equity:					National Health Investors, Inc. Stockholders' Equity:
Common stock, $0.01 par value; 100,000,000 and 60,000,000 shares authorized;
44,729,157 and 44,587,486 shares issued and outstanding, respectively		447		446
Common stock, $0.01 par value, 100,000,000 shares authorized						Common stock, $0.01 par value, 100,000,000 shares authorized
45,850,599 and 45,185,992 shares issued and outstanding, respectively						45,850,599 and 45,185,992 shares issued and outstanding, respectively	459		452
Capital in excess of par value	Capital in excess of par value	1,510,804		1,505,948		Capital in excess of par value	1,594,336		1,540,946
Cumulative dividends in excess of net income	Cumulative dividends in excess of net income	(9,337)		(5,331)		Cumulative dividends in excess of net income	(37,233)		(22,015)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(8,865)		(3,432)		Accumulated other comprehensive loss	(5,377)		(7,149)
Total National Health Investors, Inc. Stockholders' Equity	Total National Health Investors, Inc. Stockholders' Equity	1,493,049		1,497,631		Total National Health Investors, Inc. Stockholders' Equity	1,552,185		1,512,234
Noncontrolling interests	Noncontrolling interests	10,953		621		Noncontrolling interests	10,530		10,711
Total Equity	Total Equity	1,504,002		1,498,252		Total Equity	1,562,715		1,522,945
Total Liabilities and Stockholders’ Equity	Total Liabilities and Stockholders’ Equity	$	3,139,273	$	3,042,235	Total Liabilities and Stockholders’ Equity	$	3,183,273	$	3,120,489

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements. The Condensed Consolidated Balance Sheet at December 31, ~~2019~~2020 was derived from the audited consolidated financial statements at that date.

Table of Contents

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share amounts)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
		(unaudited)				(unaudited)					(unaudited)
Revenues:	Revenues:									Revenues:
Rental income	Rental income	$	77,821	$	75,247	$	232,266	$	218,777	Rental income		$	74,749	$	76,527
Interest income and other	Interest income and other	6,480		6,435		19,306		17,109		Interest income and other		6,136		6,549
		84,301		81,682		251,572		235,886				80,885		83,076
Expenses:	Expenses:									Expenses:
Depreciation	Depreciation	20,836		19,695		62,126		57,206		Depreciation		20,806		20,443
Interest	Interest	12,892		14,661		40,589		41,925		Interest		12,973		14,140
Legal	Legal	241		40		826		409		Legal		130		334
Franchise, excise and other taxes	Franchise, excise and other taxes	164		121		553		1,441		Franchise, excise and other taxes		233		243
General and administrative	General and administrative	2,785		2,802		10,127		9,787		General and administrative		7,989		4,311
Taxes and insurance on leased properties	Taxes and insurance on leased properties	4,187		1,608		7,190		4,205		Taxes and insurance on leased properties		2,161		1,553
Loan and realty (gains) losses	Loan and realty (gains) losses	(193)		0		1,002		2,500		Loan and realty (gains) losses		(50)		1,555
		40,912		38,927		122,413		117,473				44,242		42,579
Loss from equity method investment	Loss from equity method investment	(728)		0		(2,018)		0		Loss from equity method investment		(808)		(442)
Gains on sales of real estate	Gains on sales of real estate	0		0		21,007		0		Gains on sales of real estate		0		21,007

Loss on early retirement of debt										Loss on early retirement of debt		(451)		0
Net income	Net income	42,661		42,755		148,148		118,413		Net income		35,384		61,062
Less: net (income) loss attributable to noncontrolling interests		(66)		3		(162)		4
Less: net income attributable to noncontrolling interests										Less: net income attributable to noncontrolling interests		(52)		(39)
Net income attributable to common stockholders	Net income attributable to common stockholders	$	42,595	$	42,758	$	147,986	$	118,417	Net income attributable to common stockholders		$	35,332	$	61,023

Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	44,661,650		43,505,332		44,641,748		43,187,847		Basic		45,305,087		44,613,593
Diluted	Diluted	44,662,403		43,861,089		44,643,514		43,494,714		Diluted		45,357,773		44,618,139

Earnings per common share:	Earnings per common share:									Earnings per common share:
Net income attributable to common stockholders - basic	Net income attributable to common stockholders - basic	$	0.95	$	0.98	$	3.31	$	2.74	Net income attributable to common stockholders - basic		$	0.78	$	1.37
Net income attributable to common stockholders - diluted	Net income attributable to common stockholders - diluted	$	0.95	$	0.97	$	3.31	$	2.72	Net income attributable to common stockholders - diluted		$	0.78	$	1.37

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

Table of Contents

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
		(unaudited)				(unaudited)					(unaudited)

Net income	Net income	$	42,661	$	42,755	$	148,148	$	118,413	Net income		$	35,384	$	61,062
Other comprehensive income (loss):	Other comprehensive income (loss):									Other comprehensive income (loss):
Decrease (increase) in fair value of cash flow hedges		92		(960)		(9,966)		(5,077)
Increase in fair value of cash flow hedges										Increase in fair value of cash flow hedges		(6)		(9,191)
Reclassification for amounts recognized as interest expense	Reclassification for amounts recognized as interest expense	1,778		(390)		4,533		(1,031)		Reclassification for amounts recognized as interest expense		1,778		492
Total other comprehensive income (loss)	Total other comprehensive income (loss)	1,870		(1,350)		(5,433)		(6,108)		Total other comprehensive income (loss)		1,772		(8,699)
Comprehensive income	Comprehensive income	44,531		41,405		142,715		112,305		Comprehensive income		37,156		52,363
Comprehensive (income) loss attributable to noncontrolling interest		(66)		3		(162)		4
Comprehensive income attributable to noncontrolling interest										Comprehensive income attributable to noncontrolling interest		(52)		(39)
Comprehensive income attributable to common stockholders	Comprehensive income attributable to common stockholders	$	44,465	$	41,408	$	142,553	$	112,309	Comprehensive income attributable to common stockholders		$	37,104	$	52,324

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

Table of Contents

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended
September 30,
2020 2019
(unaudited)
Cash flows from operating activities:
Net income $ 148,148 $ 118,413
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation 62,126 57,206
Amortization of debt issuance costs, debt discounts and prepaids 3,775 3,664
Amortization of commitment fees and note receivable discounts (581) (365)
Amortization of lease incentives 735 607
Straight-line rent income (15,481) (16,255)
Non-cash interest income on mortgage and other notes receivable (2,865) (1,509)
Gains on sales of real estate (21,007) 0
Loss from equity method investment 2,018 0
Loan and realty losses 1,002 2,500
Payment of lease incentives (498) (3,100)
Non-cash stock-based compensation 2,772 2,955
Changes in operating assets and liabilities:
Other assets (835) 2,059
Accounts payable and accrued expenses (2,513) 1,757
Deferred income (269) 16,877
Net cash provided by operating activities 176,527 184,809
Cash flows from investing activities:
Investments in mortgage and other notes receivable (41,715) (83,946)
Collections of mortgage and other notes receivable 33,895 2,566
Investments in real estate (102,712) (209,227)
Investments in real estate development (158) 0
Investments in renovations of existing real estate (11,113) (14,295)
Equity method investment (875) 0
Proceeds from sale of real estate 39,260 0
Net cash used in investing activities (83,418) (304,902)
Cash flows from financing activities:
Proceeds from revolving credit facility 145,000 332,000
Payments on revolving credit facility (157,000) (166,000)
Borrowings on term loan 100,000 0
Payments on term loans (917) (886)
Debt issuance costs (1,039) (126)
Distributions to noncontrolling interests (537) 0
Proceeds from noncontrolling interests 13 631
Taxes remitted on employee stock awards (2,705) (1,374)
Proceeds from issuance of common shares, net 4,791 95,802
Dividends paid to stockholders (145,270) (133,585)
Net cash (used in) provided by financing activities (57,664) 126,462
Increase in cash and cash equivalents and restricted cash 35,445 6,369
Cash and cash equivalents and restricted cash, beginning of period 15,669 9,912
Cash and cash equivalents and restricted cash, end of period $ 51,114 $ 16,281


	Three Months Ended
	March 31,
	2021		2020
	(unaudited)
Cash flows from operating activities:
Net income	$	35,384	$	61,062
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	20,806		20,443
Amortization of debt issuance costs, debt discounts and prepaids	1,192		1,173
Amortization of commitment fees and note receivable discounts	(131)		(129)
Amortization of lease incentives	260		236
Straight-line rent income	(4,241)		(5,177)
Non-cash interest income on mortgage and other notes receivable	(700)		(888)
Gains on sales of real estate	0		(21,007)
Loss from equity method investment	808		442
Loss on early retirement of debt	451		0
Loan and realty (gains) losses	(50)		1,555
Payment of lease incentives	(1,042)		0
Non-cash stock-based compensation	5,446		1,845
Changes in operating assets and liabilities:
Other assets	(484)		(357)
Accounts payable and accrued expenses	(735)		(1,497)
Deferred income	(52)		(619)
Net cash provided by operating activities	56,912		57,082

Cash flows from investing activities:
Investments in mortgage and other notes receivable	(8,412)		(20,298)
Collections of mortgage and other notes receivable	442		14,288
Investments in real estate	0		(80,335)
Investments in equipment	(8)		0
Investments in renovations of existing real estate	(1,443)		(3,057)
Investment in equity method investment	0		(875)
Distribution from equity method investment	288		0
Proceeds from sale of real estate	0		39,260
Net cash used in investing activities	(9,133)		(51,017)

Cash flows from financing activities:
Proceeds from revolving credit facility	30,000		125,000
Payments on revolving credit facility	(298,000)		(17,000)

Payments on term loans	(100,094)		(304)
Proceeds from issuance of senior notes	396,784		0
Debt issuance costs	(4,459)		0
Distributions to noncontrolling interests	(258)		(16)
Proceeds from noncontrolling interests	0		13
Taxes remitted on employee stock awards	0		(2,705)
Proceeds from issuance of common shares, net	47,951		(87)


Dividends paid to stockholders	(49,818)		(46,817)
Net cash provided by financing activities	22,106		58,084

Increase in cash and cash equivalents and restricted cash	69,885		64,149
Cash and cash equivalents and restricted cash, beginning of period	46,343		15,669
Cash and cash equivalents and restricted cash, end of period	$	116,228	$	79,818

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

Table of Contents

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(in thousands)


		Nine Months Ended					Three Months Ended
		September 30,					March 31,
		2020		2019			2021		2020
		(unaudited)					(unaudited)
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Interest paid, net of amounts capitalized	Interest paid, net of amounts capitalized	$	33,174	$	39,355	Interest paid, net of amounts capitalized	$	9,674	$	12,954
Supplemental disclosure of non-cash investing and financing activities:	Supplemental disclosure of non-cash investing and financing activities:					Supplemental disclosure of non-cash investing and financing activities:
Real estate acquired in exchange for straight-line rent receivable		$	0	$	38,000

Real estate acquired in exchange for mortgage notes receivable	Real estate acquired in exchange for mortgage notes receivable	$	63,220	$	14,035	Real estate acquired in exchange for mortgage notes receivable	$	0	$	59,350
Noncash portion of noncontrolling interest conveyed in acquisition		$	10,778	$	0

Increase in mortgage note receivable from sale of real estate	Increase in mortgage note receivable from sale of real estate	$	4,000	$	0	Increase in mortgage note receivable from sale of real estate	$	0	$	4,000
Change in other assets related to investments in real estate		$	348	$	176

Change in accounts payable related to investments in real estate construction	Change in accounts payable related to investments in real estate construction	$	(1,744)	$	(1,981)	Change in accounts payable related to investments in real estate construction	$	(112)	$	(234)
Change in accounts payable related to investments in real estate acquisition		$	0	$	1,178
Change in accounts payable related to renovations of existing real estate		$	355	$	0

Change in accounts payable related to distributions to noncontrolling interests	Change in accounts payable related to distributions to noncontrolling interests	$	85	$	0	Change in accounts payable related to distributions to noncontrolling interests	$	(25)	$	0

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

Table of Contents

NATIONAL HEALTH INVESTORS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in thousands, except share and per share amounts)


		Common Stock			Capital in Excess of Par Value				Cumulative Net Income in Excess (Deficit) of Dividends		Accumulated Other Comprehensive Income (Loss)					Total National Health Investors, Inc. Stockholders’ Equity			Noncontrolling Interests				Total Equity			Common Stock				Capital in Excess of Par Value				Cumulative Dividends in Excess of Net Income				Accumulated Other Comprehensive Income Loss				Total National Health Investors, Inc. Stockholders’ Equity				Noncontrolling Interests				Total Equity
		Shares	Amount												Shares						Amount
Balances at December 31, 2019		44,587,486	$	446			$	1,505,948					$	(5,331)				$	(3,432)			$	1,497,631			$	621	$	1,498,252
Balances at December 31, 2020																									Balances at December 31, 2020	45,185,992		$	452			$	1,540,946			$	(22,015)			$	(7,149)			$	1,512,234			$	10,711			$	1,522,945
Cumulative effect of change in accounting principle	Cumulative effect of change in accounting principle	—	—		—				(4,225)		—					(4,225)			—				(4,225)		Cumulative effect of change in accounting principle	—		—		—				0				—				0				—				0
Noncontrolling interest conveyed in acquisition	Noncontrolling interest conveyed in acquisition	—	—		—				—		—					—			10,791				10,791		Noncontrolling interest conveyed in acquisition	—		—		—				—				—				—				0				0
Noncontrolling interest distribution	Noncontrolling interest distribution	—	—		—				—		—					—			(398)				(398)		Noncontrolling interest distribution	—		—		—				—				—				—				(233)				(233)
Total comprehensive income	Total comprehensive income	—	—		—				105,391		(7,303)					98,088			96				98,184		Total comprehensive income	—		—		—				35,332				1,772				37,104				52				37,156
Equity issuance costs		—	—		(291)				—		—					(291)			—				(291)

Taxes remitted on employee stock awards		—	—		(2,705)				—		—					(2,705)			—				(2,705)
Issuance of common stock, net																									Issuance of common stock, net	661,951		7		47,944				—				—				47,951				—				47,951

Shares issued on stock options exercised	Shares issued on stock options exercised	62,516	1		(2)				—		—					(1)			—				(1)		Shares issued on stock options exercised	2,656		0		0				—				—				0				—				0
Stock-based compensation	Stock-based compensation	—	—		2,315				—		—					2,315			—				2,315		Stock-based compensation	—		—		5,446				—				—				5,446				—				5,446
Dividends declared, $2.205 per common share		—	—		—				(98,453)		—					(98,453)			—				(98,453)
Activity for the six months ended June 30, 2020		62,516	1		(683)				2,713		(7,303)					(5,272)			10,489				5,217
Dividends declared, $1.1025 per common share																									Dividends declared, $1.1025 per common share	—		—		—				(50,550)				—				(50,550)				—				(50,550)

Noncontrolling interest distribution		—	—		—				—		—					—			(223)				(223)
Total comprehensive income		—	—		—				42,595		1,870					44,465			66				44,531
Equity issuance costs		—	—		(12)				—		—					(12)			—				(12)

Issuance of common stock, net		79,155	—		5,094				—		—					5,094			—				5,094
Stock-based compensation		—	—		457				—		—					457			—				457
Dividends declared, $1.1025 per common share		—	—		—				(49,314)		—					(49,314)			—				(49,314)
Activity for the three months ended September 30, 2020		79,155	—		5,539				(6,719)		1,870					690			(157)				533
Balances at September 30, 2020		44,729,157	$	447	$	1,510,804			$	(9,337)	$	(8,865)				$	1,493,049		$	10,953			$	1,504,002

Balances at March 31, 2021																									Balances at March 31, 2021	45,850,599		$	459	$	1,594,336			$	(37,233)			$	(5,377)			$	1,552,185			$	10,530			$	1,562,715

~~The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.~~

~~Table of Contents~~

~~NATIONAL HEALTH INVESTORS, INC.~~

~~CONDENSED CONSOLIDATED STATEMENTS OF EQUITY~~

~~(unaudited, in thousands, except share and per share amounts)~~


		Common Stock			Capital in Excess of Par Value				Cumulative Net Income in Excess (Deficit) of Dividends		Accumulated Other Comprehensive Income (Loss)					Total National Health Investors Stockholders’ Equity			Noncontrolling Interest				Total Equity			Common Stock				Capital in Excess of Par Value				Cumulative Net Income in Excess (Deficit) of Dividends				Accumulated Other Comprehensive Loss				Total National Health Investors Stockholders’ Equity				Noncontrolling Interest				Total Equity
		Shares	Amount												Shares						Amount
Balances at December 31, 2018		42,700,411	$	427			$	1,369,919					$	18,068				$	1,299			$	1,389,713			$	0	$	1,389,713
Balances at December 31, 2019																									Balances at December 31, 2019	44,587,486		$	446			$	1,505,948			$	(5,331)			$	(3,432)			$	1,497,631			$	621			$	1,498,252
Cumulative effect of change in accounting principle																									Cumulative effect of change in accounting principle	—		—		—				(4,225)				—				(4,225)				—				(4,225)
Noncontrolling interest conveyed in acquisition	Noncontrolling interest conveyed in acquisition	—	—		—				—		—					—			642				642		Noncontrolling interest conveyed in acquisition	—		—		—				—				—				—				10,791				10,791
Noncontrolling interest distribution																									Noncontrolling interest distribution	—		—		—				—				—				—				(16)				(16)
Total comprehensive income	Total comprehensive income	—	—		—				75,659		(4,758)					70,901			(1)				70,900		Total comprehensive income	—		—		—				61,023				(8,699)				52,324				39				52,363

Issuance of common stock, net	Issuance of common stock, net	618,654	6		47,848				—		—					47,854			0				47,854		Issuance of common stock, net	0		0		(85)				—				—				(85)				0				(85)

Taxes remitted on employee stock awards	Taxes remitted on employee stock awards	—	—		(1,016)				—		—					(1,016)			0				(1,016)		Taxes remitted on employee stock awards	—		—		(2,705)				—				—				(2,705)				0				(2,705)
Shares issued on stock options exercised	Shares issued on stock options exercised	37,953	1		(1)				—		—					0			—				0		Shares issued on stock options exercised	62,516		1		(2)				—				—				(1)				—				(1)
Stock-based compensation	Stock-based compensation	—	—		2,478				—		—					2,478			0				2,478		Stock-based compensation	—		—		1,845				—				—				1,845				0				1,845
Dividends declared, $2.10 per common share		—	—		—				(90,885)		—					(90,885)			0				(90,885)
Activity for the six months ended June 30, 2019		656,607	7		49,309				(15,226)		(4,758)					29,332			641				29,973
Noncontrolling interest conveyed in acquisition		—	—		—				—		—					—			(11)				(11)
Total comprehensive income		—	—		—				42,758		(1,350)					41,408			(3)				41,405
Issuance of common stock, net		590,868	6		47,942				—		—					47,948			—				47,948
Taxes remitted on employee stock awards		—	—		(358)				—		—					(358)			—				(358)
Shares issued on stock options exercised		8,352	—		—				—		—					—			—				—
Stock-based compensation		—	—		477				—		—					477			—				477
Dividends declared, $1.05 per common share		—	—		—				(46,154)		—					(46,154)			—				(46,154)
Activity for the three months ended September 30, 2019		599,220	6		48,061				(3,396)		(1,350)					43,321			(14)				43,307
Balances at September 30, 2019		43,956,238	$	440	$	1,467,289			$	(554)	$	(4,809)				$	1,462,366		$	627			$	1,462,993
Dividends declared, $1.1025 per common share																									Dividends declared, $1.1025 per common share	—		—		—				(49,226)				—				(49,226)				0				(49,226)

Balances at March 31, 2020																									Balances at March 31, 2020	44,650,002		$	447	$	1,505,001			$	2,241			$	(12,131)			$	1,495,558			$	11,435			$	1,506,993

The accompanying notes to condensed consolidated financial statements are an integral part of these condensed consolidated financial statements.

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NATIONAL HEALTH INVESTORS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~September 30, 2020~~March 31, 2021

(unaudited)

Note 1. Organization and Nature of Business

National Health Investors, Inc. (“~~NHI”~~NHI,” “the Company,” “we,” “us,” or ~~“the Company”~~“our”), established in 1991 as a Maryland corporation, is a self-managed real estate investment trust (“REIT”) ~~that invests~~specializing in sale-leaseback, joint venture, mortgage and mezzanine financing of need-driven and discretionary senior housing and medical facility investments. Our portfolio consists of lease, mortgage and other ~~healthcare-related real estate properties located throughout the United States.~~note investments in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities, hospitals and medical office buildings. As of ~~September 30, 2020,~~March 31, 2021, we had investments of ~~$3,261,886,000 (excluding our corporate office of $2,678,000)~~$3.3 billion in 228 health care real estate properties located in 34 states and leased pursuant primarily to triple-net leases to 34 lessees consisting of 151 senior housing communities (“SHO”), 72 skilled nursing facilities, 3 hospitals and 2 medical office buildings. Our portfolio of 1514 mortgages ~~and~~along with other notes receivable totaled ~~$292,189,000,~~$306.2 million, excluding an allowance for expected credit losses of ~~$4,907,000,~~$4.9 million, as of ~~September 30, 2020.~~March 31, 2021.

Note 2. Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation. Interim results of operations are not necessarily indicative of the results that may be achieved for a full year. The condensed consolidated financial statements and related notes do not include all information and footnotes required by GAAP for annual reports. These interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2019,~~2020, included in our ~~2019~~2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”).

Principles of Consolidation

The condensed 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 (“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.

At ~~September 30, 2020,~~March 31, 2021, we held interests in 87 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 ~~NHI~~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 receivables, excluding ~~Timber Ridge OpCo which is~~our investment accounted for under the equity ~~method.~~method discussed in Note 5.

~~NHI’s~~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 condensed consolidated financial statements cross-referenced below.


Date	Date	Name	Source of Exposure	Carrying Amount		Maximum Exposure to Loss		Note Reference	Date	Name	Source of Exposure	Carrying Amount		Maximum Exposure to Loss		Note Reference
2012	2012	Bickford Senior Living	Various1	$	61,834,000	$	75,275,000	Notes 3, 4	2012	Bickford Senior Living	Various1	$	64,495,000	$	76,317,000	Notes 3, 4
2014	2014	Senior Living Communities	Notes and straight-line receivable	$	75,546,000	$	81,375,000	Notes 3, 4	2014	Senior Living Communities	Notes and straight-line receivable	$	83,546,000	$	84,057,000	Notes 3, 4
2016	2016	Senior Living Management	Notes and straight-line receivable	$	26,953,000	$	26,953,000	—	2016	Senior Living Management	Notes and straight-line receivable	$	26,997,000	$	26,997,000	—
2017		Evolve Senior Living	Notes	$	9,963,000	$	9,963,000	—
2018	2018	Sagewood, LCS affiliate	Notes	$	151,236,000	$	178,780,000	Note 4	2018	Sagewood, LCS affiliate	Notes	$	164,763,000	$	178,945,000	Note 4
2019	2019	41 Management, LLC	Notes and straight-line receivable	$	9,220,000	$	11,488,000	Note 7	2019	41 Management, LLC	Notes and straight-line receivable	$	15,872,000	$	33,765,000	Note 7
2020	2020	Timber Ridge OpCo	Various2	$	(1,142,000)	$	3,858,000	Notes 3, 5	2020	Timber Ridge OpCo, LLC	Various2	$	(3,346,000)	$	1,654,000	Notes 5, 7
2020	2020	Watermark Retirement	Notes and straight-line receivable	$	3,888,000	$	8,888,000	Note 7	2020	Watermark Retirement	Notes and straight-line receivable	$	4,403,000	$	9,403,000	Note 7

1 Notes, loan commitments, straight-line rent receivables, and unamortized lease incentives

2 Loan commitment, equity method investment and straight-line rent receivables

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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, ~~above~~in excess of what is presented in the table above, if any, would be limited to that resulting from a short period of arrearage and non-payment of monthly 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 ~~will~~would be dependent upon individual facts and circumstances, and is therefore not included in the ~~tabulation~~table above.

In the future, NHI may be deemed the primary beneficiary of the operations if the tenants 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 statements of financial position and results of operations of the operators into our consolidated financial statements.

We consolidate two real estate partnerships formed with our partners, Discovery Senior Housing Investor XXIV, LLC, (“Discovery”) and LCS Timber Ridge LLC (“LCS”), to invest in senior housing facilities. As of and for the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, our non-controlling interests relate to these partnerships with Discovery and LCS.

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.

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 §1031 exchange agreement or in accordance with agency agreements governing our ~~Fannie Mae and U.S. Department of Housing and Urban Development (“HUD”)~~ mortgages).

The following table sets forth our ~~cash,~~“Cash, cash equivalents and restricted cash” reported within the Company’s Condensed Consolidated Statements of Cash Flows ($ in thousands):


		September 30, 2020		September 30, 2019			March 31, 2021		March 31, 2020
Cash and cash equivalents	Cash and cash equivalents	$	42,198	$	5,882	Cash and cash equivalents	$	113,375	$	46,049
Restricted cash (included in Other assets)	Restricted cash (included in Other assets)	8,916		10,399		Restricted cash (included in Other assets)	2,853		33,769
		$	51,114	$	16,281		$	116,228	$	79,818

~~New~~ Accounting ~~Pronouncements~~for Lease Modifications related to Coronavirus Disease 2019

For information about significant accounting policies, refer to the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2019 included in the Company’s 2019 Annual Report on Form 10-K filed with the SEC. During the nine months ended September 30, 2020, there were no material changes to these policies except as noted below.

~~With the adoption of Accounting Standards Update 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 quarterly as of the balance sheet date. 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 and revolving lines of credit are evaluated at the 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 and revolving lines of credit 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 judgement. 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 uncollectable.

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Upon adoption, we recorded an allowance for expected credit losses of $3,900,000 that is reflected as an adjustment to Mortgage and other notes receivable, net, in the Condensed Consolidated Balance Sheets and recorded a corresponding cumulative-effect adjustment to cumulative dividends in excess of net income. Upon adoption, we also recorded a $325,000 liability for estimated credit losses pertaining to unfunded loan commitments as a cumulative dividends in excess of net income. The corresponding credit loss liability is included in the financial statement caption Accounts payable and accrued expenses in the Condensed Consolidated Balance Sheets.

~~In March 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-04,~~ ~~Reference Rate Reform~~ (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Inter-bank Offered Rate (”LIBOR”) indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

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”). pandemic. 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 pandemic is a lease modification under ASC 842. Instead, an entity that elects not to evaluate whether a concession directly related to COVID-19 pandemic, which does not substantially increase either its rights as lessor or the obligations of the tenant, is a modification can elect whether to apply the modification guidance. ~~Such~~An entity should apply the election ~~being applied~~ consistently to leases with similar characteristics and similar circumstances. ~~During the third quarter, the Company provided~~ ~~$2,654,000~~ ~~in lease concessions as a result of COVID-19, as discussed in more detail in Note 7.~~ NHI has elected not to apply the modification guidance under ASC 842 and has accounted for ~~the related~~rent concessions as variable lease payments when applicable, recorded as rental income when received. During the three months ended March 31, 2021, the Company provided $4.2 million in lease concessions as a result of COVID-19 pandemic, as discussed in more detail in Note 7.

Note 3. Real Estate Properties and Investments

~~During the nine months ended September 30, 2020~~, ~~we made the following real estate investments and related commitments~~ ~~($ in thousands)~~:

Operator Date Properties Asset Class Land Improvements Total
Bickford Senior Living Q1 1 SHO $ 1,588 $ 13,512 $ 15,100
Life Care Services Q1 1 SHO 4,370 130,522 134,892
Autumn Trace Q2 2 SHO 344 13,906 14,250
The Courtyard at Bellevue Q3 1 SHO 504 11,796 12,300
$ 6,806 $ 169,736 $ 176,542

~~Bickford - Shelby, MI~~

On January 27, 2020, we acquired a 60-unit assisted living/memory care facility located in Shelby, Michigan, from Bickford. The acquisition price was $15,100,000 and included the full payment of an outstanding construction note receivable of $14,091,000, including interest. We added the facility to an existing master lease for a term of twelve years at an initial lease rate of 8%, with CPI escalators subject to a floor and ceiling.

~~Life Care Services~~

On January 31, 2020 we acquired an 80% equity interest in a property company, NHI-LCS JV I, LLC (“Timber Ridge PropCo”), which owns a 401-unit Continuing Care Retirement Community (“CCRC”) located in Issaquah, Washington comprising 330 independent living units, 26 assisted living/memory care units and 45 skilled nursing beds. The same transaction conveyed to NHI a 25% equity interest in the newly formed operating company, Timber Ridge OpCo, LLC (“Timber Ridge OpCo”).

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~~5.75%. LCS paid $10,778,000 for its 20% equity stake in Timber Ridge PropCo and provided $2,625,000 for a 75% equity participation in Timber Ridge OpCo.~~

The lease between Timber Ridge PropCo and Timber Ridge OpCo carries a rate of 6.75% for an initial term of seven years plus renewal options and has a CPI-based lease escalator, subject to floor and ceiling. Including interest payments on debt to NHI and our lease participation in the Timber Ridge PropCo, as detailed above, we will receive approximately $8,216,000 in the first twelve months plus 25% of the remaining Timber Ridge OpCo cash flow. NHI’s contribution was allocated to our interest in the tangible assets of Timber Ridge PropCo with no material fair value allocated to Timber Ridge OpCo beyond our initial investment. The lease between Timber Ridge PropCo and Timber Ridge OpCo includes an “earn out” provision whereby Timber Ridge OpCo could become eligible for a payment of $10,000,000 based on the attainment of certain operating metrics. See Note 5 for a discussion of Timber Ridge OpCo.

~~Autumn Trace~~

On May 1, 2020, we completed a purchase leaseback to acquire 2 senior housing facilities each with 44 assisted living units for a total purchase price of $14,250,000, including $150,000 in closing costs. The facilities are located in Indiana and are leased to Autumn Trace Senior Communities, which is a new operator relationship for NHI. The 15-year master lease has an initial lease rate of 7.25% with fixed annual escalators of 2.25% and offers two optional extensions of five years each. NHI was also granted a purchase option on a newly opened Indiana facility.

~~The Courtyard at Bellevue~~

On September 30, 2020, we acquired a 43-unit assisted living and memory care facility located in Bellevue, Wisconsin from 41 Management. The acquisition price was $12,300,000 and included the full payment of an outstanding mortgage loan of $3,870,000, plus accrued interest. The property is leased to an affiliate of 41 Management pursuant to a 15-year master lease that has an initial lease rate of 7.5% with fixed annual escalators of 2.5% and offers two optional extensions of five years each.

Tenant Concentration

The following table contains information regarding tenant concentration in our portfolio, excluding $2.5 million for our corporate office and a credit loss reserve balance of $4.9 million, based on the percentage of revenues for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ related to tenants or affiliates of tenants, that exceed 10% of total revenue ($ in thousands):

as of September 30, 2020
Revenues1
Number of Real Notes Nine Months Ended September 30,
Properties Estate Receivable 2020 2019
Bickford Senior Living 48 $ 534,376 $ 33,458 $ 39,142 16% $ 39,356 17%
Senior Living Communities 10 573,631 38,870 38,972 15% 36,914 16%
Holiday Retirement 26 531,378 0 30,529 12% 30,283 13%
National HealthCare Corporation (NHC) 42 171,297 0 28,362 11% 28,670 12%
All others 1,451,204 219,861 114,567 100,663
$ 3,261,886 $ 292,189 $ 251,572 $ 235,886

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	as of March 31, 2021						Revenues1
	Asset	Number of	Real		Notes		Three Months Ended March 31,
	Class	Properties	Estate		Receivable		2021			2020

Senior Living Communities	EFC	10	$	573,631	$	44,189	$	12,723	16%	$	12,717	15%
Bickford Senior Living	ALF	48	534,376		35,079		10,207		13%	13,603		16%
Holiday Retirement	ILF	26	532,672		—		10,185		13%	10,176		12%
National HealthCare Corporation (NHC)	SNF	42	171,235		—		9,452		12%	9,448		11%
All others2	Various		1,451,799		226,906		36,157		44%	35,579		42%
Escrow funds received from tenants
for property operating expenses	Various		—		—		2,161		2%	1,553		2%
			$	3,263,713	$	306,174	$	80,885		$	83,076

1 includes interest income on notes receivable

2 includes prior period amounts for disposals or transitioned to new operators

At ~~September 30, 2020,~~March 31, 2021, the 1 state in which we had an investment concentration of 10% or more was South Carolina (10.3%).

NHC Percentage Rent

Under the terms of our two leases with NHC, rent escalates by 4% of the increase, if any, in each of the facility’s revenue over a base year and is referred to as percentage rent. The following table summarizes the percentage rent income from NHC (~~(10.3%~~$ in thousands).:


	Three Months Ended March 31,
		2021		2020
Current year		$	920	$	926
Prior year final certification1		(5)		(14)
Total percentage rent income		$	915	$	912

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.

NaN of our board members, including our chairman, are also members of NHC’s board of directors.

Tenant Purchase Options

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purchase options on 1211 properties in which we had an aggregate net investment of ~~$122,982,000~~$100.1 million at ~~September 30, 2020,~~March 31, 2021, become exercisable between ~~2021~~2022 and 2028.

Rental income from leased properties with tenant purchase options either currently exercisable or exercisable in the future was ~~$4,703,000~~$5.0 million and ~~$13,418,000~~$4.4 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and $4,547,000 and $13,763,000~~respectively.

In January 2021, we received notification of a tenant’s intention to acquire in July 2021, pursuant to a purchase option, one of the 6 properties mentioned above, a behavioral hospital located in Tennessee, for approximately $26.4 million. The net investment at March 31, 2021 was $21.1 million. Rental income was $0.7 million for both the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~March 31, 2021 and 2020. We cannot reasonably estimate at this time the probability that ~~these~~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.

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Other Portfolio Activity

Tenant Transitioning

NaN properties were transitioned during 2019 to 5 new tenants following a period of non-compliance by the former ~~operator.~~operators. NaN leases with ~~the~~ new tenants for 6 of these properties specify periods during which rental income is based on operating income, net of management fees. We recognized rental income from these nine properties of ~~$930,000~~$0.9 million and ~~$3,741,000~~$1.6 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively and $1,103,000 and $2,310,000 for the three and nine months ended September 30, 2019,~~ respectively.

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

~~Asset Dispositions~~

In September 2019, we classified a portfolio of 8 assisted living properties located in Arizona (4), Tennessee (3) and South Carolina (1) as held for sale, after the current tenant, Brookdale Senior Living, expressed an intention to exercise its purchase option on the properties. The purchase option called for the parties to split any appreciation on an equal basis above $37,520,000. During the first quarter of 2020, NHI and the tenant agreed to a fair valuation of $41,000,000 for the properties, and, accordingly, on January 22, 2020, we disposed of the properties at the agreed price of $39,260,000 and recognized a gain of $20,752,000. For the three and nine months ended September 30, 2020 we recognized $0 and $229,000, respectively and $1,062,000 and $3,187,000 for the three and nine months ended September 30, 2019, respectively, of rental income from this portfolio.

On February 21, 2020, we disposed of 2 assisted living properties previously classified as held-for-sale in exchange for a term note of $4,000,000 from the buyer, Bickford. The note, which is due February 2025 and bears interest at 7%, will begin amortizing on a twenty-five-year basis in January 2021. In the first quarter of 2019, we recorded an adjustment to write off straight-line rent receivables of $124,000 and recognized an impairment loss of $2,500,000, included in loan and realty (gains) losses on the Condensed Consolidated Statements of Income to write down the properties to their estimated net realizable value upon classification of these properties as held-for-sale.

Future Minimum Base Rent

Future minimum ~~base rents due~~lease payments to be received by us under ~~the remaining non-cancelable terms of~~our operating leases ~~in place as of September 30, 2020,~~at March 31, 2021, are as follows ($in thousands):


Remainder of 2020		$	70,818
2021		281,516
Remainder of 2021				Remainder of 2021	$	215,167
2022	2022	285,924		2022	287,817
2023	2023	282,072		2023	283,511
2024	2024	274,544		2024	277,004
2025	2025	267,944		2025	273,507
2026				2026	277,816
Thereafter	Thereafter	1,398,860		Thereafter	1,158,838
		$	2,861,678		$	2,773,660

We assess the collectability of lease payments to be received from our tenants, which includes receivables, consisting primarily of straight-line rents receivable, based on several factors, including payment history, the financial strength of the tenant

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and any guarantors, historical operations and operating trends of the property, and current economic conditions. If our evaluation of these factors indicates it is not probable that we will be able to collect substantially all of the lease payments, we recognize lease payments on a cash basis and de-recognize all rent receivable assets, including the straight-line rent receivable asset and record as a reduction in rental revenue.

Variable Lease Payments

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. Some of our leases contain escalators that are determined annually based on a variable index or other factor 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):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
Lease payments based on fixed escalators, net of deferrals	Lease payments based on fixed escalators, net of deferrals	$	67,342	$	66,671	$	205,444	$	194,706	Lease payments based on fixed escalators, net of deferrals		$	67,281	$	68,669
Lease payments based on variable escalators	Lease payments based on variable escalators	1,386		1,248		4,151		3,611		Lease payments based on variable escalators		1,326		1,364
Straight-line rent income	Straight-line rent income	5,086		5,720		15,481		16,255		Straight-line rent income		4,241		5,177
Escrow funds received from tenants		4,007		1,608		7,190		4,205
Escrow funds received from tenants for property operating expenses										Escrow funds received from tenants for property operating expenses		2,161		1,553
Amortization of lease incentives										Amortization of lease incentives		(260)		(236)
Rental income	Rental income	$	77,821	$	75,247	$	232,266	$	218,777	Rental income		$	74,749	$	76,527

Bickford Portfolio Sale

Effective April 30, 2021, we executed an agreement for the sale of 6 properties that were leased to Bickford for a purchase price of $52.9 million, which includes a $13.0 million Company-financed second mortgage. Upon completion of this transaction, Bickford satisfied the terms of our prior agreement that contingently waived $2.1 million in rent for the third quarter of 2020 and none of that amount will be repaid. These 6 properties had an aggregate net book value of approximately $34.6 million as of March 31, 2021. Rental income from this portfolio was $1.3 million and $1.5 million for the three months ended March 31, 2021

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and 2020, respectively. These properties were part of the Company’s ongoing negotiations for the sale to Bickford of 9 properties leased to Bickford. We continue to explore our options for the remaining three properties including a sale to a third party, re-tenanting, or retaining the existing lease with Bickford.

Note 4. Mortgage and Other Notes Receivable

At ~~September 30, 2020, we had~~March 31, 2021, our investments in mortgage notes receivable totaled $268.4 million secured by real estate and other assets of the borrower (e.g., UCC liens on personal property) related to 1514 facilities and other notes receivable totaled $37.8 million guaranteed by significant parties to the notes or by cross-collateralization of properties with the same ~~owner with an aggregate carrying value~~owner. These balances exclude a credit loss reserve of ~~$287,282,000, net of an allowance of $4,907,000.~~$4.9 million at March 31, 2021. All our notes were on full accrual basis at ~~September 30, 2020.~~March 31, 2021.

In April 2021, the Company entered into a $50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a new fund that will invest in medical real estate, including medical office buildings, throughout the United States. Amounts under the loan agreement will be funded as real estate investments are identified for acquisition. Borrowings under the loan agreement will bear interest at an annual rate of 9.5% and accrue an additional 2.5% in interest to be paid upon certain future events including repayments, sales of fund investments, and refinancings. The mezzanine loan has a five year term, commencing on the earlier of full deployment of the funds or two years and includes 2 one year extensions.

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 (“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, ~~June 30,~~December 31, 2020, 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) ~~over~~more than 1.5x, (ii) between 1.0x and 1.5x, (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. As of ~~September 30, 2020,~~March 31, 2021, we did not have any construction loans that we considered underperforming. The tables below present outstanding note balances as of March 31, 2021 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 ~~tables below present outstanding note balances as of September 30, 2020 at amortized cost based on the~~ credit quality indicator as of ~~June 30, 2020,~~March 31, 2021, is presented below for the amortized cost, net by year of origination ($ in thousands):

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		2020		2019		2018		2017		2016		Prior		Total			2020		2019		2018		2017		2016		Prior		Total
Mortgages	Mortgages															Mortgages
more than 1.5x	more than 1.5x	$	1,553	$	8,453	$	179,141	$	—	$	—	$	6,894	$	196,041	more than 1.5x	$	8,424	$	8,833	$	193,463	$	—	$	—	$	4,540	$	215,260
between 1.0x and 1.5x	between 1.0x and 1.5x	—		0		—		—		10,000		—		10,000		between 1.0x and 1.5x	—		0		—		—		10,000		—		10,000
below 1.0x		4,000		39,123		—		9,963		—		—		53,086
less than 1.0x																less than 1.0x	3,989		39,123		—		—		—		—		43,112
No coverage available	No coverage available	—		—		—		—		—		—		—		No coverage available	—		—		—		—		—		—		—
		5,553		47,576		179,141		9,963		10,000		6,894		259,127			12,413		47,956		193,463		$	0	10,000		4,540		268,372
Mezzanine	Mezzanine															Mezzanine
more than 1.5x	more than 1.5x	—		—		—		—		—		—		—		more than 1.5x	—		—		—		—		—		—		—
between 1.0x and 1.5x	between 1.0x and 1.5x	—		—		—		—		14,479		—		14,479		between 1.0x and 1.5x	—		—		—		—		—		—		—
below 1.0x		—		—		—		—		0		11,663		11,663
less than 1.0x																less than 1.0x	—		—		—		—		14,491		11,072		25,563
No coverage available	No coverage available	—		750		—		—		—		—		750		No coverage available	—		750		—		—		—		—		750
		—		750		—		—		14,479		11,663		26,892			—		750		—		—		14,491		11,072		26,313
Revolver	Revolver															Revolver
more than 1.5x	more than 1.5x													—		more than 1.5x													—
between 1.0x and 1.5x	between 1.0x and 1.5x													6,170		between 1.0x and 1.5x													11,489
below 1.0x														—
less than 1.0x																less than 1.0x													—
														6,170															11,489
										Credit loss reserve				(4,907)											Credit loss reserve				(4,856)
														$	287,282														$	301,318

Due to the economic uncertainty created by the COVID-19 pandemic and the potential impact on the collectability of our mortgages and other notes receivable, we ~~are forecasting~~forecasted at the beginning of the pandemic a 20% increase in the probability of a default and a 20% increase in the amount of loss from a default resulting in an effective adjustment of 44%. The COVID-19 adjustments resulted in a $1,700,000 increase in the credit loss reserve during the first quarter of 2020. Excluding the effects of the COVID-19 adjustment, our provision for expected credit losses decreased by $693,000 since our adoption of the credit loss guidance on January 1, 2020, due primarily to a decrease in the balance of our construction mortgage receivables and the resulting reduction in our historical probability of default experience for our acquisition and construction mortgage pool.

The allowance for expected credit losses ~~for our commercial loans~~ is presented in the following table for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 ($ in thousands):


Beginning balance January 1, ~~2020 (upon adoption of ASU 2016-13)~~2021	$	~~3,900~~4,946
Provision for expected credit losses	~~1,007~~ (90)


Balance ~~September 30, 2020~~March 31, 2021	$	~~4,907~~4,856

Bickford

At ~~September 30, 2020,~~March 31, 2021, our construction loans to Bickford are summarized in the following table ($ in thousands):


Commencement	Commencement	Rate	Maturity	Commitment		Drawn		Location	Commencement	Rate	Maturity	Commitment		Drawn		Location
January 2018	January 2018	9%	5 years	$	14,000	$	(13,687)	Virginia	January 2018	9%	5 years	$	14,000	$	(14,000)	Virginia
July 2018	July 2018	9%	5 years	14,700		(14,218)		Michigan	July 2018	9%	5 years	14,700		(14,700)		Michigan
June 2020	June 2020	9%	5 years	14,200		(1,553)		Virginia	June 2020	9%	5 years	14,200		(2,390)		Virginia
				$	42,900	$	(29,458)					$	42,900	$	(31,090)

~~On June 30, 2020, we entered into a $14,200,000 construction loan agreement with Bickford to develop a 64-unit assisted living facility.~~

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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 ~~$2,000,000~~$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.

~~Our loans to Bickford represent a variable interest and Bickford is considered a VIE. We have concluded that we are not the primary beneficiary.~~

~~Life Care Services - Timber Ridge~~

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In February 2015, we entered into a loan agreement in which the proceeds were used to fund the construction of Phase II of Timber Ridge at Talus, a Type-A continuing care retirement community in Issaquah, Washington. The outstanding balance due from LCS-Westminster Partnership III LLP (“LCS-WP III”), an affiliate of LCS and the manager of the facility, was $59,350,000 as of January 31, 2020, when we acquired the property and Timber Ridge PropCo assumed the debt (see Note 3) which was increased to $81,000,000 as part of the transaction. To provide working capital in support of the CCRC’s entry-fee model, NHI agreed to supply a revolving line of credit permitting draws up to a maximum of $5,000,000. See Note 5 for more information about our equity-method investment in Timber Ridge OpCo.

~~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 $180,000,000. The loan agreement conveys a mortgage interest and will facilitate the construction of Phase II of Sagewood, a Type-A Continuing Care Retirement Community in Scottsdale, AZ. As an affiliate of a larger company, LCS-WP IV is structured to limit liability for potential damage claims, is capitalized to achieve that purpose and is considered a VIE. As discussed more fully in Note 2, we have concluded that we are not the primary beneficiary.

The loan conveys a mortgage interest in the form of 2 notes under a master credit agreement. The senior note (“Note A”) totals $118,800,000 at a 7.25% interest rate with 10 basis-point annual escalators after three years and has a term of 10 years. We have funded $91,256,000 of Note A as of September 30, 2020. Note A is interest-only and is locked to prepayment until January 2021. After 2020, the prepayment penalty starts at 2% and declines to 1% in 2022. The second note (“Note B”) is a construction loan for up to $61,200,000 at an annual interest rate of 8.5% and carries a maturity of five years. The total amount funded on Note B was $61,200,000 as of September 30, 2020.

Senior Living Communities

~~We provided a $12,000,000~~On March 30, 2021, we amended the revolving line of credit ~~whose borrowings~~agreement with Senior Living Communities (“Senior Living”) to increase availability from $15.0 million to $20.0 million. Borrowings by Senior Living under the revolver are to be used ~~primarily~~for working capital needs and to finance construction projects within ~~the Senior Living~~its portfolio, including building additional units. ~~No more than $10,000,000 may be used to meet general working capital needs.~~ Beginning January 1, ~~2022,~~2023, availability under the revolver reduces to ~~$7,000,000 with the limit for general working capital needs reduced to $5,000,000.~~$15.0 million. The revolver matures in December 2029 at the time of lease maturity. At ~~September 30, 2020,~~March 31, 2021, the ~~$6,170,000~~$11.5 million outstanding under the facility bears interest at ~~6.69%~~7.74% per annum, the prevailing 10-year U.S. Treasury rate plus 6%.

On ~~July 31, 2020, Senior Living Communities repaid 2 fully drawn mezzanine loans~~The Company also has a mortgage loan of $12,000,000 and $2,000,000, respectively. The purpose of the mezzanine loans were to partially fund construction of a 186-unit senior living campus on Daniel Island in South Carolina, which opened in April 2018. The loans bore interest, payable monthly, at a 10% annual rate.

~~Our loans~~$32.7 million to Senior Living that commenced in July 2019 for the acquisition of a 248-unit continuing care retirement community in Columbia, South Carolina. The mortgage loan is for a term of five years with 2 one year extensions and ~~its subsidiaries totaling $38,870,000, represent~~carries an interest rate of 7.25%. Additionally, the loan conveys to NHI a ~~variable interest. Senior Living is structured~~purchase option at a stated minimum price of $38.3 million, subject to ~~limit liability~~adjustment for potential claims for damages, is appropriately capitalized for that purpose and is considered a VIE. As discussed more fully in Note 2, we have concluded that we are not the primary beneficiary of Senior Living.market conditions.

Note 5. Equity Method Investment

~~Equity Method Investment~~

~~As discussed in Note 2, our~~Our initial $0.9 million investment in the operating company, Timber Ridge OpCo, held by our Taxable REIT Subsidiary (“TRS”) ~~and recorded in the initial amount of $875,000,~~ arose in conjunction with the acquisition of a CCRC from ~~LCS-WP III.~~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

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Investment Diversification and Empowerment Act of 2007 (“RIDEA”) which permits NHI to receive rent payments through a triple-net lease between Timber Ridge PropCo, the property company, and Timber Ridge OpCo and is designed to give NHI the opportunity to capture additional value on the improving performance of the operating company through distributions from the TRS.. Accordingly, the TRS holds our 25% equity interest in Timber Ridge OpCo, ~~in order to provide an organizational structure that will allow~~which permits the TRS to engage in ~~a broad range of~~ activities and share in ~~cash-flows~~cash flows that would otherwise be non-qualifying income under the REIT gross income ~~tests.~~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 since we are not the primary beneficiary of Timber Ridge OpCo as our participating rights do not give us the power to direct the activities that most significantly impact Timber Ridge OpCo’s ~~activities are managed through an “eligible independent contractor” subject~~economic performance. Our equity share in the losses of Timber Ridge OpCo during three months ended March 31, 2021 and 2020, was $0.8 million and $0.4 million, respectively. During first quarter of 2021, we received $0.3 million in cash distributions from Timber Ridge OpCo. Under the equity method, we decrease the carrying value of our investment for losses in the entity and distributions to ~~the oversight~~NHI for cumulative amounts up to and including our basis plus any commitments to fund operations. As of March 31, 2021, we have recognized our share of Timber Ridge OpCo’s ~~board. This organizational structure meets~~operating losses in excess of our initial investment. These cumulative losses of $3.3 million in excess of our original basis are included in “Accounts payable and accrued expenses” in our Condensed Consolidated Balance Sheet as of March 31, 2021. Our commitments are currently limited to the ~~requirements of Internal Revenue Code regulations for TRS entities. LCS is~~additional $5.0 million under the managing member of Timber Ridge OpCo, although we have retained specific non-controlling rights. As a result of LCS’s retention of operations oversight and control over all day-to-day business matters, our participating influence at Timber Ridge OpCo does not amount to control of the entity.revolving credit facility.

~~As part of our acquisition of the~~The Timber Ridge property ~~in January 2020, we accepted the property~~is 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~~resident mortgages secured by ~~liens and entered into~~ a Deed of Trust and Indenture of Trust (the “Deed and Indenture”) ~~for the benefit~~. As part of the trustee (now Wilmington Trust, N.A., “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. Subsequent to these early transactions, the practice was discontinued at Timber Ridge.

Our entry into the Timber Ridge joint venture involved the separation of the existing owner/operator configuration into property and operating companies. Accomplishing the split required the allocation of assets and liabilities of the previously unified entity.our acquisition, Timber Ridge PropCo acquired the Timber Ridge property ~~subject to the resident mortgages secured by the Deed~~ and Indenture. Accordingly, 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 our acquisition,~~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.

~~With the periodic settlement of some of the outstanding resident loans in the course of normal entrance-fee community operations~~ In addition, by ~~Timber Ridge OpCo, the balance owing on the Deed and Indenture at the date of our acquisition on January 31, 2020 was $20,063,000 and was further reduced to $17,530,000 at September 30, 2020. By~~ terms of the resident loan assumption agreement, during the term of the lease (7(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. ~~NHI estimates that no material outflow~~As a result of ~~cash will result from Timber Ridge PropCo’s secondary obligation as guarantor under~~the subordination and resident loan assumption agreements, a liability was not recorded for the resident ~~mortgages. Accordingly, no liability was recorded on NHI’s books for the guarantee~~loan obligation upon acquisition and as of ~~September 30, 2020.~~

~~Timber Ridge OpCo meets~~March 31, 2021. The balance secured by the criteria to be considered a VIE. However, we are not the primary beneficiary of Timber Ridge OpCo as our participating rights do not give us the power to direct the activities that most significantly impact Timber Ridge OpCo’s economic performance. As a result, we report our investment in Timber Ridge OpCo under the equity method of accounting as prescribed by ASC Topic 970, ~~Real Estate - General, Subtopic 323-30~~ ~~Equity Method~~Deed and ~~Joint Ventures. Our equity share in the losses of Timber Ridge OpCo during the three months and nine months ended September 30, 2020~~Indenture was $728,000 and $2,018,000. Under the equity method, we 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. As ~~of September 30, 2020, we have recognized our share of Timber Ridge OpCo’s operating losses in excess of our initial investment. These cumulative losses in excess of our basis of $1,143,000~~ ~~are~~ ~~included in accounts payable and accrued expenses in our Condensed Consolidated Balance Sheets. Our commitments are currently limited to an additional $5,000,000 under a revolving credit facility.~~$16.7 million at March 31, 2021.

Note 6. Debt

Debt consists of the following ($ in thousands):

1815

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September 30,
2020 December 31,
2019
Revolving credit facility - unsecured $ 288,000 $ 300,000
Bank term loans - unsecured 650,000 550,000
Private placement term loans - unsecured 400,000 400,000
HUD mortgage loans - secured, non-recourse 41,542 42,138
Fannie Mae term loans - secured, non-recourse 95,444 95,706
Convertible senior notes - unsecured 60,000 59,697
Unamortized loan costs (6,018) (7,076)
$ 1,528,968 $ 1,440,465

~~The HUD loans are presented in the table above net of discounts of $1,179,000 and $1,238,000 as of September 30, 2020 and December 31, 2019, respectively.~~

~~Repayment of HUD mortgage loans~~

As of September 30, 2020, the Company had HUD mortgage loans secured by 10 properties leased to Bickford with a net book value of $47,862,000. NaN of the mortgage notes required monthly payments of principal and interest from 4.3% to 4.4% (inclusive of mortgage insurance premiums) with original maturities in August and October 2049. NaN additional HUD mortgage loan assumed in 2014 at a discount, required monthly payments of principal and interest of 2.9% (inclusive of mortgage insurance premium) with an original maturity in October 2047. On October 30, and November 2, 2020, the Company repaid all ten HUD mortgage loans with a combined balance of $42,629,000, plus accrued interest of $157,000 and a prepayment fee of $1,619,000.


	March 31, 2021		December 31, 2020
Revolving credit facility - unsecured	$	30,000	$	298,000
Bank term loans - unsecured	550,000		650,000
Senior notes - unsecured, net of discount of $3,162	396,838		0
Private placement term loans - unsecured	400,000		400,000
Fannie Mae term loans - secured, non-recourse	95,260		95,354
Convertible senior notes - unsecured	60,000		60,000
Unamortized loan costs	(7,373)		(4,069)
	$	1,524,725	$	1,499,285

Aggregate principal maturities of debt as of ~~September 30, 2020~~March 31, 2021 are as follows ($in thousands):


Remainder of 2020		$	91
2021		448,371
Remainder of 2021 (including Convertible Notes)				Remainder of 2021 (including Convertible Notes)	$	60,277
2022	2022	250,389		2022	280,389
2023	2023	475,407		2023	475,408
2024	2024	75,425		2024	75,425
2025	2025	143,761		2025	143,761
2026				2026	0
Thereafter	Thereafter	100,000		Thereafter	496,838
		1,493,444			1,532,098
Less: unamortized loan costs	Less: unamortized loan costs	(6,018)		Less: unamortized loan costs	(7,373)
HUD mortgages		41,542
		$	1,528,968		$	1,524,725

Convertible senior notes

On April 1, 2021, the $60.0 million in aggregate principal amount of our 3.25% senior unsecured convertible notes (the “Convertible Notes”) 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 Condensed Consolidated Balance Sheets.

Unsecured revolving credit facility and bank term loans

Our unsecured bank credit facility consists of ~~three~~two term loans ~~–$100,000,000 maturing in July 2021,~~- $~~250,000,000~~250.0 million maturing in August 2022 and ~~$300,000,000~~$300.0 million maturing in September 2023 - and a ~~$550,000,000~~$550.0 million revolving credit facility that ~~matures~~was initially scheduled to mature in August 2021. In April 2021, ~~with a one year~~the Company elected to exercise the extension option on the revolving credit facility available after payment of a 10 basis point extension ~~fee.~~fee totaling $0.6 million, extending the maturity of the revolver to August 2022. We have swap agreements to fix the interest rates on ~~$340,000,000~~$400.0 million of term loans ~~and $60,000,000 of our revolving credit facility~~ that expire in December ~~2021, when LIBOR is scheduled for discontinuation.~~2021.

WeOn January 26, 2021, we repaid a $100.0 million term loan that was entered into July 2020 with the ~~$100,000,000~~net proceeds from the 2031 Senior Notes offering discussed below. The term loan ~~in July 2020, which bears~~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. ~~The term loan provides us with~~Upon repayment, the option to extend the maturity by one year subject to the payment of a 20 basis point extension fee. The proceeds from this loan were used to reduce the outstanding balance on our revolving credit facility. The Company ~~incurred~~expensed approximately ~~$1,039,000~~$0.5 million of deferred financing cost associated with this ~~loan.~~loan which is included in “Loss on early retirement of debt” in our Condensed Consolidated Statement of Income for the three months ended March 31, 2021.

The revolving facility fee is currently 20 ~~basis points~~bps per annum, and based on our current leverage ratios, the facility presently provides for floating interest on the revolver and the term loans at 30-day LIBOR plus 120 ~~basis points~~bps and a blended ~~140 basis~~

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~~points,~~132 bps, respectively. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 30-day LIBOR was ~~15 basis points~~11 bps and ~~176 basis points,~~14 bps, respectively. Through June 2020, the Company utilized $610,000,000 in interest rate swaps, designated as cash flow hedges, to fix the variable interest rate on the amounts outstanding on our term loans and revolving credit facility, at which time $210,000,000 of these hedges expired. As of September 30, 2020, we had $538,000,000 of outstanding variable rate debt exposed to interest rate risk through December 2021, at which time our remaining hedges expire. Our swaps and the financial instruments to which they relate are described in the table below, under the caption “Interest Rate Swap Agreements.”

At ~~September 30, 2020,~~March 31, 2021, we had ~~$262,000,000~~$520.0 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 ~~September 30, 2020,~~March 31, 2021, we were in compliance with these ratios.

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Pinnacle Bank is a participating member of our banking group. A member of NHI’s Board of Directors and chairman of our audit committee 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.

Senior Notes due 2031

On January 26, 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 the net proceeds from the 2031 Senior Notes offering to repay our $100.0 million term loan that was entered into in July 2020 and reduce borrowings outstanding under our revolving credit facility.

The 2031 Senior Notes are subject to affirmative and negative covenants, including financial covenants. As of March 31, 2021 we were in compliance with all affirmative and negative covenants, including financial covenants for our 2031 Senior Notes borrowings.

Private placement term loans

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


Amount		Inception	Maturity	Fixed Rate

$	125,000	January 2015	January 2023	3.99%
50,000		November 2015	November 2023	3.99%
75,000		September 2016	September 2024	3.93%
50,000		November 2015	November 2025	4.33%
100,000		January 2015	January 2027	4.51%
$	400,000

Except for specific debt-coverage ratios and net worth minimums, covenants pertaining to the private placement term loans are generally conformed with those governing our credit facility. Our unsecured private placement term loan agreements 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

In March 2015, we obtained ~~$78,084,000~~$78.1 million in Fannie Mae financing. The term-debt financing consists of interest-only payments at an annual rate of 3.79% and a 10-year maturity. The mortgages are non-recourse and secured by 13 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%, and has a remaining balance of ~~$17,360,000~~$17.2 million at ~~September 30, 2020.~~March 31, 2021. All together, these notes are secured by facilities having a net book value of ~~$131,024,000~~$129.0 million at ~~September 30, 2020.~~

~~Convertible senior notes~~

In March 2014, we issued $200,000,000 of 3.25% senior unsecured convertible notes due April 2021 (the “Notes”) with interest payable April 1st and October 1st of each year. The Notes were convertible at an initial rate of 13.93 shares of common stock per $1,000 principal amount, representing a conversion price of approximately $71.81 per share for a total of approximately 2,785,200 underlying shares. The conversion rate is subsequently adjusted upon each occurrence of certain events, as defined in the indenture governing the Notes, including the payment of dividends at a rate exceeding that prevailing in 2014. The conversion option was accounted for as an “optional net-share settlement conversion feature,” meaning that upon conversion, NHI’s conversion obligation may be satisfied, at our option, in cash, shares of common stock or a combination of cash and shares of common stock. Therefore, we use the treasury stock method to account for potential dilution in the calculation of earnings per diluted share.

In December 2019, through the issuance of common stock and cash we retired $60,000,000 of our convertible notes. Settlement of the notes requires management to allocate the consideration we ultimately pay between the debt component and the equity conversion feature as though they were separate instruments. The allocation is effected by recording the fair value of the

~~Table of Contents~~

debt component first, with any remainder allocated to the conversion feature. Amounts expended to settle the notes are recognized first as a settlement of the notes at our carrying value and then are recognized in income to the extent the portion allocated to the debt instrument differs from carrying value. The remainder of the allocation, if any, is treated as settlement of equity and adjusted through our capital in excess of par account.

As of September 30, 2020, our $60,000,000 of senior unsecured convertible notes were convertible at a rate of 14.88 shares of common stock per $1,000 principal amount, representing a conversion price of approximately $67.21 per share for a total of 892,716 shares on the remaining $60,000,000 of senior unsecured convertible notes. For the three and nine months ended September 30, 2020, there was no dilution resulting from the conversion option within our convertible debt. If our current share price increases above the adjusted $67.21 conversion price, dilution may become attributable to the conversion feature. At September 30, 2020, the face amount of the convertible debt exceeded its value on conversion, when value on conversion was computed as if the debt were immediately eligible to convert.31, 2021.

Interest Rate Swap Agreements

Our existing interest rate swap agreements will collectively continue through December 2021 to hedge against fluctuations in variable interest rates applicable to ~~$400,000,000~~$400.0 million of our bank loans. ~~In June 2020, there were $210,000,000 notional amount of swaps that matured.~~ During the ~~next year,~~remainder of 2021, approximately ~~$7,100,000~~$5.4 million of losses, which are included in ~~accu~~“~~mulated~~Accumulated other comprehensive loss” in our Condensed Consolidated Balance Sheets, are projected to be reclassified into earnings.

As of ~~September 30, 2020,~~March 31, 2021, we employed the following interest rate swap contracts to mitigate our interest rate risk on our bank term and revolver loans described above ($ in thousands):

Date Entered Maturity Date Swap Rate Rate Index Notional Amount Fair Value (Liability)
March 2019 December 2021 2.22% 1-month LIBOR $ 100,000 $ (2,597)
March 2019 December 2021 2.21% 1-month LIBOR $ 100,000 $ (2,613)
June 2019 December 2021 1.61% 1-month LIBOR $ 150,000 $ (2,736)
June 2019 December 2021 1.63% 1-month LIBOR $ 50,000 $ (920)

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Date Entered	Maturity Date	Swap Rate	Rate Index	Notional Amount		Fair Value (Liability)
March 2019	December 2021	2.22%	1-month LIBOR	$	100,000	$	(1,574)
March 2019	December 2021	2.21%	1-month LIBOR	$	100,000	$	(1,584)
June 2019	December 2021	1.61%	1-month LIBOR	$	150,000	$	(1,661)
June 2019	December 2021	1.63%	1-month LIBOR	$	50,000	$	(558)

If the fair value of the hedge is an asset, we include it in our Condensed Consolidated Balance Sheets ~~among other~~in the line item “Other assets”, and, if a liability, as a component of ~~accounts~~“Accounts payable and accrued ~~expenses.~~expenses”. See Note 11 for fair value disclosures about our interest rate swap agreements. Net liability balances for our hedges included as components of ~~accounts~~“Accounts payable and accrued expenses” on ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, were ~~$8,866,000~~$5.4 million and ~~$3,433,000,~~$7.1 million, respectively.

The following table summarizes interest expense ($ in thousands):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
Interest expense on debt at contractual rates	Interest expense on debt at contractual rates	$	10,129	$	14,308	$	33,701	$	40,736	Interest expense on debt at contractual rates		$	10,452	$	13,003
(Gains) losses reclassified from accumulated other
comprehensive income (loss) into interest expense		1,778		(390)		4,533		(1,031)
Losses reclassified from accumulated other										Losses reclassified from accumulated other
comprehensive income into interest expense										comprehensive income into interest expense		1,778		492
Capitalized interest	Capitalized interest	(9)		(161)		(169)		(476)		Capitalized interest		(16)		(98)
Amortization of debt issuance costs, debt discount and other	Amortization of debt issuance costs, debt discount and other	994		904		2,524		2,696		Amortization of debt issuance costs, debt discount and other		759		743
Total interest expense	Total interest expense	$	12,892	$	14,661	$	40,589	$	41,925	Total interest expense		$	12,973	$	14,140

Note 7. 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.~~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 ~~September 30, 2020~~March 31, 2021 according to the nature of their impact on our leasehold or loan portfolios. ($ in thousands):

~~Table of Contents~~


		Asset Class	Type	Total		Funded		Remaining			Asset Class	Type	Total		Funded		Remaining
Loan Commitments:	Loan Commitments:									Loan Commitments:
LCS Sagewood Note A	LCS Sagewood Note A	SHO	Construction	$	118,800	$	(91,256)	$	27,544	LCS Sagewood Note A	SHO	Construction	$	118,800	$	(104,618)	$	14,182
LCS Sagewood Note B	LCS Sagewood Note B	SHO	Construction	61,200		(61,200)		0		LCS Sagewood Note B	SHO	Construction	61,200		(61,200)		0
Bickford Senior Living	Bickford Senior Living	SHO	Construction	42,900		(29,458)		13,442		Bickford Senior Living	SHO	Construction	42,900		(31,090)		11,810
41 Management										41 Management	SHO	Construction	22,200		(6,207)		15,993
Senior Living Communities	Senior Living Communities	SHO	Revolving Credit	12,000		(6,170)		5,830		Senior Living Communities	SHO	Revolving Credit	20,000		(11,489)		8,511
41 Management	41 Management	SHO	Construction	10,800		(8,532)		2,268		41 Management	SHO	Construction	10,800		(8,901)		1,899
Timber Ridge OpCo	Timber Ridge OpCo	SHO	Working Capital	5,000		0		5,000		Timber Ridge OpCo	SHO	Working Capital	5,000		0		5,000
Watermark Retirement	Watermark Retirement	SHO	Working Capital	5,000		0		5,000		Watermark Retirement	SHO	Working Capital	5,000		0		5,000
Discovery Senior Living		SHO	Working Capital	750		(750)		0
				$	256,450	$	(197,366)	$	59,084				$	285,900	$	(223,505)	$	62,395

As provided above, loans funded do not include the effects of discounts or commitment fees. Our loans and loan commitments to 41 Management, LLC (“41 Management”) represent a variable interest. 41 Management is structured to limit liability for potential claims for damages, is capitalized to achieve that purpose and is considered a VIE. On June 12, 2020, we provided a $5,000,000 loan commitment to Watermark Retirement to provide working capital liquidity in connection with the renewal of an existing lease on two continuing care retirement communities.

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 COVID-19 pandemic adjustments as discussed in Note 4.

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The liability for expected credit losses on our unfunded loans is presented in the following table for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 ($ in thousands):


Beginning balance January 1, ~~2020 (upon adoption of ASU 2016-13)~~2021	$	~~325~~270
~~Benefit to~~Provision for expected credit losses	~~(5)~~40
Balance at ~~September 30, 2020~~March 31, 2021	$	~~320~~310


		Asset Class	Type	Total		Funded		Remaining			Asset Class	Type	Total		Funded		Remaining
Development Commitments:	Development Commitments:									Development Commitments:
Ignite Medical Resorts		SNF	Construction	$	25,350	$	(24,313)	$	1,037
Woodland Village	Woodland Village	SHO	Renovation	7,515		(7,425)		90		Woodland Village	SHO	Renovation	$	7,515	$	(7,425)	$	90
Senior Living Communities	Senior Living Communities	SHO	Renovation	9,930		(9,763)		167		Senior Living Communities	SHO	Renovation	9,930		(9,930)		0
Wingate Healthcare	Wingate Healthcare	SHO	Renovation	1,900		(1,532)		368		Wingate Healthcare	SHO	Renovation	1,900		(1,800)		100
Discovery Senior Living	Discovery Senior Living	SHO	Renovation	900		(697)		203		Discovery Senior Living	SHO	Renovation	900		(899)		1
Navion Senior Solutions		SHO	Construction	650		0		650
41 Management		SHO	Renovation	400		0		400
Watermark Retirement	Watermark Retirement	SHO	Renovation	6,500		(3,000)		3,500		Watermark Retirement	SHO	Renovation	6,500		(3,000)		3,500
Other										Other	SHO	Various	1,650		(391)		1,259
				$	53,145	$	(46,730)	$	6,415				$	28,395	$	(23,445)	$	4,950

In addition to the commitments listed above, Discovery PropCo has committed to Discovery Senior Living for funding up to ~~$2,000,000~~$2.0 million toward the purchase of condominium units located at one of the facilities. As of ~~September 30, 2020,~~March 31, 2021, we have funded ~~$968,000~~$1.0 million toward this commitment.

As of ~~September 30, 2020,~~March 31, 2021, we had ~~$31,850,000~~$31.9 million of contingent lease inducement commitments in 6 lease agreements which are generally based on the performance of facility operations and may or may not be met by the tenant. At ~~September 30, 2020,~~March 31, 2021, we had funded ~~$500,000~~$1.5 million toward these ~~commitments.~~

~~Table~~commitments of ~~Contents~~

which $1.0 million was funded during the three months ended March 31, 2021.

COVID-19 Pandemic Contingencies

~~The~~Since the World Health Organization declared ~~COVID-19~~coronavirus disease 2019 a pandemic on March 11, ~~2020. The~~2020, the continually evolving pandemic has resulted in a widespread health crisis adversely affecting governments, businesses, and financial markets. In response to the COVID-19 pandemic, many state, local and federal agencies instituted various health and safety measures including temporary closures of many businesses, “shelter in place” orders, and social distancing guidelines that remain in place to some degree. The COVID-19 pandemic and related health and safety measures ~~have created a significant strain on~~continue to impact the operations of many of ~~our~~the Company’s tenants, operators and borrowers. The federal government has provided economic assistance and other forms of assistance which mitigated to some extent the negative financial impact of the pandemic for certain of our tenants and operators who are eligible.

WeRevenues for the operators of our properties continue to be significantly impacted by occupancy. Building occupancy rates have been and may continue to be adversely affected by the COVID-19 pandemic if it continues to cause sustained negative trends such as early resident move-outs, delays in admitting new residents, or other collateral events such as a weakening in the housing market, a typical funding source for our senior housing operators’ customers. In addition, actions our operators take to address outbreaks could materially increase their operating costs, including costs related to enhanced health and safety precautions among other measures. A decrease in occupancy or increase in costs could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us, including the payment of rent, as well as on our results of operations.

Since the pandemic began, we have granted rent concessions ~~to two tenants~~ as ~~a result of~~shown in the ~~COVID-19 pandemic. Effective July 1, 2020, we agreed to defer $2,100,000~~following table ($ in ~~rent due for the third quarter of 2020 from Bickford with half of the deferral placed in escrow.~~thousands):

~~We have agreed to defer or abate portions~~


					Three months ended
	As of December 31, 2020				March 31, 2021				Cumulative Totals
	Deferrals		Abatements		Deferrals		Abatements		Deferrals		Abatements
Bickford Senior Living	$	3,750	$	2,100	$	3,750	$	0	$	7,500	$	2,100
All Others	1,232		50		447		0		1,679		50
	$	4,982	$	2,150	$	4,197	$	0	$	9,179	$	2,150

Table of ~~rents for~~Contents

The deferred amounts noted in the remainder of 2020 with another tenant that would also grant the tenant the option to defer a portion of rents related to the first quarter of 2021. The COVID-19 related deferrals and abatement granted for lease payments were $534,000 and $20,000, respectively, for the third quarter and $538,000 and $30,000, respectively for the fourth quarter. The optional deferred amount for the first quarter of 2021 is $447,000. Any deferred rent payments willtable above accrue interest starting at 8% per annum from the date of the deferral until paid in ~~full. All amounts deferred are due no later than December 31, 2022. Initial interest is 8% through December 31, 2021, at which time~~full under the ~~rate increases to 9%.~~terms of each tenant’s deferral agreement.

We have ~~elected not~~agreed with Bickford to ~~apply the modification guidance under ASC 842 and have decided to account~~defer $5.0 million in contractual rent due for the ~~related~~second quarter of 2021. See Note 3 for further discussion on Bickford rent concessions. We have either reached agreement or are in advanced discussions with 4 other tenants regarding additional rent concessions of approximately $2.3 million for the second quarter 2021. The majority of the deferrals we have granted are expected to bear interest at 8% per annum. We are also in negotiations with Holiday that could result in rent concessions starting in the second quarter of 2021 and may utilize a portion of our lease deposit with Holiday that totaled approximately $10.6 million as of March 31, 2021.

When applicable, we have accounted for rent concessions as variable lease payments, recorded as rental income when ~~received.~~received, in accordance with the FASB's Lease Modification Q&A. Reference Note 2 for further discussion. We will evaluate any rent deferral requests as a result of the COVID-19 pandemic on a tenant-by-tenant basis. The extent of future concessions we make as a result of the COVID-19 pandemic, which could have a material impact on our future operating results, cannot be reasonably or reliably projected by us at this time.

We have evaluated the impacts of COVID-19 on our operations thus far and incorporated COVID-19 information, where possible, into our assessments of liquidity, asset impairments, and collectability of amounts due from tenants and borrowers as of September 30, 2020. The extent of the impact of COVID-19 on our financial condition, results of operations and cash flows, in the near term, will depend on future developments which are highly uncertain and cannot be predicted at this time. We will continue to monitor for any material or adverse effects resulting from the COVID-19 pandemic.

Litigation

Our facilities are subject to claims and suits in the ordinary course of business. Our lessees 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. While there may be lawsuits pending against 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.

In June 2018, East Lake Capital Management LLC and certain related entities, including Regency (for three assisted living facilities in Tennessee, Indiana and North Carolina), filed suit against NHI in Texas seeking injunctive and declaratory relief and unspecified monetary damages. NHI responded with counterclaims and filed motions requesting the immediate appointment of a receiver and for pre-judgment possession. Resulting from these claims and counterclaims, on December 6, 2018, the parties entered into an agreement resulting in Regency vacating the facilities in December 2018. Litigation is ongoing.

Note 8. Equity and Dividends

~~Additional Common Shares Authorized~~

~~At our annual meeting on May 6, 2020, our stockholders approved an amendment to the Articles of Incorporation to increase the number of authorized common shares from 60,000,000 to 100,000,000.~~

At-the-Market (ATM) Equity Program

In March 2020 the Company entered into a new ATM equity offering sales agreement pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $500,000,000 of the Company’s common shares through the ATM equity

~~program. Upon entering into the new agreement, the Company terminated its previously existing ATM equity program, dated February 22, 2017.~~ During the three months ~~and nine months~~ ended ~~September 30, 2020,~~March 31, 2021, we issued ~~79,155~~661,951 common shares through the ATM program with an average price of ~~$65.35,~~$73.62, resulting in net proceeds of approximately ~~$4,791,000.~~$48.0 million. We intend to use the proceeds from any further activity under the ATM program for general corporate purposes, which may include future acquisitions and repayment of indebtedness, including borrowings under our credit facility.

Dividends

The following table summarizes dividends declared by the Board of Directors or paid during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021

Date of Declaration

Date of Record

Date Paid/Payable

Quarterly Dividend

December 15, 2020

December 31, 2020

January 29, 2021

$1.1025

March 12, 2021

March 31, 2021

May 7, 2021

$1.1025

Three Months Ended March 31, 2020

Date of Declaration

Date of Record

Date Paid/Payable

Quarterly Dividend

November 7, 2019

December 31, 2019

January 31, 2020

$1.05

February 19, 2020

March ~~30,~~31, 2020

May 8, 2020

$1.1025

~~June 15, 2020~~

~~June 30, 2020~~

~~August 7, 2020~~

~~$1.1025~~

~~September 14, 2020~~

~~September 30, 2020~~

~~November 6, 2020~~

~~$1.1025~~

~~Nine Months Ended September 30, 2019~~

~~Date of Declaration~~

~~Date of Record~~

~~Date Paid/Payable~~

~~Quarterly Dividend~~

~~December 17, 2018~~

~~December 28, 2018~~

~~January 31, 2019~~

~~$1.00~~

~~February 19, 2019~~

~~March 29, 2019~~

~~May 10, 2019~~

~~$1.05~~

~~May 7, 2019~~

~~June 28, 2019~~

~~August 9, 2019~~

~~$1.05~~

~~August 8, 2019~~

~~September 30, 2019~~

~~November 8, 2019~~

~~$1.05~~

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Note 9. Stock-Based Compensation

WeThe 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”~~2019 Plan”). During the first quarter of 2021, we granted stock options under the 2019 Plan of 639,500 and the remaining 12,500 awards available under the 2012 Plan. As of ~~September 30, 2020,~~March 31, 2021, shares available for future grants totaled ~~2,730,169. Stock options granted during 2020~~2,117,336 all under the ~~2012 Plan totaled 319,669. No shares remain available for issuance under the 2012 Plan.~~2019 plan. The following is a summary of stock-based compensation expense, net of any forfeitures, included in “General and administrative expenses” in the Condensed Consolidated Statements of Income ($ in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Non-cash stock-based compensation expense $ 457 $ 477 $ 2,772 $ 2,955


	Three Months Ended
	March 31,
		2021		2020
Non-cash stock-based compensation expense		$	5,446	$	1,845

The weighted average fair value of options granted during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 was $14.54 and ~~2019 was $5.57 and $6.17~~$5.54 per option, 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:


		2020	2019		2021	2020
Dividend yield	Dividend yield	5.1%	5.5%	Dividend yield	6.7%	5.1%
Expected volatility	Expected volatility	17.1%	18.6%	Expected volatility	48.1%	16.8%
Expected lives	Expected lives	2.9 years	2.9 years	Expected lives	2.9 years	2.9 years
Risk-free interest rate	Risk-free interest rate	1.30%	2.50%	Risk-free interest rate	0.33%	1.31%

The following table summarizes our outstanding stock options:

~~Table of Contents~~


				Weighted Average				Weighted Average
		Number	Weighted Average	Remaining		Number	Weighted Average	Remaining
		of Shares	Exercise Price	Contractual Life (Years)
Options outstanding January 1, 2019		920,346	$69.24
Options granted		602,000	$79.96
Options exercised		(431,993)	$70.55
Options outstanding, September 30, 2019		1,090,353	$74.63

Exercisable at September 30, 2019		599,834	$74.34
						of Shares	Exercise Price	Contractual Life (Years)
Options outstanding January 1, 2020	Options outstanding January 1, 2020	1,004,014	$74.35		Options outstanding January 1, 2020	1,004,014	$74.35
Options granted	Options granted	592,000	$90.32		Options granted	584,500	$90.79
Options exercised	Options exercised	(512,509)	$72.98		Options exercised	(512,509)	$72.98
Options forfeited	Options forfeited	(10,500)	$88.73		Options forfeited	(8,000)	$88.08
Options outstanding, September 30, 2020		1,073,005	$83.68	3.70
Options outstanding, March 31, 2020					Options outstanding, March 31, 2020	1,068,005	$83.90

Exercisable at September 30, 2020		601,994	$81.09	3.40
Exercisable at March 31, 2020					Exercisable at March 31, 2020	600,327	$81.22

Options outstanding January 1, 2021					Options outstanding January 1, 2021	1,033,838	$83.54
Options granted					Options granted	652,000	$69.20
Options exercised					Options exercised	(20,000)	$60.52

Options outstanding, March 31, 2021					Options outstanding, March 31, 2021	1,665,838	$78.20	3.88

Exercisable at March 31, 2021					Exercisable at March 31, 2021	1,180,824	$79.31	3.58

At ~~September 30, 2020,~~March 31, 2021, the aggregate intrinsic value of stock options outstanding and exercisable was ~~$49,000~~$2.8 million and ~~$16,000,~~$1.7 million, respectively. The aggregate intrinsic value of stock options exercised during the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ was ~~$8,118,000~~$0.2 million or ~~$15.84~~$9.27 per share and ~~$5,066,000~~$8.1 million or ~~$11.73~~$15.84 per share, respectively.

As of ~~September 30, 2020,~~March 31, 2021, unrecognized compensation expense totaling ~~$1,246,000~~$4.8 million associated with unvested stock options is expected to be recognized over the following periods: remainder of ~~2020 - $458,000,~~ 2021 - ~~$706,000 and~~$3.0 million, 2022 - ~~$82,000.~~$1.6 million and 2023 - $0.2 million.

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Note 10. 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 using the treasury stock method, to the extent dilutive. Dilution resulting from the conversion option within our convertible debt is determined by computing an average of incremental shares included in each quarterly diluted EPS computation. If our average stock price for the period increases over the conversion price of our convertible debt, the conversion feature will be 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):

~~Table of Contents~~


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
Net income attributable to common stockholders	Net income attributable to common stockholders	$	42,595	$	42,758	$	147,986	$	118,417	Net income attributable to common stockholders		$	35,332	$	61,023

BASIC:	BASIC:									BASIC:
Weighted average common shares outstanding	Weighted average common shares outstanding	44,661,650		43,505,332		44,641,748		43,187,847		Weighted average common shares outstanding		45,305,087		44,613,593

DILUTED:	DILUTED:									DILUTED:
Weighted average common shares outstanding	Weighted average common shares outstanding	44,661,650		43,505,332		44,641,748		43,187,847		Weighted average common shares outstanding		45,305,087		44,613,593
Stock options	Stock options	753		79,933		1,766		73,924		Stock options		10,873		4,546
Convertible subordinated debentures		0		275,824		0		232,943
Convertible senior notes										Convertible senior notes		41,813		0
Weighted average dilutive common shares outstanding	Weighted average dilutive common shares outstanding	44,662,403		43,861,089		44,643,514		43,494,714		Weighted average dilutive common shares outstanding		45,357,773		44,618,139

Net income attributable to common stockholders - basic	Net income attributable to common stockholders - basic	$	0.95	$	0.98	$	3.31	$	2.74	Net income attributable to common stockholders - basic		$	0.78	$	1.37
Net income attributable to common stockholders - diluted	Net income attributable to common stockholders - diluted	$	0.95	$	0.97	$	3.31	$	2.72	Net income attributable to common stockholders - diluted		$	0.78	$	1.37

Incremental anti-dilutive shares excluded:	Incremental anti-dilutive shares excluded:									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 shares	Net share effect of stock options with an exercise price in excess of the average market price for our common shares	410,012		7,858		427,180		11,200		Net share effect of stock options with an exercise price in excess of the average market price for our common shares		216,762		305,862

Regular dividends declared per common share	Regular dividends declared per common share	$	1.1025	$	1.05	$	3.3075	$	3.15	Regular dividends declared per common share		$	1.1025	$	1.1025

Note 11. Fair Value of Financial Instruments

Our financial assets and liabilities measured at fair value ~~(based on the hierarchy of the three levels of inputs described in Note 1 to the consolidated financial statements contained in our most recent Annual Report on Form 10-K)~~ on a recurring basis include derivative financial instruments. Derivative financial instruments include our interest rate swap agreements.

Derivative financial instruments. Derivative financial instruments are valued in the market using discounted cash flow techniques. These techniques incorporate Level 1 and Level 2 inputs. The market inputs are utilized in the discounted cash flow calculation considering the instrument’s term, notional amount, discount rate and credit risk. Significant inputs to the derivative valuation model for interest rate swaps are observable in active markets and are classified as Level 2 in the hierarchy.

~~Liabilities~~Assets and liabilities measured at fair value on a recurring basis are as follows ($ in thousands):

Fair Value Measurement

Balance Sheet Classification

September 30,
2020

December 31, 2019

Balance Sheet Classification

March 31,
2021

December 31, 2020

Level 2

Interest rate swap liability

Accounts payable and accrued expenses

8,866

3,434

Interest rate swap liability

Accounts payable and accrued expenses

5,377

7,150

Carrying amounts and fair values of financial instruments that are not carried at fair value at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 in the Condensed Consolidated Balance Sheets are as follows ($ in thousands):

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		Carrying Amount				Fair Value Measurement					Carrying Amount				Fair Value Measurement
		September 30, 2020		December 31, 2019		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020		March 31, 2021		December 31, 2020
Level 2	Level 2									Level 2
Variable rate debt	Variable rate debt	$	934,339	$	845,744	$	938,000	$	850,000	Variable rate debt	$	578,087	$	945,078	$	580,000	$	948,000
Fixed rate debt	Fixed rate debt	$	594,629	$	594,721	$	633,141	$	602,926	Fixed rate debt	$	946,638	$	554,207	$	927,281	$	575,292

Level 3	Level 3									Level 3
Mortgage and other notes receivable		$	287,282	$	340,143	$	319,418	$	347,543
Mortgage and other notes receivable, net										Mortgage and other notes receivable, net	$	301,318	$	292,427	$	320,783	$	321,021

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 ~~value~~values of our borrowings under our revolving credit facility and other variable rate debt are reasonably estimated at their notional amounts at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, due to the predominance of floating interest rates, which generally reflect market conditions.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward Looking Statements

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 Quarterly Report on Form 10-Q has been written in the first person. In this document, the words “we”, “our”, “ours” and “us” refer only to National Health Investors, Inc. and its consolidated subsidiaries and not any other person. Unless the context indicates otherwise, references herein to “the Company” include all of our consolidated subsidiaries.

This Quarterly Report on Form 10-Q 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,” “believes,” “anticipates,” “expects,” “intends,” “estimates,” “plans,” 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)~~coronavirus (“COVID-19”), ~~has~~have had and isare expected to continue to have a material adverse effect on our business and results of operations;

* We depend on the operating success of our tenants and borrowers for collection of our lease and note payments;

* 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 our 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;

* 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 related to governmental regulations and payors, principally Medicare and Medicaid, and the effect that lower reimbursement rates would have on our tenants’ and borrowers’ business;

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

* We are exposed to the risk that the cash flows of our tenants and borrowers would 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 lessees and borrowers against future litigation;

* 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 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 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;

* 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;

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* If our efforts to maintain the privacy and security of Company information are not successful, we could 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 exposed to the risk that we may not be fully indemnified by our lessees and borrowers against future litigation;~~

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

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

* 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;

* ~~When interest rates increase,~~Downgrades in our ~~common stock may decline in price;~~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 are subject to risks related to changes in the method of determining LIBOR, or the replacement of LIBOR with an alternative reference rate, which may adversely affect interest rates on our current or future indebtedness and may otherwise adversely affect our financial condition and result of operations;

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

* We depend on the ability to continue to qualify for taxation as a Real Estate Investment Trust;

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

* ~~We are subject to risks associated with~~Legislative, regulatory, or administrative changes could adversely affect us or 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;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;

* 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; and

* IfWhen interest rates increase, our efforts to maintain the privacy and security of Company information are not successful, we could incur substantial costs and reputational damage, and could become subject to litigation and enforcement actions.common stock may decline in price.

See the notes to the annual audited consolidated financial statements in our most recent Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, and “Business” and “Risk Factors” under Item 1 and Item 1A therein for a further discussion of these and of various governmental regulations and other operating factors relating to the healthcare industry and the risk factors inherent in them. ~~See also an update to the “Risk Factors” under item 1A in this Form 10-Q.~~ You should carefully consider these risks before making any investment decisions in the Company. These risks and uncertainties are not the only ones facing the Company. There may be additional risks that we do not presently know of and or that we currently deem immaterial. If any of the risks actually occur, our business, financial condition, results of operations, or cash flows could be materially and adversely affected. In that case, the trading price of our shares of stock could decline and you may lose part or all of your investment. Given these risks and uncertainties, we can give no assurance that these forward-looking statements will, in fact, occur and, therefore, caution investors not to place undue reliance on them.

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Executive Overview

National Health Investors, Inc., established in 1991 as a Maryland corporation, is a self-managed real estate investment trust (“REIT”) specializing in sale-leaseback, joint-venture, mortgage and mezzanine financing of need-driven and discretionary senior housing and medical facility investments. Our portfolio consists of real estate investments in independent living facilities, assisted living facilities, entrance-fee communities, senior living campuses, skilled nursing facilities, specialty hospitals and

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medical office buildings. 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.

Portfolio

As of ~~September 30, 2020,~~March 31, 2021, we had investments in real estate and mortgage and other notes receivable involving ~~243~~242 facilities located in 34 states. These investments involve 162 senior housing properties, 7675 skilled nursing facilities, 3 hospitals, 2 medical office buildings and other notes receivable. These investments ~~(excluding our corporate office of $2,678,000)~~ consisted of properties with an original cost of approximately ~~$3,261,886,000,~~$3.3 billion, rented under primarily triple-net leases to 34 lessees, and ~~$292,189,000~~$306.2 million aggregate ~~net~~ carrying value of mortgage and other notes receivable, excluding an allowance for expected credit losses of ~~$4,907,000,~~$4.9 million, due from 119 borrowers.

We classify all of the properties in our 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 communities as either need-driven (assisted living and memory care communities and senior living campuses) or discretionary (independent living and entrance-fee communities.)

Senior Housing – Need-Driven includes assisted living and memory care communities (“ALF”) and senior living campuses (“SLC”) 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 (“ILF”) and entrance-fee communities (“EFC”) 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 (“SNF”), medical office buildings (“MOB”) and hospitals 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.

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The following tables summarize our investments in real estate and mortgage and other notes receivable as of and for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 ($ in thousands):


				Properties	Beds/Sq. Ft.*		Revenue		%		Investment					Properties	Beds/Sq. Ft.*		Revenue		% Total		Investment
Real Estate Properties	Real Estate Properties												Real Estate Properties
		Senior Housing - Need-Driven												Senior Housing - Need-Driven
			Assisted Living	94	5,131		$	59,343	23.6	%	$	950,510			Assisted Living	94	5,131		$	16,866	20.9	%	$	950,643
			Senior Living Campus	14	1,976		18,042		7.2	%	307,082				Senior Living Campus	14	1,976		5,803		7.2	%	307,552
			Total Senior Housing - Need-Driven	108	7,107		77,385		30.8	%	1,257,592				Total Senior Housing - Need-Driven	108	7,107		22,669		28.1	%	1,258,195
		Senior Housing - Discretionary												Senior Housing - Discretionary
			Independent Living	32	3,703		35,305		14.0	%	599,321				Independent Living	32	3,703		11,767		14.5	%	600,615
			Entrance-Fee Communities	11	2,707		45,022		17.9	%	742,985				Entrance-Fee Communities	11	2,707		15,377		19.0	%	742,985
			Total Senior Housing - Discretionary	43	6,410		80,327		31.9	%	1,342,306				Total Senior Housing - Discretionary	43	6,410		27,144		33.5	%	1,343,600
			Total Senior Housing	151	13,517		157,712		62.7	%	2,599,898				Total Senior Housing	151	13,517		49,813		61.6	%	2,601,795
		Medical Facilities												Medical Facilities
			Skilled Nursing Facilities	72	9,433		60,891		24.2	%	595,531				Skilled Nursing Facilities	72	9,433		20,573		25.4	%	595,461
			Hospitals	3	207		5,701		2.3	%	55,971				Hospitals	3	207		2,035		2.5	%	55,971
			Medical Office Buildings	2	88,517	*	500		0.2	%	10,486				Medical Office Buildings	2	88,517	*	167		0.2	%	10,486
			Total Medical Facilities	77			67,092		26.7	%	661,988				Total Medical Facilities	77			22,775		28.1	%	661,918
			Total Real Estate Properties	228			224,804		89.4	%	$	3,261,886			Total Real Estate Properties	228			72,588		89.7	%	$	3,263,713
			Income from properties sold				272
			Escrow Funds Received From Tenants				7,190								Escrow Funds Received From Tenants				2,161
			Total Rental Income				232,266								Total Rental Income				74,749

Mortgage and Other Notes Receivable	Mortgage and Other Notes Receivable												Mortgage and Other Notes Receivable
		Senior Housing - Need-Driven		9	495		4,081		1.7	%	$	68,297		Senior Housing - Need-Driven		9	565		1,407		1.8	%	$	66,368
		Senior Housing - Discretionary		2	714		10,102		4.0	%	183,936			Senior Housing - Discretionary		2	714		3,770		4.7	%	197,463
		Medical Facilities		4	270		474		0.2	%	6,894			Medical Facilities		3	180		104		0.1	%	4,541
		Other Notes Receivable		—	—		3,252		1.3	%	33,062			Other Notes Receivable		—	—		778		1.0	%	37,802
			Total Mortgage and Other Notes Receivable	15	1,479		17,909		7.2	%	$	292,189			Total Mortgage and Other Notes Receivable	14	1,459		6,059		7.6	%	$	306,174
			Income from notes paid off				1,038
			Other Income				359								Other Income				77
			Total Revenue				$	251,572							Total Revenue				$	80,885


Portfolio Summary	Portfolio Summary			Properties	Revenue		%		Investment		Portfolio Summary			Properties	Revenue		% Portfolio		Investment
		Real Estate Properties		228	$	224,804	92.6	%	$	3,261,886		Real Estate Properties		228	$	72,588	92.3	%	$	3,263,713
		Mortgage and Other Notes Receivable		15	17,909		7.4	%	292,189			Mortgage and Other Notes Receivable		14	6,059		7.7	%	306,174
			Total Portfolio	243	$	242,713	100.0	%	$	3,554,075			Total Portfolio	242	$	78,647	100.0	%	$	3,569,887

Portfolio by Operator Type	Portfolio by Operator Type										Portfolio by Operator Type
		Public		66	$	52,501	21.7	%	$	511,293		Public		66	$	17,647	22.4	%	$	511,231
		National Chain (Privately Owned)		28	45,251		18.6	%	817,506			National Chain (Privately Owned)		28	15,762		20.0	%	832,327
		Regional		136	138,618		57.1	%	2,096,845			Regional		134	42,733		54.3	%	2,091,351
		Small		13	6,343		2.6	%	128,431			Small		14	2,505		3.3	%	134,978
			Total Portfolio	243	$	242,713	100.0	%	$	3,554,075			Total Portfolio	242	$	78,647	100.0	%	$	3,569,887

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For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, operators of facilities ~~which~~who provided 3% or more ~~than 3%~~and collectively 82% of our total revenues were ~~(in~~(parent company, in alphabetical order): Bickford Senior Living; Chancellor Health Care; Discovery Senior Living; ~~The Ensign Group;~~ Health Services Management; Holiday Retirement; Life Care Services; National HealthCare Corporation; Senior Living Communities; and Senior Living ~~Management. In the aggregate these operators provided 80.8%~~Management; and The Ensign Group.

Table of ~~our total revenue for nine months ended September 30, 2020.~~Contents

As of ~~September 30, 2020,~~March 31, 2021, our average effective annualized rental income was ~~$8,718~~$8,724 per bed for SNFs, ~~$11,788~~$11,746 per unit for SLCs, ~~$14,121~~$14,435 per unit for ALFs, ~~$12,701~~$12,711 per unit for ILFs, ~~$22,694~~$22,723 per unit for EFCs, ~~$39,319~~$39,330 per bed for hospitals, and $8$7 per square foot for MOBs.

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

COVID-19 Pandemic

~~The~~Since the World Health Organization declared ~~coronavirus disease 2019 (“COVID-19”)~~COVID-19 a pandemic on March 11, ~~2020. The~~2020, the continually evolving pandemic has resulted in a widespread health crisis adversely affecting governments, businesses, and financial markets. In response to the COVID-19 pandemic, many state, local and federal agencies instituted various health and safety measures including temporary closures of many businesses, “shelter in place” orders, and social distancing guidelines that remain in place to some degree. The COVID-19 pandemic and related health and safety measures ~~have created a significant strain on~~continue to impact the operations of many of the Company’s tenants, operators and borrowers.

The federal government ~~passed the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act into law in March 2020 that provides~~has provided economic assistance and other forms of relief from the financial hardships caused by the pandemic. Funds have been distributed by various government agencies including the US Department of Treasury and the Department of Health and Human Services (“HHS”)assistance which ~~oversees the distributions to healthcare providers who participate in various government reimbursement programs (e.g., Medicare). This federal government assistance has~~ mitigated to some extent the negative financial impact of the pandemic for certain of our tenants and operators who are eligible.

Revenues for the operators of our properties ~~are~~continue to be significantly impacted by occupancy. Building occupancy rates have been and may continue to be adversely affected by the COVID-19 pandemic if it continues to cause sustained negative trends such as early resident move-outs, delays in admitting new residents, or other collateral events such as a weakening in the housing market, a typical funding source for our senior housing operators’ customers. In addition, actions our operators take to address outbreaks could materially increase their operating costs, including costs related to enhanced health and safety precautions among other measures. A decrease in occupancy or increase in costs could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us, including the payment of rent, as well as on our results of operations.

~~We collected approximately 96.2% of contractual rents due for~~Since the ~~third quarter ended September 30, 2020 and approximately 97.8% of contractual rents due for October 2020. We~~pandemic began, we have granted rent concessions ~~to two tenants during~~as shown in the ~~third quarter of 2020 as a result of the COVID-19 pandemic. We agreed to defer $2,100,000~~following table ($ in rent due for the third quarter of 2020 from Bickford with half of the deferral placed in escrow. We continue our negotiations with Bickford for the sale of nine properties which are currently leased to Bickford and have a gross book value of approximately $76,658,000 as of September 30, 2020. The deferred rent will be forgiven contingent upon Bickford’s ability to close on the acquisition of these properties. Rental income from this portfolio was $6,514,000 (net of $182,000 of the deferral mentioned above) and $7,151,000 for the nine months ended September 30, 2020 and 2019, respectively, including straight-line rental income of $217,000 and $568,000, respectively.thousands):

~~Subsequent to~~


					Three months ended
	As of December 31, 2020				March 31, 2021				Cumulative Totals
	Deferrals		Abatements		Deferrals		Abatements		Deferrals		Abatements
Bickford Senior Living	$	3,750	$	2,100	$	3,750	$	0	$	7,500	$	2,100
All Others	1,232		50		447		0		1,679		50
	$	4,982	$	2,150	$	4,197	$	—	$	9,179	$	2,150

The deferred amounts noted in the end of the third quarter, we began discussions with Bickford regarding additional rent deferrals for the fourth quarter of 2020 and first quarter of 2021 as a result of the ongoing impact from the pandemic. As currently discussed, these additional deferrals may include $3,000,000 for November 2020 and optional deferrals of up to $750,000 for each of December 2020 and January 2021. The additional deferrals in discussion are expected to beartable above accrue interest starting at 8% per annum ~~with repayments over 12 months beginning in June 2021.~~

We have agreed to defer or abate portions of rents for the remainder of 2020 with another tenant that would also grant the tenant the option to defer a portion of rents related to the first quarter of 2021. The COVID-19 related deferrals and abatement granted for lease payments were $534,000 and $20,000, respectively, for the third quarter and $538,000 and $30,000,

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~~respectively, for the fourth quarter. The optional deferred amount for the first quarter of 2021 is $447,000. Any deferred rent payments will accrue interest~~ from the date of the deferral until paid in ~~full. All amounts deferred are due no later than December 31, 2022. Initial interest is 8% through December 31, 2021, at which time~~full under the ~~rate increases to 9%.~~terms of each tenant’s deferral agreement.

We have agreed with Bickford to defer $5.0 million in contractual rent due for the second quarter of 2021. See Note 3 to our Condensed Consolidated Financial Statements for further discussion on Bickford rent concessions. We have either reached agreement or are in advanced discussions with 4 other tenants regarding additional rent concessions of approximately $2.3 million for the second quarter 2021. The majority of the deferrals we have granted are expected to bear interest at 8% per annum. We are also in negotiations with Holiday that could result in rent concessions starting in the second quarter of 2021 and may utilize a portion of our lease deposit with Holiday that totaled approximately $10.6 million as of March 31, 2021.

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. We will evaluate any rent deferral requests as a result of the COVID-19 pandemic on a tenant-by-tenant basis. The extent of future concessions we make as a result of the COVID-19 pandemic, which could have a material impact on our future operating results, cannot be reasonably or reliably projected by us at this time.

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. Fitch Ratings (“Fitch”) reaffirmed its BBB- and “Stable” outlook on the Company on September 30, 2020 and S&P Global Ratings (“S&P Global”) also currently maintains a BBB- and “Stable” outlook on the Company. In July 2020, we entered into a new one-year $100 million term loan bearing interest at a rate of 30-day LIBOR (with a 0.50% floor) plus 1.85% with a syndicate of banks. We have the right to extend the maturity by an additional year, subject to the payment of a 20 basis point extension fee. We had approximately ~~$38,150,000~~$37.4 million in unrestricted cash and cash equivalents on hand and ~~$252,000,000~~$550.0 million in availability under our unsecured revolving credit facility as of October 31, 2020. We believe this liquidity positions us to manage through the negative effects of the COVID-19 pandemic. Any reduction in outlook or downgrade in our credit ratings from the rating agencies could impact our costs of borrowings. However,April 30, 2021. In addition, we believe we continue to have access to additional debt

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sources and maintain availability under our at-the-market (“ATM”) equity issuance program and shelf registration statement to fund our future obligations, although no assurances can be made. We believe these liquidity sources position us to manage through the negative effects of the COVID-19 pandemic.

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

~~Critical Accounting Policies~~

See our most recent Annual Report on Form 10-K for a discussion of critical accounting policies including those concerning revenue recognition, our status as a REIT, principles of consolidation, evaluation of impairments and allocation of property acquisition costs.

~~With the adoption of ASU 2016-13 beginning January 1, 2020, and the onset of COVID-19 in the United States, we have revised our discussion of~~ ~~estimates~~ ~~and~~ ~~valuations and impairments~~ ~~to include specific reference to additional judgments required under the new standard and evolving economic conditions, as follows:~~

~~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. Actual results could differ from those estimates. 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.

~~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.~~

~~Valuations and Impairments~~

Our tenants and borrowers who operate SNFs derive their revenues primarily from Medicare, Medicaid and other government programs. Amounts paid under these government programs are subject to legislative and government budget constraints. From time to time, there may be material changes in government reimbursement. In the past, SNFs have experienced material reductions in government reimbursement.

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The long-term health care industry has experienced significant professional liability claims which have resulted in an increase in the cost of insurance to cover potential claims. In previous years, these factors have combined to cause a number of bankruptcy filings, bankruptcy court rulings and court judgments affecting our lessees and borrowers. In prior years, we have determined that impairment of certain of our loan investments had occurred as a result of these events. The frequency and breadth of bankruptcies may intensify as a result of macro-economic conditions.

We evaluate the recoverability of the carrying values of our properties on a property-by-property basis. We review our properties for recoverability when events or circumstances, including significant physical changes in the property, significant adverse changes in general economic conditions and 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. 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.

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, 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 in its 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. We additionally 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 heightened vigilance in our assessment when the lease payments approach 90% of the composition of all future cash flows expected from the asset.

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 that is other than temporary 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 the length and impetus of an expected economic recovery before we conclude that evidence of impairment is likely to be other than temporary. While we believe our assumptions are reasonable, changes in these assumptions may have a material impact on our financial results.

While we believe that the carrying amounts of our properties are recoverable and 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.

~~Investment~~Recent Highlights

~~Since January 1, 2020, we have made or announced the following investments and related commitments~~ ~~($ in thousands)~~:

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Date Properties Asset Class Amount
Lease Investments
Bickford Senior Living January 2020 1 SHO $ 15,100
Life Care Services January 2020 1 SHO 134,892
Autumn Trace May 2020 2 SHO 14,250
The Courtyard at Bellevue September 2020 1 SHO 12,300
Note Investments
Timber Ridge OpCo line of credit January 2020 1 SHO 5,000
Bickford Senior Living mortgage note January 2020 1 SHO 4,000
Bickford Senior Living construction loan June 2020 1 SHO 14,200
Watermark Retirement line of credit June 2020 2 SHO 5,000
$ 204,742

~~Bickford~~

On January ~~27, 2020,~~26, 2021, we ~~acquired a 60-unit assisted living/memory care facility located in Shelby, Michigan, from Bickford.~~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 acquisition price was $15,100,000, including $100,000 in closing costs, and the cancellation of an outstanding construction note receivable of $14,091,000, including interest. We added the facility to an existing master lease for a term of twelve years2031 Senior Notes were sold at an ~~initial lease rate~~issue price of ~~8%, with CPI escalators subject~~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 the net proceeds from the 2031 Senior Notes offering to ~~a floor and ceiling.~~

~~On June 30, 2020, we~~repay our $100.0 million term loan that was entered into ~~a $14,200,000 construction loan agreement with Bickford to construct a 64-unit assisted living facility in Virginia, of which $1,553,000 was funded.~~

~~Life Care Services~~

~~On January 31,~~July 2020 we acquired an 80% equity interest in a property company, NHI-LCS JV I, LLC (“Timber Ridge PropCo”), which owns a 401-unit Continuing Care Retirement Community (“CCRC”) located in Issaquah, Washington comprising 330 independent living units, 26 assisted living/memory care units and ~~45 skilled nursing beds. The same transaction conveyed to NHI a 25% equity interest in the newly formed operating company, Timber Ridge OpCo, LLC (“Timber Ridge OpCo”).~~

Total consideration for NHI’s interests in the combined venture was $124,989,000, comprised of the $59,350,000 remaining balance of a mortgage note initially funded in 2015, an additional loan of $21,650,000, and cash of $43,114,000 to Timber Ridge PropCo and $875,000 to Timber Ridge OpCo. Total debt due from Timber Ridge PropCo of $81,000,000, bears interest to NHI at 5.75%. LCS Timber Ridge LLC (“LCS”) paid $10,778,000 for its 20% equity stake in Timber Ridge PropCo and provided $2,625,000 for a 75% equity participation in Timber Ridge OpCo. To provide working capital in support of the CCRC’s entry-fee model, NHI agreed to supply areduce borrowings outstanding under our revolving ~~line of~~ credit ~~permitting draws up to a maximum of $5,000,000. No amounts have been drawn as of September 30, 2020.~~

The lease between Timber Ridge PropCo and Timber Ridge OpCo carries a rate of 6.75% for an initial term of seven years plus renewal options and has a CPI-based lease escalator, subject to floor and ceiling. Including interest payments on debt to NHI and our lease participation in the Timber Ridge PropCo, as detailed above, we expect to receive $8,216,000 in the first twelve months plus 25% of the remaining Timber Ridge OpCo cash flow. NHI’s contribution was allocated to our interest in the tangible assets of Timber Ridge PropCo with no material fair value allocated to Timber Ridge OpCo beyond our initial investment. The lease between Timber Ridge PropCo and Timber Ridge OpCo includes an “earn out” provision whereby Timber Ridge OpCo could become eligible for a payment of $10,000,000 based on the attainment of certain operating metrics.

Our investment in Timber Ridge OpCo was structured, to be compliant with the provisions of the REIT Investment Diversification and Empowerment Act of 2007 ("RIDEA") which permits us to receive rent payments through a triple-net lease between Timber Ridge PropCo and Timber Ridge OpCo and is designed to give us the opportunity to capture additional value on the improving performance of the operating company through distributions from the TRS. Accordingly, the TRS holds our 25% equity interest in Timber Ridge OpCo in order to provide an organizational structure that will allow the TRS to engage in a broad range of activities and share in cash flows that would otherwise be non-qualifying income under the REIT gross income tests.

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Timber Ridge OpCo’s activities are managed through an "eligible independent contractor" subject to the oversight of Timber Ridge OpCo’s board. This organizational structure meets the requirements of Internal Revenue Code regulations for TRS entities. LCS is the managing member of Timber Ridge OpCo, although we have retained specific non-controlling rights. As a result of LCS’s retention of operations oversight and control over all day-to-day business matters, our participating influence at Timber Ridge OpCo does not amount to control of the entity.

We report our investment in Timber Ridge OpCo under the equity method of accounting. Our equity share in the losses of Timber Ridge OpCo during the three months and nine months ended September 30, 2020 was $728,000 and $2,018,000, respectively, and was recorded as a reduction in our carrying value of Timber Ridge OpCo. As of September 30, 2020, we have recognized our share of Timber Ridge OpCo’s operating losses in excess of our initial investment. These cumulative losses in excess of our basis of $1,143,000 are included in accounts payable and accrued expenses in our Condensed Consolidated Balance Sheets.

~~Autumn Trace~~

On May 1, 2020, we completed a purchase leaseback to acquire two senior housing facilities each with 44 assisted living units for a total purchase price of $14,250,000, including $150,000 in closing costs. The facilities are located in Indiana and are leased to Autumn Trace Senior Communities, which is a new operator relationship for NHI. The 15-year master lease has an initial lease rate of 7.25% with fixed annual escalators of 2.25% and offers two optional extensions of 5 years each. ~~NHI was also granted a purchase option on a newly opened Indiana~~ facility.

~~Watermark Retirement~~

On June 12, 2020, we provided a $5,000,000 loan commitment to Watermark Retirement to provide working capital liquidity in connection with the renewal of an existing lease on two continuing care retirement communities. No amounts have been drawn as of September 30, 2020.

~~The Courtyard at Bellevue~~

~~Senior Living Communities~~

On July 31, 2020, Senior Living Communities repaid two fully drawn mezzanine loans of $12,000,000 and $2,000,000, respectively. The purpose of the mezzanine loans were to partially fund construction of a 186-unit senior living campus on Daniel Island in South Carolina, which opened in April 2018. The loans bore interest, payable monthly, at a 10% annual rate.

~~Asset Dispositions~~

In ~~September 2019, we classified~~April 2021, the Company entered into a ~~portfolio~~$50.0 million mezzanine loan and security agreement with Montecito Medical Real Estate for a new fund that will invest in medical real estate, including medical office buildings, throughout the United States. Amounts under the loan agreement will be funded as real estate investments are identified for acquisition. Borrowings under the loan agreement will bear interest at an annual rate of ~~eight assisted living properties located~~9.5% and accrue an additional 2.5% in ~~Arizona (4), Tennessee (3)~~interest to be paid upon certain future events including repayments, sales of fund investments, and ~~South Carolina (1) as held for sale, after the current tenant, Brookdale Senior Living, expressed an intention to exercise its purchase option~~refinancings. The mezzanine loan has a five-year term, commencing on the ~~properties. The purchase option called~~earlier of full deployment of the funds or two years and includes two one-year extensions.

Effective April 30, 2021, we executed an agreement for the ~~parties~~sale of six properties that were leased to ~~split evenly any appreciation above $37,520,000. During~~Bickford for a purchase price of $52.9 million, which includes a $13.0 million Company-financed second mortgage. Upon completion of this transaction, Bickford satisfied the ~~first~~terms of our prior agreement that contingently abated $2.1 million in rent for the third quarter of 2020 ~~NHI~~ and ~~the tenant agreed to a fair valuation~~none of ~~$41,000,000 for the~~that amount will be repaid. These six properties ~~and, accordingly, on January 22, 2020, we disposed~~had an aggregate net book value of ~~the properties at the agreed price~~approximately $34.6 million as of ~~$39,260,000. For the nine months ended September 30, 2020 and 2019, we recognized $229,000 and $3,187,000, respectively, of rental~~March 31, 2021. Rental income from this ~~portfolio.~~

~~On February 21,~~portfolio was $1.3 million and $1.5 million for the three months ended March 31, 2021 and 2020, ~~we disposed~~respectively. These properties were part of ~~two assisted living~~the Company’s ongoing negotiations for the sale to Bickford of nine properties ~~previously classified as held-for-sale in exchange~~leased to Bickford. We continue to explore our options for the remaining three properties including a ~~term note of $4,000,000 from~~sale to a third party, re-tenanting, or retaining the ~~buyer,~~existing lease with Bickford. The note, which is due February 2025 and bears interest at 7%, will begin amortizing on a twenty-five-year basis in January 2021. In the first quarter of 2019, we classified these properties as held-for-sale, recorded an adjustment to lease revenues to write off the associated $124,000 in straight-line receivables and recognized an impairment loss of $2,500,000 to write down the properties to their estimated net realizable value.

Other

Our leases 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,

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lease renewals or expirations. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, 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.

Certain of our leases contain purchase options allowing tenants to acquire the leased properties. At ~~September 30, 2020,~~March 31, 2021, we had a net investment of ~~$11,712,000~~$40.2 million in ~~two~~six real estate properties which are subject to exercisable tenant purchase options. Tenant purchase options on 1211 properties in which we had an aggregate net investment of ~~$122,982,000~~$100.1 million at ~~September 30, 2020,~~March 31, 2021, become exercisable between ~~2021~~2022 and 2028.

Rental income from leased properties with tenant purchase options either currently exercisable or exercisable in the future was ~~$13,418,000~~$5.0 million and ~~$13,763,000~~$4.4 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, respectively.

In January 2021, we received notification of a tenant’s intention to acquire in July 2021, pursuant to a purchase option, one of the six properties mentioned above, a behavioral hospital located in Tennessee, for approximately $26.4 million. The net investment at March 31, 2021 was $21.1 million. Rental income was $0.7 million for both the three months ended March 31, 2021 and ~~2019, respectively.~~2020. We cannot reasonably estimate at this time the probability that ~~these~~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.

We adjust rental income for the amortization of lease inducements paid to our tenants. Current outstanding commitments and contingencies are listed under our discussion of liquidity and capital resources. Amortization of these payments against revenues was $735,000 and $607,000 for the nine months ended September 30, 2020 and 2019, respectively.

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Tenant Concentration

As discussed in Note 3 to the condensed consolidated financial statements, we have four lessees (including their affiliated entities, which are the legal tenants) from whom we individually derive at least 10% of our ~~rental income~~total revenues as follows ($ in thousands):


	as of March 31, 2021						Revenues1
	Asset	Number of	Real		Notes		Three Months Ended March 31,
	Class	Properties	Estate		Receivable		2021			2020

Senior Living Communities	EFC	10	$	573,631	$	44,189	$	12,723	16%	$	12,717	15%
Bickford Senior Living	ALF	48	534,376		35,079		10,207		13%	13,603		16%
Holiday Retirement	ILF	26	532,672		—		10,185		13%	10,176		12%
National HealthCare Corporation (NHC)	SNF	42	171,235		—		9,452		12%	9,448		11%
All others2	Various		1,451,799		226,906		36,157		44%	35,579		44%
Escrow funds received from tenants
for property operating expenses	Various		—		—		2,161		2%	$	1,553	2%
			$	3,263,713	$	306,174	$	80,885		$	83,076

1 includes interest income on notes receivable

Rental Income
Investment Nine Months Ended September 30, Lease
Asset Class Amount 2020 2019 Renewal
Bickford Senior Living ALF $ 534,376 $ 37,142 17% $ 38,494 18% Various
Senior Living Communities EFC 573,631 35,788 16% 35,001 16% 2029
Holiday Retirement ILF 531,378 30,529 14% 30,283 14% 2035
National HealthCare Corporation SNF 171,297 28,362 13% 28,670 13% 2026
All others Various 1,451,204 93,255 40% 82,124 39% Various
$ 3,261,886 $ 225,076 $ 214,572
2 includes prior period amounts for disposals or transitioned to new operators

The table above, for the nine months ended September 30, 2020 and 2019, excludes $7,190,000 and $4,205,000, respectively, for certain property operating expenses (e.g. property tax and insurance) received from our tenants through escrow reimbursement. Straight-line rent of ~~$4,992,000~~$1.5 million and ~~$4,958,000~~$1.7 million was recognized from the Holiday lease for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Straight-line rent of ~~$3,203,000~~$0.5 million and ~~$3,519,000~~$1.1 million and interest revenue of $0.8 million and $1.1 million was recognized from the Senior Living Communities lease for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. Straight-line rent of ~~$2,111,000~~$0.6 million and ~~$3,680,000~~$0.8 million and interest revenue of $0.8 million and $0.7 million was recognized from the Bickford leases for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. For NHC, rent escalations are based on a percentage increase in revenue over a base year and do not give rise to non-cash, straight-line rental income. ~~The amounts in the table above are reflected with prior period amounts for properties transitioned to new operators or disposed being reclassified into the All others category.~~

For the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, approximately ~~24%~~26% of our total revenue was derived from operators of our skilled nursing facilities who receive a significant portion of their revenue from governmental payors, primarily Medicare and Medicaid. Such revenues are subject annually to statutory and regulatory ~~changes and in recent years have been reduced due to federal and state budgetary pressures.~~changes.

The following table summarizes the average portfolio occupancy for Senior Living Communities, Bickford and Holiday for the periods indicated, excluding development properties in operation less than 24 months, notes receivable, and properties transitioned to new operators or disposed.


	Properties	1Q20	2Q20	3Q20	4Q20	1Q21	Mar 2021	April 2021
Senior Living Communities	9	80.3%	79.1%	79.0%	77.3%	77.7%	77.8%	77.9%
Bickford*	48	85.2%	82.6%	81.7%	79.0%	74.9%	74.5%	76.3%

Holiday	26	87.3%	83.5%	79.6%	77.2%	74.1%	73.5%	73.5%

* Prior period occupancies have been restated to include an additional building added to the calculation in April 2021.

The following table summarizes the revenue concentration of our top five states for the three months ended March 31, 2021 and 2020, respectively, excluding any escrow funds received for property operating expenses.

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Properties 3Q19 4Q19 1Q20 2Q20 3Q20 September 2020
Senior Living Communities 9 80.3% 80.4% 80.3% 79.1% 79.0% 78.9%
Bickford 47 86.0% 86.3% 85.2% 82.5% 81.7% 81.8%
Holiday 26 87.6% 87.0% 87.3% 83.5% 79.6% 78.5%


	Three Months Ended March 31,
Location	2021		2020
South Carolina	$	8,731	$	9,176
Florida	7,707		7,906
Texas	6,889		7,004
Tennessee	4,697		4,809
Washington	4,662		4,387
All others	46,038		48,241
Escrow funds received from tenants for property operating expenses	2,161		1,553
	$	80,885	$	83,076

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, ~~depreciation and amortization;~~ 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 and selected immaterial properties identified in 2019 as available for sale and subsequently sold in the first quarter of 2020. 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.

The results of our coverage ratio analysis are presented below on a trailing twelve-month basis, as of ~~June 30,~~December 31, 2020 and 2019 (the most recent periods available):.

3831

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Total Portfolio

By asset type

SHO

SNF

HOSP

MOB

TOTAL

By asset type

SHO

SNF

HOSP

MOB

TOTAL

Properties

135

214

Properties

136

215

2Q19

1.20x

2.76x

1.83x

6.39x

1.68x

2Q20

1.13x

2.89x

2.31x

6.48x

1.69x

4Q19

1.18x

2.76x

2.01x

6.35x

1.68x

4Q20

1.12x

2.90x

2.66x

7.99x

1.69x

Market served

Need Driven

Need Driven excl. Bickford

Discretionary

Discretionary excl. SLC & Holiday

Medical

Medical excl. NHC

Market served

Need Driven

Need Driven excl. Bickford

Discretionary

Discretionary excl. SLC & Holiday

Medical

Medical excl. NHC

Properties

2Q19

1.12x

1.16x

1.27x

1.94x

2.70x

1.86x

2Q20

1.10x

1.13x

1.17x

1.43x

2.86x

2.15x

4Q19

1.12x

1.17x

1.24x

1.76x

2.72x

1.97x

4Q20

0.95x

0.93x

1.30x

1.78x

2.91x

2.24x

Major tenants

NHC1

SLC

Bickford

Holiday

Major tenants

NHC1

SLC

Bickford2

Holiday

Properties

2Q19

3.79x

1.10x

1.08x

1.20x

2Q20

3.81x

1.06x

1.18x

4Q19

3.71x

1.07x

1.22x

4Q20

3.82x

1.31x

0.97x

1.08x

Same-Store Portfolio

By asset type

SHO

SNF

HOSP

MOB

Total

By asset type

SHO

SNF

HOSP

MOB

Total

Properties

127

205

Properties

128

206

2Q19

1.20x

2.76x

1.48x

6.39x

1.68x

2Q20

1.13x

2.89x

1.62x

6.48x

1.67x

4Q19

1.18x

2.76x

1.54x

6.35x

1.67x

4Q20

1.12x

2.90x

1.96x

7.99x

1.67x

Market served

Need Driven

Need Driven excl. Bickford

Discretionary

Discretionary excl. SLC & Holiday

Medical

Medical excl. NHC

Market served

Need Driven

Need Driven excl. Bickford

Discretionary

Discretionary excl. SLC & Holiday

Medical

Medical excl. NHC

Properties

2Q19

1.12x

1.17x

1.28x

1.98x

2.70x

1.82x

2Q20

1.09x

1.12x

1.17x

1.48x

2.84x

2.07x

4Q19

1.12x

1.17x

1.25x

1.83x

2.71x

1.91x

4Q20

0.94x

0.90x

1.30x

1.83x

2.88x

2.13x

Major tenants

NHC1

SLC

Bickford

Holiday

Major tenants

NHC1

SLC

Bickford

Holiday

Properties

2Q19

3.79x

1.10x

1.08x

1.20x

2Q20

3.81x

1.06x

1.18x

4Q19

3.71x

1.07x

1.22x

4Q20

3.82x

1.31x

0.97x

1.08x

1 NHC based on corporate-level ~~FCCR~~Fixed Charge Coverage Ratio and includes 3 independent living ~~facilities~~facilities.

2 Pro forma EBITDARM coverage excluding the disposition of six leased assets is 1.02x.

These results include any amounts received and recognized by the operators from the HHS CARES Act Provider Relief Fund ~~but do not include any~~and funds received under the Paycheck Protection ~~Program.~~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 portfolio shows a decline brought about primarily by a softening in occupancy and lower net entrance-fees within particular markets, as well as rising 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

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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

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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 the economic effects of the COVID-19 pandemic continue. The metrics presented in the tables above give no effect to the presence of these security deposits. Each MOB’s coverage is driven by the underlying performance of its on-campus hospital as the tenant or guarantor under the lease. As a result, it is typical for MOB operations to have large fluctuations in coverage resulting from hospital operations.

Other Portfolio Activity

Tenant Transitioning

Nine properties were transitioned during 2019 to five new tenants following a period of non-compliance by the former operators. Two leases with the new tenants for six of these properties specify periods during which rental income is based on operating income, net of management fees. We recognized rental income from these nine properties of ~~$930,000~~$0.9 million and ~~$3,741,000~~$1.6 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively and $1,103,000 and $2,310,000 for the three and nine months ended September 30, 2019,~~ respectively.

The following table summarizes the transition properties during the ~~nine~~three months ended ~~September 30, 2020:~~March 31, 2021:


				Occupancy1								Occupancy1
Facility Name (New Tenant)	Facility Name (New Tenant)	Units	State	September 2019	December 2019	March 2020	June 2020	September 2020	Facility Name (New Tenant)	Units	State	March 2020	June 2020	September 2020	December 2020	March 2021
Discovery Commons of College Park	Discovery Commons of College Park	148	IN	16.2%	15.5%	16.0%	14.2%	13.8%	Discovery Commons of College Park	148	IN	16.0%	14.2%	13.8%	15.7%	23.1%
The Charlotte (SLC)	The Charlotte (SLC)	99	NC	12.8%	20.8%	28.5%	34.8%	38.9%	The Charlotte (SLC)	99	NC	28.5%	34.8%	38.9%	42.9%	46.6%
Maybelle Carter (Vitality)	Maybelle Carter (Vitality)	135	TN	78.5%	80.1%	82.2%	77.3%	76.8%	Maybelle Carter (Vitality)	135	TN	82.2%	77.3%	76.8%	73.1%	68.7%
Chancellor TX-IL portfolio	Chancellor TX-IL portfolio	196	IL/TX	66.0%	65.9%	67.1%	57.2%	54.4%	Chancellor TX-IL portfolio	196	IL/TX	67.1%	57.2%	54.4%	53.7%	54.4%
Beaver Dam Assisted Living (BAKA)	Beaver Dam Assisted Living (BAKA)	120	WI	68.3%	66.9%	68.3%	61.7%	61.8%	Beaver Dam Assisted Living (BAKA)	120	WI	68.3%	61.7%	61.8%	60.4%
		698		50.7%	51.7%	53.9%	49.6%	49.2%		698		53.9%	49.6%	49.2%	49.0%	50.5%

1 Monthly Average

Real Estate and Mortgage Write-downs

In addition to the impact of the COVID-19 pandemic, our borrowers and tenants experience periods of significant financial pressures and difficulties similar to those encountered by other health care providers. Governments at both the federal and state levels have enacted legislation to lower, or at least slow, the growth in payments to health care providers. Furthermore, the cost of professional liability insurance has increased significantly during this same period.

Our condensed consolidated financial statements for the three ~~and nine~~ months ended ~~September 30, 2020~~March 31, 2021 do not reflect any significant impairment of our long-lived assets as a result of the COVID-19 pandemic or other factors. We have no significant intangible assets currently recorded on our ~~balance sheet~~Condensed Consolidated Balance Sheet that would require assessment for impairment.

In July 2020, Quorum Health Corporation (“Quorum”) completed a Chapter 11 bankruptcy restructuring. As a result, NHI wrote off straight-line rent receivable under the lease of $380,000 in the first quarter of 2020 and began recognizing revenues under the lease as cash is received. Quorum continues to operate the hospital while timely paying its rent under the lease, which totaled $2,637,000 for the nine months ended September 30, 2020.

~~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 ~~$4,907,000~~$4.9 million and a liability of ~~$320,000~~$0.3 million for estimated credit losses on unfunded loan commitments as of ~~September 30, 2020.~~March 31, 2021. We evaluate the reserves for estimated credit losses on a quarterly basis and make adjustments based on current circumstances as considered necessary.

We believe that the carrying amounts of our real estate properties are recoverable and that mortgage and other notes receivable are realizable and supported by the value of the underlying collateral. However, it is possible that future events could require us to make significant adjustments to these carrying amounts.

4033

Table of Contents

Results of Operations

The significant items affecting revenues and expenses are described below ($ in thousands):

Three Months Ended
September 30, Period Change
2020 2019 $ %
Revenues:
Rental income
CCRC leased to Timber Ridge OpCo $ 2,276 $ — $ 2,276 NM
SNF leased to Ignite Team Partners 549 — 549 NM
ALFs leased to 41 Management 530 — 530 NM
EFCs leased to Senior Living Communities 10,857 10,520 337 3.2 %
ALFs leased to Bickford Senior Living 10,407 11,778 (1,371) (11.6) %
SHOs leased to Chancellor Health Care 2,051 2,441 (390) (16.0) %
SHOs leased to Discovery Senior Living 2,521 2,958 (437) (14.8) %
Other new and existing leases 39,537 38,638 899 2.3 %
Current year disposals — 1,584 (1,584) NM
68,728 67,919 809 1.2 %
Straight-line rent adjustments, new and existing leases 5,086 5,720 (634) (11.1) %
Escrow funds received from tenants for taxes and insurance 4,007 1,608 2,399 NM
Total Rental Income 77,821 75,247 2,574 3.4 %
Interest income and other
Life Care Services mortgages and construction loans 2,972 2,074 898 43.3 %
Bickford construction loans 739 384 355 92.4 %
41 Management mortgage loan 185 54 131 NM
Senior Living Communities mortgage and other notes 908 1,029 (121) (11.8) %
Current year note payoffs 143 1,623 (1,480) (91.2) %
Other new and existing mortgages and notes 1,296 1,239 57 4.6 %
Total Interest Income from Mortgage and Other Notes 6,243 6,403 (160) (2.5) %
Other income 237 32 205 NM
Total Revenues 84,301 81,682 2,619 3.2 %
Expenses:
Depreciation
CCRC leased to Timber Ridge OpCo 937 — 937 NM
ALFs leased to 41 Management 168 — 168 NM
SNF leased to Ignite Team Partners 152 — 152 NM
SHOs leased to Senior Living Communities 3,853 3,743 110 2.9 %
ALFs leased to Autumn Trace Communities 105 — 105 NM
Other new and existing assets 15,621 15,952 (331) (2.1) %
Total Depreciation 20,836 19,695 1,141 5.8 %
Interest 12,892 14,661 (1,769) (12.1) %
Payroll and related compensation expenses 1,527 1,451 76 5.2 %
Loan and realty gains (193) — (193) NM
Taxes and insurance on leased properties 4,187 1,608 2,579 NM
Other expenses 1,663 1,512 151 10.0 %
Total Expenses 40,912 38,927 1,985 5.1 %
Loss from equity method investment (728) — (728) NM
Net income 42,661 42,755 (94) (0.2) %
Less: net (income) loss attributable to noncontrolling interest (66) 3 (69) NM
Net income attributable to common stockholders $ 42,595 $ 42,758 $ (163) (0.4) %
NM - not meaningful


	Three Months Ended
	March 31,				Period Change
	2021		2020		$		%
Revenues:
Rental income
CCRC leased to Timber Ridge OpCo	$	2,303	$	1,518	$	785	51.7	%
SNF leased to Ignite Team Partners	602		—		602		NM
ALFs leased to 41 Management	745		389		356		91.5	%
EFCs leased to Senior Living Communities	11,441		10,870		571		5.3	%
ALFs leased to Bickford Senior Living	8,892		12,251		(3,359)		(27.4)	%
SHOs leased to Chancellor Health Care	2,096		2,634		(538)		(20.4)	%
SHOs leased to Discovery Senior Living	2,658		2,992		(334)		(11.2)	%
Other new and existing leases	39,610		38,836		774		2.0	%
Current year disposals	—		307		(307)		(100.0)	%

	68,347		69,797		(1,450)		(2.1)	%
Straight-line rent adjustments, new and existing leases	4,241		5,177		(936)		(18.1)	%
Escrow funds received from tenants for taxes and insurance	2,161		1,553		608		39.2	%
Total Rental Income	74,749		76,527		(1,778)		(2.3)	%
Interest income and other
Life Care Services mortgages and construction loans	3,178		2,582		596		23.1	%
Bickford construction loans	762		584		178		30.5	%
41 Management mortgage loan	327		153		174		113.7	%
Senior Living Communities mortgage and other notes	801		779		22		2.8	%
Current year note payoffs	—		1,378		(1,378)		(100.0)	%
Other new and existing mortgages and notes	991		1,042		(51)		(4.9)	%
Total Interest Income from Mortgage and Other Notes	6,059		6,518		(459)		(7.0)	%
Other income	77		31		46		NM
Total Revenues	80,885		83,076		(2,191)		(2.6)	%
Expenses:
Depreciation
CCRC leased to Timber Ridge OpCo	937		625		312		49.9	%
ALFs leased to 41 Management	260		168		92		54.8	%
SNF leased to Ignite Team Partners	213		—		213		NM
SHOs leased to Senior Living Communities	3,853		3,853		—		—	%
ALFs leased to Autumn Trace Communities	105		—		105		NM
Other new and existing assets	15,438		15,797		(359)		(2.3)	%
Total Depreciation	20,806		20,443		363		1.8	%
Interest	12,973		14,140		(1,167)		(8.3)	%
Non-cash stock-based compensation expense	5,446		1,845		3,601		NM
Loan and realty (gains) losses	(50)		1,555		(1,605)		NM
Taxes and insurance on leased properties	2,161		1,553		608		39.2	%
Other expenses	2,906		3,043		(137)		(4.5)	%
Total Expenses	44,242		42,579		1,663		3.9	%

Loss from equity method investment	(808)		(442)		(366)		82.8	%
Gains on sales of real estate	—		21,007		(21,007)		(100.0)	%
Loss on early retirement of debt	(451)		—		(451)		NM
Net income	35,384		61,062		(25,678)		(42.1)	%
Less: net income attributable to noncontrolling interests	(52)		(39)		(13)		33.3	%
Net income attributable to common stockholders	$	35,332	$	61,023	$	(25,691)	(42.1)	%

NM - not meaningful

4134

Table of Contents

Financial highlights of the quarter ended ~~September 30, 2020,~~March 31, 2021, compared to the same quarter of ~~2019~~2020 were as follows:

•Rental income received from our tenants ~~increased~~ ~~by $809,000,~~decreased $1.5 million, or ~~1.2%~~2.1%, primarily ~~due~~as a result of rent concessions related to ~~$3,692,000~~the first quarter of ~~additional rental income from~~2021 totaling $4.2 million, net of new investments funded since September 2019. Rent concessions granted to tenants in third quarter 2020 totaling $2,654,000 as a result of the COVID-19 pandemic, partially offset the increase in rental income. Escrow funds received from tenants totaling $4,007,000 were used to pay certain property operating expenses (e.g. taxes and insurance), which is typical of triple net leases.March 2020.

•Interest income from mortgage and other notes decreased ~~$160,000,~~$0.5 million, or ~~(2.5)%~~7.0%, primarily due to Senior Living Communities
Daniel Island and other currentseveral prior year ~~note~~loan pay offs.

•~~Depreciation expense increased $1,141,000 primarily due to new real estate investments completed since September 2019.~~

•Interest expense decreased ~~$1,769,000 primarily~~$1.2 million as a result of ~~$210,000,000~~$210.0 million notional amount of fixed rate swaps that ~~matured.~~matured and the payoff of the HUD mortgages in the fourth quarter of 2020.

•~~As part~~Non-cash stock-based compensation expense increased $3.6 million from the same period one year ago. The Company’s stock option grants in the first quarter of 2021 had an increase in estimated fair value of $9.00 per option share compared to the first quarter of 2020 as determined using the Black-Scholes valuation model primarily from the increased volatility in the Company’s common stock price caused by the COVID-19 pandemic. In addition, the Company granted 67,500 additional options in the first quarter of 2021 compared to the first quarter of 2020, of which 50,000 options relate to the two new directors added during 2020.

•Loan and realty (gains) losses decreased $1.6 million related to our ~~current period~~ assessment of expected credit ~~losses, we recorded a $193,000 decrease in our credit loss reserve which is included in loan and realty (gains) losses in our Condensed Consolidated Statements~~losses.

•Loss on early retirement of ~~Income.~~debt of $0.5 million for the three months ended March 31, 2021, represents the remaining deferred financing cost expensed upon early repayment of the $100.0 million term loan.

•The following table summarizes our stabilizing real estate recently transitioned to new tenants ($ in thousands):


		Three Months Ended									Three Months Ended
		September 30,				Period Change					March 31,				Period Change
		2020		2019		$		%			2021		2020		$		%
Revenues:	Revenues:									Revenues:
Rental income	Rental income									Rental income
SHOs leased to Chancellor Health Care	SHOs leased to Chancellor Health Care	$	—	$	437	$	(437)	NM		SHOs leased to Chancellor Health Care	$	—	$	587	$	(587)	(100.0)	%
SHO leased to Senior Living Communities	SHO leased to Senior Living Communities	38		366		(328)		(89.6)	%	SHO leased to Senior Living Communities	298		356		(58)		(16.3)	%
SHO leased to Discovery Senior Living	SHO leased to Discovery Senior Living	19		189		(170)		(89.9)	%	SHO leased to Discovery Senior Living	44		189		(145)		(76.7)	%
SLC leased to Vitality Senior Living	SLC leased to Vitality Senior Living	66		(40)		106		NM		SLC leased to Vitality Senior Living	3		80		(77)		(96.3)	%
ALF leased to BAKA Enterprises	ALF leased to BAKA Enterprises	210		150		60		40.0	%	ALF leased to BAKA Enterprises	150		343		(193)		(56.3)	%
Straight-line rent adjustments	Straight-line rent adjustments	584		—		584		NM		Straight-line rent adjustments	363		—		363		NM
Total Rental Income	Total Rental Income	917		1,102		(185)		NM		Total Rental Income	858		1,555		(697)		(44.8)	%
Expenses:	Expenses:									Expenses:
Depreciation	Depreciation									Depreciation
SHOs leased to Chancellor Health Care	SHOs leased to Chancellor Health Care	406		406		—		—	%	SHOs leased to Chancellor Health Care	406		406		—		—	%
SHO leased to Senior Living Communities	SHO leased to Senior Living Communities	153		132		21		15.9	%	SHO leased to Senior Living Communities	153		153		—		—	%
SHO leased to Discovery Senior Living	SHO leased to Discovery Senior Living	171		171		—		—	%	SHO leased to Discovery Senior Living	171		171		—		—	%
SLC leased to Vitality Senior Living	SLC leased to Vitality Senior Living	158		154		4		2.6	%	SLC leased to Vitality Senior Living	158		155		3		1.9	%
ALF leased to BAKA Enterprises	ALF leased to BAKA Enterprises	135		145		(10)		(6.9)	%	ALF leased to BAKA Enterprises	135		135		—		—	%
Total Depreciation	Total Depreciation	1,023		1,008		15		1.5	%	Total Depreciation	1,023		1,020		3		0.3	%
Legal	Legal	(6)		52		(58)		NM		Legal	—		12		(12)		(100.0)	%
Franchise, excise and other taxes	Franchise, excise and other taxes	—		17		(17)		NM		Franchise, excise and other taxes	—		36		(36)		(100.0)	%
		1,017		1,077		(60)		(5.6)	%		1,023		1,068		(45)		(4.2)	%
Net income (loss)		$	(100)	$	25	$	(125)	NM
Net (loss) income										Net (loss) income	$	(165)	$	487	$	(652)	NM

~~Table of Contents~~

~~The significant items affecting revenues and expenses are described below (in thousands~~):

Nine Months Ended
September 30, Period Change
2020 2019 $ %
Revenues:
Rental income
CCRC leased to Timber Ridge OpCo $ 6,070 $ — $ 6,070 NM
SHOs leased to Discovery Senior Living 8,551 5,399 3,152 58.4 %
ALFs leased to 41 Management 1,354 — 1,354 NM
EFCs leased to Senior Living Communities 32,585 31,482 1,103 3.5 %
SNF leased to Ignite Team Partners 892 — 892 NM
ALFs leased to Comfort Care Senior Living 2,323 1,612 711 44.1 %
ALFs leased to Autumn Trace Communities 430 — 430 NM
ALF’s leased to Bickford Senior Living 35,031 35,984 (953) (2.6) %
Other new and existing leases 122,359 120,258 2,101 1.7 %
Current year disposals — 3,582 (3,582) NM
209,595 198,317 11,278 5.7 %
Straight-line rent adjustments, new and existing leases 15,481 16,255 (774) (4.8) %
Escrow funds received from tenants for taxes and insurance 7,190 4,205 2,985 71.0 %
Total Rental Income 232,266 218,777 13,489 6.2 %
Interest income and other
Senior Living Communities mortgage and other notes 3,184 1,913 1,271 66.4 %
Bickford construction loans 2,000 862 1,138 NM
41 Management mortgage and construction loans 510 62 448 NM
Bickford construction loan payoffs — 1,791 (1,791) NM
Life Care Services mortgages and construction loans 8,324 8,732 (408) NM
Other existing mortgages and notes 4,929 3,609 1,320 36.6 %
Total Interest Income from Mortgage and Other Notes 18,947 16,969 1,978 11.7 %
Other income 359 140 219 NM
Total Revenues 251,572 235,886 15,686 6.6 %
Expenses:
Depreciation
CCRC leased to Timber Ridge OpCo 2,499 — 2,499 NM
SHOs leased to Discovery Senior Living 4,151 2,646 1,505 NM
ALFs leased to 41 Management 505 — 505 NM
EFCs leased to Senior Living Communities 11,558 11,163 395 3.5 %
Other new and existing assets 43,413 43,397 16 — %
Total Depreciation 62,126 57,206 4,920 8.6 %
Interest 40,589 41,925 (1,336) (3.2) %
Payroll and related compensation expenses 4,512 4,050 462 11.4 %
Non-cash stock-based compensation expense 2,772 2,955 (183) (6.2) %
Loan and realty losses 1,002 2,500 (1,498) (59.9) %
Taxes and insurance on leased properties 7,190 4,205 2,985 71.0 %
Other expenses 4,222 4,632 (410) (8.9) %
Total Expenses 122,413 117,473 4,940 4.2 %
Loss from equity method investment (2,018) — (2,018) NM
Gains on sales of real estate 21,007 — 21,007 NM
Net income 148,148 118,413 29,735 25.1 %
Less: net (income) loss attributable to noncontrolling interest (162) 4 (166) NM
Net income attributable to common stockholders $ 147,986 $ 118,417 $ 29,569 25.0 %
NM - not meaningful

~~Table of Contents~~

~~Financial highlights of the nine months ended September 30, 2020, compared to the same period in 2019 were as follows:~~

•Rental income received from our tenants increased $11,278,000, or 5.7%, primarily as a result of new investments funded since September 2019, net of rent concessions granted in third quarter 2020 totaling $2,654,000. Included in rental income were funds received from tenants totaling $7,190,000 used to pay certain property operating expenses (e.g. property taxes and insurance), which is typical of triple net leases.

•~~Interest income from mortgage and other notes increased $1,978,000, primarily due to interest income received on loans to Senior Living Communities, Bickford Senior Living and 41 Management.~~

•~~Depreciation expense increased $4,920,000 primarily due to new real estate investments completed since September 2019.~~

•~~Interest expense decreased $1,336,000 primarily as a result of $210,000,000 notional amount of fixed rate swaps that matured.~~

•~~Payroll and related compensation expenses increased $462,000 due primarily to several new employees added during the first half of 2020.~~

•As part of our assessment of expected credit losses, we recorded a $1,002,000 increase in our credit loss reserve for the nine months ended September 30, 2020, which is included in loan and realty (gains) losses in our Condensed Consolidated Statements of Income. Loan and realty losses of $2,500,000 represent a write-down recognized in 2019 related to two facilities classified as held for sale and subsequently sold in the first quarter of 2020.

•~~The following table summarizes our real estate under lease to transitioning tenants ($ in thousands):~~

Nine Months Ended
September 30, Period Change
2020 2019 $ %
Revenues:
Rental income
SHOs leased to Chancellor Health Care $ 862 $ 725 $ 137 18.9 %
SHO leased to Senior Living Communities 129 366 (237) (64.8) %
SHO leased to Discovery Senior Living 50 — 50 NM
SLC leased to Vitality Senior Living 251 105 146 NM
ALF leased to BAKA Enterprises1
540 925 (385) (41.6) %
Straight-line rent adjustments 1,908 — 1,908 NM
Total Revenues 3,740 2,121 1,619 NM
Expenses:
Depreciation
SHOs leased to Chancellor Health Care 1,217 1,217 — — %
SHO leased to Senior Living Communities 459 375 84 22.4 %
SHO leased to Discovery Senior Living 513 513 — — %
SLC leased to Vitality Senior Living 472 462 10 2.2 %
ALF leased to BAKA Enterprises 404 436 (32) (7.3) %
Total Depreciation 3,065 3,003 62 2.1 %
Legal (16) 181 (197) NM
Franchise, excise and other taxes — 845 (845) NM
3,049 4,029 (980) (24.3) %
Net income (loss) $ 691 $ (1,908) $ 2,599 NM
1 includes $625,000 received during 2019 as a settlement payment

4435

Table of Contents

Liquidity and Capital Resources

At ~~September 30, 2020,~~March 31, 2021, we had ~~$262,000,000~~$520.0 million available to draw on our revolving credit facility, ~~$42,198,000~~$113.4 million in unrestricted cash and cash equivalents, and the potential to access ~~capital~~the remaining $417.4 million through the issuance of common stock under the Company’s ~~$500,000,000~~$500.0 million ATM equity program. In addition, the Company maintains an effective automatic shelf registration statement through which capital could be raised via the issuance of debt and or equity securities.

In July, 2020, we entered into a new one-year $100,000,000 term loan bearing interest at a rate of 30-day LIBOR (with a 50 basis point floor) plus 185 basis points, based on our current leverage ratios. We have the right to extend the maturity by an additional year subject to the payment of a 20 basis point extension fee. The proceeds from this loan were used to repay amounts outstanding on the unsecured revolving credit facility.

~~During the three and~~ ~~nine months ended September 30, 2020, we issued 79,155 common shares through the ATM program with an average price of $65.35, resulting in net proceeds of approximately~~ ~~$4,791,000 initially used to pay down our revolving credit facility. We intend to use the proceeds from any further activity under the ATM program for general corporate purposes, which may include future acquisitions and repayment of indebtedness, including borrowings under our credit facility.~~

On October 30 and November 2, 2020, the Company repaid ten HUD mortgage loans with a combined balance of $42,629,000, plus accrued interest of $157,000 and a prepayment fee of $1,619,000. The HUD mortgage loans were secured by ten properties leased to Bickford with a net book value of $47,862,000. Nine of the mortgage notes required monthly payments of principal and interest from 4.3% to 4.4% (inclusive of mortgage insurance premiums) with maturities in August and October 2049. One additional HUD mortgage loan assumed in 2014 at a discount, required monthly payments of principal and interest of 2.9% (inclusive of mortgage insurance premium) and matured in October 2047.

Sources and Uses of Funds

Our primary sources of cash include rent payments, 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 ~~term~~ 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 and general corporate overhead.

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


		Nine Months Ended September 30,				One Year Change					Three Months Ended March 31,				One Year Change
		2020		2019		$		%			2021		2020		$		%
Cash and cash equivalents and restricted cash, January 1	Cash and cash equivalents and restricted cash, January 1	$	15,669	$	9,912	$	5,757	58.1	%	Cash and cash equivalents and restricted cash, January 1	$	46,343	$	15,669	$	30,674	NM
Net cash provided by operating activities	Net cash provided by operating activities	176,527		184,809		(8,282)		(4.5)	%	Net cash provided by operating activities	56,912		57,082		(170)		(0.3)	%
Net cash used in investing activities	Net cash used in investing activities	(83,418)		(304,902)		221,484		(72.6)	%	Net cash used in investing activities	(9,133)		(51,017)		41,884		(82.1)	%
Net cash (used in) provided by financing activities		(57,664)		126,462		(184,126)		NM
Cash and cash equivalents and restricted cash, September 30		$	51,114	$	16,281	$	34,833	NM
Net cash provided by financing activities										Net cash provided by financing activities	22,106		58,084		(35,978)		(61.9)	%
Cash and cash equivalents and restricted cash, March 31										Cash and cash equivalents and restricted cash, March 31	$	116,228	$	79,818	$	36,410	45.6	%

Operating Activities –Net cash provided by operating activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021, which includes new investments completed during 2020 ~~was favorably impacted by new real estate investments in 2019~~ and ~~2020, an increase in~~ lease payment collections arising from escalators on existing leases and previously funded lease ~~incentives.~~incentives, was impacted by $4.2 million in rent deferrals granted during the current quarter.

Investing Activities – Net cash used in investing activities for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was comprised primarily of ~~$155,698,000~~$9.9 million of investments in ~~real estate~~mortgage and other notes and ~~was~~renovations of real estate, offset by the collection of principal on mortgage and other notes receivable of ~~$33,895,000 and $39,260,000 in proceeds from the disposition of real estate.~~$0.4 million.

Financing Activities – Net cash ~~(used in)~~ provided by financing activities for the ~~nine~~three months ended ~~September 30, 2020 compared to~~March 31, 2021 differs from the same period in ~~2019 is~~2020 primarily ~~the~~as a result of a ~~$78,000,000~~$79.0 million decrease in net borrowings, inclusive of a new ~~$100,000,000 term loan,~~$400.0 million senior note offering, a ~~$91,011,000 decrease~~$48.0 million increase in proceeds from issuance of common shares and dividend payments which increased ~~$11,685,000~~$3.0 million over the same period in ~~2019.~~2020.

~~Table of Contents~~

Debt Obligations

As of March 31, 2021, we had outstanding debt of $1.5 billion. Reference Note 6 to the condensed 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 - Our bank credit facility derives from the Credit Agreement dated as of August 3, 2017 (the “2017 Agreement”), and ~~two~~a Term Loan ~~Agreements~~Agreement dated as of September 17, 2018 (the “2018 Agreement”) ~~and July 9, 2020 (the “2020 Agreement”)~~. Together these agreements establish our unsecured ~~$1,200,000,000~~$1.1 billion bank credit facility, which consists of ~~three~~two term loans ~~–$100,000,000 maturing in July 2021, $250,000,000~~– $250.0 million maturing in August 2022 and ~~$300,000,000~~$300.0 million maturing in September 2023 - and a ~~$550,000,000~~$550.0 million revolving credit facility that matures in August 2021. In April 2021, ~~with a one year~~the Company elected to exercise the extension option on the revolving credit facility available after payment of a 10 basis point extension ~~fee.~~fee totaling $0.6 million, extending the maturity of the revolver to August 2022. We have swap agreements to fix the interest rates on ~~$340,000,000~~$400.0 million of term loans ~~and $60,000,000 of our revolving credit facility~~ that expire in December ~~2021, when LIBOR is scheduled for discontinuation.~~2021.

The revolving facility fee is currently 20 basis points (“bps”) per annum, and based on our current leverage ratios, the facility presently provides for floating interest on the revolver and the term loans at 30-day LIBOR plus 120 bps and a blended ~~140~~132 bps, respectively. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, 30-day LIBOR was 1511 and ~~176~~14 bps, respectively. Through June 2020, the Company utilized $610,000,000 in interest rate swaps, designated as cash flow hedges, to fix the variable interest rate on the amounts outstanding on our term loans and revolving credit facility. On June 29 and 30, 2020, $80,000,000 and $130,000,000

Table of ~~these hedges expired.~~ Contents

As of ~~September 30, 2020,~~March 31, 2021, we had ~~$538,000,000~~$180.0 million of outstanding variable rate debt exposed to interest rate risk through December 2021, at which time our remaining hedges expire. Our swaps and the financial instruments to which they relate are described in the table below, under the caption “Interest Rate Swap Agreements.” The current interest spreads and facility fee reflect our leverage-ratio compliance based on the applicable margin for LIBOR loans, measuring debt to “Total Asset Value,” at Level 3 in the Interest Rate Schedule provided below in summary format:

Interest Rate Schedule


			LIBOR Margin							LIBOR Margin
Level	Level	Leverage Ratio	Revolver	$300m Term Loan	$250m Term Loan	$100m Term Loan	Facility Fee	Level	Leverage Ratio	Revolver	$300m Term Loan	$250m Term Loan	Facility Fee
1	1	< 0.35	1.10%	1.20%	1.25%	1.75%	0.15%	1	< 0.35	1.10%	1.20%	1.25%	0.15%
2	2	≥ 0.35 & < 0.40	1.15%	1.25%	1.30%	1.80%	0.20%	2	≥ 0.35 & < 0.40	1.15%	1.25%	1.30%	0.20%
3	3	≥ 0.40 & < 0.45	1.20%	1.30%	1.35%	1.85%	0.20%	3	≥ 0.40 & < 0.45	1.20%	1.30%	1.35%	0.20%
4	4	≥ 0.45 & < 0.50	1.25%	1.40%	1.45%	1.95%	0.25%	4	≥ 0.45 & < 0.50	1.25%	1.40%	1.45%	0.25%

Beyond the applicable ratios detailed above, increasing levels of leverage (not shown) will subject our debt to defined increases in interest rates and fees.

The 2017 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 ~~September 30, 2020,~~March 31, 2021, were within required limits. The calculation of our leverage ratio involves intermediate determinations of our “total indebtedness” and of our “total asset value,” as ~~defined.~~defined in the 2017 Agreement. As discussed below in connection with our leverage-based LIBOR Margin schedule, ~~under provisions of which~~ we are given credit for collateral based on cash rental revenue (capitalized at standard rates based on asset class),. Therefore, our borrowing cost could increase if we were to experience significant declines in rent ~~collections, we could shift to Level 4 or beyond, resulting in significant additional interest expense.~~collections.

~~Aside from a more favorable rate, the 2020 and~~The 2018 ~~Agreements~~Agreement generally ~~calls for~~includes the same covenants and financial statement metrics required for compliance with terms of the 2017 Agreement. Although we are currently eligible under the term loan agreements to transact in our unsecured bank credit facilities at the respective scheduled rates represented by Level 3, the movement of our leverage ratio into Level 4 at current levels of debt would result in additional annual interest charges of ~~$1,069,000,~~$0.8 million, assuming an average revolver balance of approximately ~~$288,000,000.~~$30.0 million. Further movement of our leverage ratio beyond levels currently contemplated by management would be subject to escalating increases in interest. If, in addition to changes in the leverage ratio, certain qualitative indicators of our risk profile were to materially change, further interest-rate escalations may result.

Senior Notes Offering - On January 26, 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 the net proceeds from the 2031 Senior Notes offering to repay our $100.0 million term loan that was entered into in July 2020 and reduce borrowings outstanding under our revolving credit facility. The $100.0 million term loan bore interest at a rate of 30-day LIBOR (with a 50 basis point floor) plus 185 bps, based on our current leverage ratios.

We remain in compliance with all debt covenants under the unsecured bank credit facility, 2031 Senior Notes and other debt agreements.

Convertible Senior Notes - AsOn April 1, 2021, the $60.0 million in aggregate principal amount of ~~September 30, 2020,~~ our ~~$60,000,000 of~~3.25% senior unsecured convertible notes ~~were convertible at~~(the “Convertible Notes”) matured. The Company paid $67.1 million, including accrued interest of $1.0 million and a ~~rate~~$6.1 million conversion premium to retire the Convertible Notes. The conversion premium was recorded as a reduction of ~~14.88 shares~~“Capital in excess of ~~common stock per $1,000 principal amount, representing a conversion price of approximately $67.21~~par value”

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per share for a total of 892,716 shares on the remaining $60,000,000 of senior unsecured convertible notes. For the three and nine months ended September 30, 2020, there was no dilution resulting from the conversion option withinin our convertible debt. If NHI’s current share price increases above the adjusted $67.21 conversion price, dilution may become attributable to the conversion feature. At September 30, 2020, the face amount of the convertible debt exceeded its value on conversion, when value on conversion was computed as if the debt were immediately eligible to convert.

Condensed Consolidated Balance Sheet.

Effective October 1, 2020, the conversion feature is generally available to noteholders. The notes are “optional net-share settlement” instruments, allowing NHI the option to settle the principal amount of the indebtedness in cash and common stock for any excess. The amounts and timing of conversions will depend on prevailing market conditions, liquidity requirements, contractual restrictions and other factors.

Debt Maturities - Reference Note 6 to the condensed 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. Both Fitch and S&P Global announced in November 2019 a public issuer credit rating of BBB- with an outlook of ~~“Stable”.~~“Stable.” Fitch confirmed its rating most recently on September 30, 2020 and S&P Global confirmed its rating on November 4, 2020. Our unsecured bank credit facility includes an option to shift from the leverage-based LIBOR margin schedule in the table above to a ratings-based LIBOR margin schedule. Shifting to a ratings-based LIBOR margin schedule potentially reduces volatility of our interest cost during periods of time when our leverage may fluctuate modestly. Our decision to move to a ratings-based margin schedule will

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be based on several factors including the relative cost of the ratings-based versus leverage-based LIBOR margin schedules and our desire to have a more stable interest cost if our leverage modestly changes as compared to the existing leverage-based LIBOR margin schedule. Our unsecured private placement term loan 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.

Reference Rate Reform - On March 5, 2021, the Financial Conduct Authority (“FCA”) announced that USD LIBOR ~~is scheduled for discontinuation by December 2021. In~~will no longer be published after June 30, 2023. This announcement has several implications, including setting the ~~United States, the Alternative Reference Rates Committee, a group convened by the Federal Reserve Board and the Federal Reserve Bank of New York has identified~~spread that may be used to automatically convert contracts from LIBOR to the Secured Overnight Financing Rate ~~as its preferred alternative rate for USD LIBOR. The Company continues~~("SOFR"). Additionally, banking regulators are encouraging banks to ~~monitor the establishment of a~~discontinue new ~~replacement index with the assistance of its banking advisors.~~LIBOR debt issuances by December 31, 2021. We may choose not to hedge any more of our LIBOR positions for the relatively short duration remaining during which LIBOR may be referenced.

The Company anticipates that LIBOR will continue to be available at least until June 30, 2023. Any changes adopted by the FCA or other governing bodies in the method used for determining LIBOR may result in a sudden or prolonged increase or decrease in reported LIBOR. If ~~a suitable replacement~~that were to occur, our interest payments could change. In addition, uncertainty about the extent and manner of future changes may result in interest rates and/or payments that are higher or lower than if LIBOR ~~is not identified, bank facilities provide for rate alternatives which have historically been disadvantageous.~~were to remain available in its current form. Upon the ~~discontinuation~~issuance of ~~LIBOR,~~ the imposition of a new index rate may materially change interest expense and the credit spread, relative to that determined under the Company’s original pricing structure. However, with a public issuer credit rating and our shelf registration statement filed in March 2020,2031 Senior Notes, the Company ~~is positioned to access the public bond market, which would reduce the Company’s exposure to~~has reduced its LIBOR-based financial instruments.

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 ~~strength~~ gives us a competitive advantage when accessing debt markets.

We calculate our fixed charge coverage ratio as approximately ~~5.9x~~5.7x for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 (see our discussion under the heading Adjusted EBITDA including a reconciliation to our net income). Giving effect to our acquisitions and financings on an annualized basis, our consolidated net debt to Annualized Adjusted EBITDA ratio is approximately ~~4.8x~~5.0x for the three months ended ~~September 30, 2020~~March 31, 2021 ($ in thousands):

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Consolidated Total Debt	$	~~1,528,968~~1,524,725
Less: cash and cash equivalents	~~(42,198)~~(113,375)
Consolidated Net Debt	$	~~1,486,770~~1,411,350

Adjusted EBITDA	$	~~77,012~~70,485
Annualizing Adjustment	~~231,036~~211,455

	$	~~308,048~~281,940

Consolidated Net Debt to Annualized Adjusted EBITDA	~~4.8x~~5.0x

Interest Rate Swap Agreements

To mitigate our exposure to interest rate risk, we have ~~in place~~ the following interest rate swap contracts in place to hedge against floating rates on our bank term loans and a portion of our revolving credit facility as of ~~September 30, 2020~~March 31, 2021 ($ in thousands):


Date Entered	Date Entered	Maturity Date	Fixed Rate	Rate Index	Notional Amount		Fair Value (Liability)		Date Entered	Maturity Date	Fixed Rate	Rate Index	Notional Amount		Fair Value (Liability)
March 2019	March 2019	December 2021	2.22%	1-month LIBOR	$	100,000	$	(2,597)	March 2019	December 2021	2.22%	1-month LIBOR	$	100,000	$	(1,574)
March 2019	March 2019	December 2021	2.21%	1-month LIBOR	$	100,000	$	(2,613)	March 2019	December 2021	2.21%	1-month LIBOR	$	100,000	$	(1,584)
June 2019	June 2019	December 2021	1.61%	1-month LIBOR	$	150,000	$	(2,736)	June 2019	December 2021	1.61%	1-month LIBOR	$	150,000	$	(1,661)
June 2019	June 2019	December 2021	1.63%	1-month LIBOR	$	50,000	$	(920)	June 2019	December 2021	1.63%	1-month LIBOR	$	50,000	$	(558)

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For instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative has been reported as a component of other comprehensive income (loss), and reclassified into earnings in the same period, or periods, during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge ineffectiveness or hedge components excluded from the assessment of effectiveness have been recognized in earnings.

Supplemental Guarantor Financial Information

The Company’s $1.1 billion bank credit facility, unsecured private placement term loans 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):


	As of
	March 31, 2021
Real estate properties, net	$	2,324,359
Other assets, net	521,513
Note receivable due from non-guarantor subsidiary	81,396
Totals assets	$	2,927,268

Debt	$	1,430,124
Other liabilities	93,570
Total liabilities	$	1,523,694

Noncontrolling interest	$	506


	Three Months Ended
	March 31, 2021
Revenues	$	72,824
Interest revenue on note due from non-guarantor subsidiary	1,148
Expenses	40,455
Loss from equity method investee	(808)

Loss on early retirement of debt	(451)
Net income	$	32,258
Net income attributable to NHI and the subsidiary guarantors	$	32,207

Equity

At ~~September 30, 2020~~March 31, 2021 we had ~~44,729,157~~45,850,599 shares of common stock outstanding with a market value of ~~$2,695,817,000.~~$3.3 billion. Equity on our Condensed Consolidated Balance Sheet totaled ~~$1,504,002,000.~~$1.6 billion.

Dividends - ~~We manage our business with a goal of increasing the regular annual dividends paid to stockholders.~~ 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. Our ~~goal~~Board of ~~increasing annual dividends requires~~Directors has historically directed the Company toward maintaining a ~~careful~~strong balance ~~between identification of high-quality lease and mortgage assets in which to invest and the cost of our capital with which to fund such investments. We~~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. We~~equity, and we accept some level of risk associated with leveraging our investments. We intend to continue to make new investments that meet

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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 intend to comply with REIT dividend requirements that we distribute at least 90% of our annual taxable income for the year ending December 31, ~~2020~~2021 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).

The following table summarizes dividends declared by the Board of Directors or paid during the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~

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2020:

~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021

Date of Declaration

Date of Record

Date Paid/Payable

Quarterly Dividend

December 15, 2020

December 31, 2020

January 29, 2021

$1.1025

March 12, 2021

March 31, 2021

May 7, 2021

$1.1025

Three Months Ended March 31, 2020

Date of Declaration

Date of Record

Date Paid/Payable

Quarterly Dividend

November 7, 2019

December 31, 2019

January 31, 2020

$1.05

February 19, 2020

March ~~30,~~31, 2020

May 8, 2020

$1.1025

~~June 15, 2020~~

~~June 30, 2020~~

~~August 7, 2020~~

~~$1.1025~~

~~September 14, 2020~~

~~September 30, 2020~~

~~November 6, 2020~~

~~$1.1025~~

~~Nine Months Ended September 30, 2019~~

~~Date of Declaration~~

~~Date of Record~~

~~Date Paid/Payable~~

~~Quarterly Dividend~~

~~December 17, 2018~~

~~December 28, 2018~~

~~January 31, 2019~~

~~$1.00~~

~~February 19, 2019~~

~~March 29, 2019~~

~~May 10, 2019~~

~~$1.05~~

~~May 7, 2019~~

~~June 28, 2019~~

~~August 9, 2019~~

~~$1.05~~

~~August 8, 2019~~

~~September 30, 2019~~

~~November 8, 2019~~

~~$1.05~~

At-the-Market (ATM) Equity Program - We maintain an ATM program which allows us to sell our common stock directly into the market. In March 2020 the Company entered into a new ATM equity offering sales agreement pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $500,000,000 of the Company’s common shares through the ATM equity program. The Company terminated its previously existing ATM equity program, dated February 22, 2017, upon entering into the new agreement. During the ~~third quarter,~~three months ended March 31, 2021, we issued ~~79,155~~661,951 common shares through the ATM program with an average price of ~~$65.35, resulting~~$73.62, resulting in net proceeds of approximately ~~$4,791,000. During 2019, we issued 1,209,522 shares~~$48.0 million. We intend to use the proceeds from any further activity under the ~~February 22, 2017~~ATM program ~~with an average price~~for general corporate purposes, which may include future acquisitions and repayment of ~~$80.58 per share, generating net proceeds of approximately $95,774,000.~~indebtedness, including borrowings under our credit facility.

Shelf Registration Statement - ~~In March 2020, the Company filed~~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 March 2023.

Off Balance Sheet Arrangements

As part of the Timber Ridge transaction in January 2020, we acquired the property subject to trust liens previously granted to residents of Timber Ridge. Beginning in 2008, the initial residents of Timber Ridge executed loans to the then owner/operators which were backed by a Deed of Trust and Indenture of Trust (the “Deed and Indenture”) for the benefit of the trustee (now Wilmington Trust, N.A., “Trustee”) on behalf of all the residents who made 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 residents of the property. Subsequent to these early transactions, the repayment obligation with respect to “new” loans made to the owner/operator was no longer secured by the Timber Ridge property under the Deed and Indenture.

Our entry into the Timber Ridge transaction involved the separation of the existing owner/operator configuration into property and operating companies. Accomplishing the split required the allocation of assets and liabilities of the previously unified entity. Timber Ridge PropCo acquired the Timber Ridge property, subject to the resident mortgages secured by the Deed and Indenture. Accordingly, 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 our acquisition, 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 normal course of entrance-fee community operations, the~~The balance secured by the Deed and Indenture is $16.7 million at ~~the date of our acquisition on January~~March 31, ~~2020, was $20,063,000 and was further reduced to $17,530,000 at September 30, 2020.~~2021. By terms of the resident loan assumption agreement, during the term of the lease (7(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. ~~NHI expects that no eventual outflow~~As a result of ~~cash will result from~~the subordination agreement mentioned above and Timber Ridge ~~PropCo’s secondary obligation as guarantor under~~OpCo’s indemnity guarantee, no liability has been recorded for the resident ~~mortgages. Accordingly, no liability was recorded on NHI’s books for the guarantee obligation upon acquisition and as of September 30, 2020.~~

loan obligation.

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As described in Note 2 to the condensed consolidated financial statements, our leases, mortgages and other notes receivable with certain unconsolidated entities represent variable interests in those enterprises. However, because we do not control these entities, nor do we have any role in their day-to-day management, we are not their primary beneficiary and therefore do not consolidate their financial statements. Except as discussed in our Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, under Contractual Obligations and Contingent Liabilities, we have no further material obligations arising from our transactions with these entities, and we believe our maximum exposure to loss at ~~September 30, 2020,~~March 31, 2021, due to this involvement would be limited to our contractual commitments and contingent liabilities and the amount of our current investments with them, as detailed further in ~~Notes 2, 3, 4, 5 and 7~~the notes to the condensed consolidated financial statements. As of ~~September 30, 2020,~~March 31, 2021, we furnished no direct support to any of these entities.

In March 2014, we issued convertible notes, which have a carrying amount of $60,000,000 as of September 30, 2020, with the conversion feature intended to broaden the Company’s credit profile and as a means to obtain a more favorable coupon rate. For this feature we calculate the dilutive effect using market prices prevailing over the reporting period. Because the dilution calculation is market-driven, and per share guidance we provide is based on diluted amounts, the theoretical effects of the conversion feature result in per share unpredictability.

Additional disclosure requirements also give widely ranging results depending on market price variability. The notes will be freely convertible in the last six months of their contractual life, beginning October 1, 2020; however, generally accepted accounting principles require us to periodically report the amount by which the notes’ convertible value exceeds their principal amount, without regard to the current availability of the conversion feature. Further, the mechanics of the calculation require the use of an end-of-period stock price, so that the face amount of the convertible debt exceeded its value on conversion at September 30, 2020, whereas the use of another price point would give a different result.

The conversion feature may also become actionable if the market price of NHI’s common stock should, for 20 of 30 consecutive trading days within a calendar quarter, sustain a level in excess of 130% of the adjusted conversion price, or $87.37 per share, down from $93.55 per share, initially. The notes are “optional net-share settlement” instruments, meaning that NHI has the option to settle the principal amount of the indebtedness in cash, with possible dilutive share issuances for any excess. Settlement of the notes requires management to allocate the consideration we ultimately pay between the debt component and the equity conversion feature as though they were separate instruments. The allocation is effected by valuing the debt component first, with any remainder allocated to the conversion feature. Amounts expended to settle the notes will be recognized first as a settlement of the notes at par and then will be recognized in income to the extent the portion allocated to the debt instrument differs from par value. The remainder of the allocation, if any, will be treated as settlement of equity and adjusted through our paid in capital account.

Contractual Obligations and Contingent Liabilities

~~For~~As of March 31, 2021, our contractual payment obligations were as follows ($ in thousands):


	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Debt, including interest1	$	1,652,511	$	109,272	$	805,706	$	237,137	$	500,396
Development commitments	4,950		4,950		—		—		—
Loan commitments	62,395		62,395		—		—		—
	$	1,719,856	$	176,617	$	805,706	$	237,137	$	500,396

1 Interest is calculated based on the weighted average interest rate of outstanding debt balances as of ~~December~~March 31, ~~2019, see our Management’s Discussion and Analysis contained in our Form 10-K for the year ended December 31, 2019.~~2021. The calculation also includes a facility fee of 0.20%.

Commitments and Contingencies

The following tables summarize information as of ~~September 30, 2020~~March 31, 2021 related to our outstanding commitments and contingencies which are more fully described in the notes to the condensed consolidated financial statements ($ in thousands).:

Asset Class Type Total Funded Remaining
Loan Commitments:
LCS Sagewood Note A SHO Construction $ 118,800 $ (91,256) $ 27,544
LCS Sagewood Note B SHO Construction 61,200 (61,200) —
Bickford Senior Living SHO Construction 42,900 (29,458) 13,442
Senior Living Communities SHO Revolving Credit 12,000 (6,170) 5,830
41 Management SHO Construction 10,800 (8,532) 2,268
Timber Ridge OpCo SHO Working Capital 5,000 — 5,000
Watermark Retirement SHO Working Capital 5,000 — 5,000
Discovery Senior Living SHO Working Capital 750 (750) —
$ 256,450 $ (197,366) $ 59,084

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	Asset Class	Type	Total		Funded		Remaining
Loan Commitments:
LCS Sagewood Note A	SHO	Construction	$	118,800	$	(104,618)	$	14,182
LCS Sagewood Note B	SHO	Construction	61,200		(61,200)		—
Bickford Senior Living	SHO	Construction	42,900		(31,090)		11,810
41 Management	SHO	Construction	22,200		(6,207)		15,993
Senior Living Communities	SHO	Revolving Credit	20,000		(11,489)		8,511
41 Management	SHO	Construction	10,800		(8,901)		1,899
Timber Ridge OpCo	SHO	Working Capital	5,000		—		5,000
Watermark Retirement	SHO	Working Capital	5,000		—		5,000
			$	285,900	$	(223,505)	$	62,395

See Note 47 to our condensed consolidated financial statements for further 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 $0.3 million as of March 31, 2021 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. ~~We applied the same COVID-19 adjustments as discussed in Note 4 to the condensed consolidated financial statements. The liability for expected credit losses on our unfunded loans was $320,000 as~~

Table of ~~September 30, 2020.~~Contents


		Asset Class	Type	Total		Funded		Remaining			Asset Class	Type	Total		Funded		Remaining
Development Commitments:	Development Commitments:									Development Commitments:
Ignite Medical Resorts		SNF	Construction	$	25,350	$	(24,313)	$	1,037
Woodland Village	Woodland Village	SHO	Renovation	7,515		(7,425)		90		Woodland Village	SHO	Renovation	$	7,515	$	(7,425)	$	90
Senior Living Communities	Senior Living Communities	SHO	Renovation	9,930		(9,763)		167		Senior Living Communities	SHO	Renovation	9,930		(9,930)		—
Wingate Healthcare	Wingate Healthcare	SHO	Renovation	1,900		(1,532)		368		Wingate Healthcare	SHO	Renovation	1,900		(1,800)		100
Discovery Senior Living	Discovery Senior Living	SHO	Renovation	900		(697)		203		Discovery Senior Living	SHO	Renovation	900		(899)		1
Navion Senior Solutions		SHO	Construction	650		—		650
41 Management		SHO	Renovation	400		—		400
Watermark Retirement	Watermark Retirement	SHO	Renovation	6,500		(3,000)		3,500		Watermark Retirement	SHO	Renovation	6,500		(3,000)		3,500
Other										Other	SHO	Various	1,650		(391)		1,259
				$	53,145	$	(46,730)	$	6,415				$	28,395	$	(23,445)	$	4,950

In addition to the commitments listed above, Discovery PropCo has committed to Discovery for funding up to ~~$2,000,000~~$2.0 million toward the purchase of condominium units located at one of the facilities, of which ~~$968,000~~$1.0 million has been funded as of ~~September 30, 2020.~~March 31, 2021.


		Asset Class	Total		Funded		Remaining			Asset Class	Total		Funded		Remaining
Contingencies (Lease Inducements):	Contingencies (Lease Inducements):								Contingencies (Lease Inducements):
Timber Ridge OpCo	Timber Ridge OpCo	SHO	$	10,000	$	—	$	10,000	Timber Ridge OpCo	SHO	$	10,000	$	—	$	10,000
Comfort Care Senior Living	Comfort Care Senior Living	SHO	6,000		—		6,000		Comfort Care Senior Living	SHO	6,000		—		6,000
Wingate Healthcare	Wingate Healthcare	SHO	5,000		—		5,000		Wingate Healthcare	SHO	5,000		—		5,000
Navion Senior Solutions	Navion Senior Solutions	SHO	4,850		(500)		4,350		Navion Senior Solutions	SHO	4,850		(1,500)		3,350
Discovery Senior Living	Discovery Senior Living	SHO	4,000		—		4,000		Discovery Senior Living	SHO	4,000		—		4,000
Ignite Medical Resorts	Ignite Medical Resorts	SNF	2,000		—		2,000		Ignite Medical Resorts	SNF	2,000		—		2,000
			$	31,850	$	(500)	$	31,350			$	31,850	$	(1,500)	$	30,350

We adjust rental income for the amortization of lease inducements paid to our tenants.

Litigation

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FFO ~~AFFO~~ & FAD

These supplemental ~~operating~~ performance measures may not be comparable to similarly titled measures used by other REITs. Consequently, our Funds From Operations (“FFO”), Normalized FFO ~~Normalized Adjusted Funds From Operations (“AFFO”)~~ 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 ~~operating performance~~ measures, caution should be exercised when comparing our FFO, Normalized FFO ~~Normalized AFFO~~ and Normalized FAD to that of other REITs. These ~~financial performance~~ measures do not represent cash generated from operating activities in accordance with generally accepted accounting principles (“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 ~~operating~~ 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. Beginning in the first quarter of 2021, the Company is no longer presenting Adjusted Funds from Operations as a supplemental measure of operating performance.

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Funds From Operations - FFO

Our FFO per diluted common share for the ~~nine~~three months ended ~~September 30, 2020 increased $0.13 (3.2%)~~March 31, 2021 decreased $0.12 or 8.9% over the same period in ~~2019~~2020 due primarily to the ~~impact~~effects of the COVID-19 pandemic, partially offset by new investments completed since ~~September 2019.~~March 2020. 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, ~~plus~~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.

Our ~~normalized~~Normalized FFO per diluted common share for the ~~nine~~three months ended ~~September 30, 2020 increased $0.14 (3.4%)~~March 31, 2021 decreased $0.12 or 8.8% over the same period in ~~2019~~2020 due primarily to the ~~impact~~effects of the COVID-19 pandemic, partially offset by new investments completed since ~~September 2019.~~March 2020. 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 assets and liabilities, and recoveries of previous write-downs.

FFO and ~~normalized~~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.

~~Adjusted~~ Funds ~~From Operations~~Available for Distribution - ~~AFFO~~FAD

Our ~~normalized AFFO per diluted common share~~Normalized FAD for the ~~nine~~three months ended ~~September 30, 2020 increased $0.19 (5.0%)~~March 31, 2021 decreased $6.0 thousand or 0.01% over the same period in ~~2019~~2020 due primarily to the ~~impact~~effects of the COVID-19 pandemic, partially offset by new investments completed since ~~September 2019.~~March 2020. In addition to the adjustments included in the calculation of ~~normalized~~Normalized FFO, ~~normalized AFFO~~Normalized FAD excludes the impact of any straight-line rent revenue, amortization of the original issue discount on our convertible senior notes, ~~and~~ amortization of debt issuance ~~costs.~~costs, non-cash stock based compensation, as well as certain non-cash items related to our equity method investment.

Normalized ~~AFFO~~FAD is an important supplemental performance measure ~~of operating performance~~ for a REIT. 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 ~~the original issue~~any discount ~~of our convertible senior notes~~or premium related to indebtedness and debt issuance costs to be amortized as non-cash adjustments to earnings. We also adjust Normalized ~~AFFO~~FAD for the net change in our allowance for expected credit losses, non-cash stock 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 AFFO is useful to our investors as it reflects the growth inherent in the contractual lease payments of our real estate portfolio.~~

~~Funds Available for Distribution - FAD~~

Our normalized FAD for the nine months ended September 30, 2020 increased $12,634,000 (7.5%) over the same period in 2019 due primarily to the impact of new investments completed since September 2019. In addition to the adjustments included in the calculation of normalized AFFO, normalized FAD excludes the impact of non-cash stock based compensation. We also adjust

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~~Normalized FAD for items related to our equity method investments such as capital expenditures and the net change in non-refundable entrance fees.~~ Normalized FAD is an important supplemental measure of liquidity for a REIT as a useful indicator of the ability to distribute dividends to stockholders.

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

Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Net income attributable to common stockholders $ 42,595 $ 42,758 $ 147,986 $ 118,417
Elimination of certain non-cash items in net income:
Depreciation 20,836 19,695 62,126 57,206
Depreciation related to noncontrolling interests (210) (22) (567) (30)
Gain on sale of real estate — —�� (21,007) —
Impairment of real estate — — — 2,500
NAREIT FFO attributable to common stockholders 63,221 62,431 188,538 178,093
Non-cash write-off of straight-line rent receivable — — 380 —
Normalized FFO attributable to common stockholders 63,221 62,431 188,918 178,093
Straight-line lease revenue, net (5,086) (5,720) (15,861) (16,255)
Straight-line lease revenue, net, related to noncontrolling interests 29 6 81 8
Amortization of lease incentives 250 224 735 607
Amortization of original issue discount 102 197 303 584
Amortization of debt issuance costs 871 708 2,156 2,112
Equity method investment adjustments, net 568 — 617 —
Note receivable credit loss expense (193) — 1,002 —
Normalized AFFO attributable to common stockholders 59,762 57,846 177,951 165,149
Equity method investment capital expenditure (105) — (315) —
Equity method investment non-refundable fees received 156 — 330 —
Non-cash stock-based compensation 457 477 2,772 2,955
Normalized FAD attributable to common stockholders $ 60,270 $ 58,323 $ 180,738 $ 168,104
BASIC
Weighted average common shares outstanding 44,661,650 43,505,332 44,641,748 43,187,847
NAREIT FFO attributable to common stockholders per share $ 1.42 $ 1.44 $ 4.22 $ 4.12
Normalized FFO attributable to common stockholders per share $ 1.42 $ 1.44 $ 4.23 $ 4.12
Normalized AFFO attributable to common stockholders per share $ 1.34 $ 1.33 $ 3.99 $ 3.82
DILUTED
Weighted average common shares outstanding 44,662,403 43,861,089 44,643,514 43,494,714
NAREIT FFO attributable to common stockholders per share $ 1.42 $ 1.42 $ 4.22 $ 4.09
Normalized FFO attributable to common stockholders per share $ 1.42 $ 1.42 $ 4.23 $ 4.09
Normalized AFFO attributable to common stockholders per share $ 1.34 $ 1.32 $ 3.99 $ 3.80

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	Three Months Ended
	March 31,
		2021		2020
Net income attributable to common stockholders		$	35,332	$	61,023
Elimination of certain non-cash items in net income:
Depreciation		20,806		20,443
Depreciation related to noncontrolling interests		(210)		(147)
Gains on sales of real estate		—		(21,007)

NAREIT FFO attributable to common stockholders		55,928		60,312
Loss on early retirement of debt		451		—
Non-cash write-off of straight-line rent receivable		—		380


Normalized FFO attributable to common stockholders		56,379		60,692
Straight-line lease revenue, net		(4,241)		(5,557)
Straight-line lease revenue, net, related to noncontrolling interests		24		22
Straight-line lease expense related to equity method investment		25		21
Amortization of lease incentives		260		236
Amortization of original issue discount		54		100
Amortization of debt issuance costs		705		643
Amortization related to equity method investment		535		—
Note receivable credit loss expense		(50)		1,575

Non-cash stock-based compensation		5,446		1,845
Equity method investment capital expenditures		(105)		(105)
Equity method investment non-refundable fees received		519		73
Normalized FAD attributable to common stockholders		$	59,551	$	59,545


BASIC
Weighted average common shares outstanding		45,305,087		44,613,593
NAREIT FFO attributable to common stockholders per share		$	1.23	$	1.35
Normalized FFO attributable to common stockholders per share		$	1.24	$	1.36


DILUTED
Weighted average common shares outstanding		45,357,773		44,618,139
NAREIT FFO attributable to common stockholders per share		$	1.23	$	1.35
Normalized FFO attributable to common stockholders per share		$	1.24	$	1.36

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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):


		Three Months Ended				Nine Months Ended					Three Months Ended
		September 30,				September 30,					March 31,
		2020		2019		2020		2019				2021		2020
Net income	Net income	$	42,661	$	42,755	$	148,148	$	118,413	Net income		$	35,384	$	61,062
Interest expense	Interest expense	12,892		14,661		40,589		41,925		Interest expense		12,973		14,140
Franchise, excise and other taxes	Franchise, excise and other taxes	164		121		553		1,441		Franchise, excise and other taxes		233		243
Depreciation	Depreciation	20,836		19,695		62,126		57,206		Depreciation		20,806		20,443
NHI’s share of EBITDA adjustments for unconsolidated entities	NHI’s share of EBITDA adjustments for unconsolidated entities	652		—		652		—		NHI’s share of EBITDA adjustments for unconsolidated entities		688		—
Gain on sale of real estate		—		—		(21,007)		—
Impairment of real estate		—		—		—		2,500
Note receivable credit loss expense										Note receivable credit loss expense		(50)		1,575
Gains on sales of real estate										Gains on sales of real estate		—		(21,007)
Loss on note retirement										Loss on note retirement		451		—

Non-cash write-off of straight-line rent receivable	Non-cash write-off of straight-line rent receivable	—		—		380		—		Non-cash write-off of straight-line rent receivable		—		380

Note receivable credit loss expense		(193)		—		1,002		—
Adjusted EBITDA	Adjusted EBITDA	$	77,012	$	77,232	$	232,443	$	221,485	Adjusted EBITDA		$	70,485	$	76,836

Interest expense at contractual rates	Interest expense at contractual rates	$	10,129	$	14,308	$	33,701	$	40,736	Interest expense at contractual rates		$	10,452	$	13,003
Interest rate swap payments, net	Interest rate swap payments, net	1,778		(410)		4,555		(1,006)		Interest rate swap payments, net		1,778		478
Principal payments	Principal payments	308		590		917		886		Principal payments		94		304
Fixed Charges	Fixed Charges	$	12,215	$	14,488	$	39,173	$	40,616	Fixed Charges		$	12,324	$	13,785

Fixed Charge Coverage	Fixed Charge Coverage	6.3x		5.3x		5.9x		5.5x		Fixed Charge Coverage		5.7x		5.6x

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

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

At ~~September 30, 2020,~~March 31, 2021, we were exposed to market risks related to fluctuations in interest rates on approximately ~~$538,000,000~~$180.0 million of variable-rate indebtedness (excludes ~~$400,000,000~~$400.0 million of variable-rate debt that has been hedged through interest-rate swap contracts) and on our mortgage and other notes receivable. The unused portion ($~~262,000,000~~520.0 million at ~~September 30, 2020)~~March 31, 2021) 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 ~~September 30, 2020,~~March 31, 2021, net interest expense would increase or decrease annually by approximately ~~$2,690,000~~$0.9 million or ~~$0.06~~$0.02 per common share on a diluted basis.

We use 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 are included in the Condensed 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.

The following table sets forth certain information with respect to our debt ($ in thousands):


		September 30, 2020						December 31, 2019							March 31, 2021						December 31, 2020
		Balance1		% of total		Rate3		Balance1		% of total		Rate3			Balance1		% of total		Rate2		Balance1		% of total		Rate2
Fixed rate:	Fixed rate:													Fixed rate:
Convertible senior notes		$	60,000	3.9	%	3.25	%	$	60,000	4.1	%	3.25	%
Private placement term loans		400,000		26.0	%	4.15	%	400,000		27.6	%	4.15	%
Convertible senior notes - unsecured														Convertible senior notes - unsecured	$	60,000	3.8	%	3.25	%	$	60,000	4.0	%	3.25	%
Private placement term loans - unsecured														Private placement term loans - unsecured	400,000		26.1	%	4.15	%	400,000		26.6	%	4.15	%
Senior notes - unsecured														Senior notes - unsecured	400,000		26.1	%	3.00	%	—		—	%	—	%
Bank term loans - unsecured	Bank term loans - unsecured	340,000		22.1	%	3.27	%	550,000		38.0	%	3.36	%	Bank term loans - unsecured	400,000		26.1	%	3.23	%	340,000		22.6	%	3.27	%
HUD mortgage loans2		42,721		2.8	%	4.04	%	43,376		3.0	%	4.04	%
Fannie Mae term loans		95,444		6.2	%	3.94	%	95,706		6.6	%	3.94	%
Fannie Mae term loans - secured, non-recourse														Fannie Mae term loans - secured, non-recourse	95,260		6.2	%	3.94	%	95,354		6.3	%	3.94	%
Revolving credit facility - unsecured	Revolving credit facility - unsecured	60,000		3.9	%	2.81	%	60,000		4.1	%	2.81	%	Revolving credit facility - unsecured	—		—	%	—	%	60,000		4.0	%	2.81	%
Variable rate:	Variable rate:													Variable rate:
Bank term loans - unsecured	Bank term loans - unsecured	310,000		20.3	%	1.77	%	—		—	%	—	%	Bank term loans - unsecured	150,000		9.7	%	1.11	%	310,000		20.7	%	1.77	%
Revolving credit facility - unsecured	Revolving credit facility - unsecured	228,000		14.8	%	1.35	%	240,000		16.6	%	2.96	%	Revolving credit facility - unsecured	30,000		2.0	%	1.31	%	238,000		15.8	%	1.34	%
		$	1,536,165	100.0	%	2.96	%	$	1,449,082	100.0	%	3.54	%		$	1,535,260	100.0	%	3.24	%	$	1,503,354	100.0	%	2.91	%

1 Differs from carrying amount due to unamortized discounts and loan costs.	1 Differs from carrying amount due to unamortized discounts and loan costs.													1 Differs from carrying amount due to unamortized discounts and loan costs.
2 Includes 10 HUD mortgages; rate is a weighted average inclusive of a mortgage insurance premium; paid off subsequent to September 30, 2020.
3 Total is weighted average rate
2 Total is weighted average rate														2 Total is weighted average rate

The unsecured bank term loans in the table above reflect the effect of ~~$400,000,000~~$400.0 million notional amount interest rate swaps with maturities in December 2021 that effectively convert variable rate debt to fixed rate debt. These loans bear interest at LIBOR plus a spread, currently a blended ~~102 basis points,~~132 bps, based on our ~~Leverage-Based Applicable Margin, as defined.~~leverage-based LIBOR margin.

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To highlight the sensitivity of our convertible 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”)~~bps in market interest rates for a contract with similar maturities as of ~~September 30, 2020~~March 31, 2021 ($ in thousands):


		Balance		Fair Value1		FV reflecting change in interest rates					Balance		Fair Value1		FV reflecting change in interest rates
Fixed rate:	Fixed rate:					-50 bps		+50 bps		Fixed rate:					-50 bps		+50 bps
Private placement term loans - unsecured	Private placement term loans - unsecured	$	400,000	$	421,412	$	429,421	$	413,585	Private placement term loans - unsecured	$	400,000	$	405,295	$	412,048	$	398,682
Senior notes										Senior notes	400,000		367,164		383,288		351,785
Convertible senior notes	Convertible senior notes	60,000		60,637		60,813		60,463		Convertible senior notes	60,000		60,045		60,070		60,020
Fannie Mae loans	Fannie Mae loans	95,444		99,202		101,296		97,154		Fannie Mae loans	95,260		94,777		96,567		93,023
HUD mortgage loans		42,721		51,890		55,545		48,555
1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.	1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.									1 The change in fair value of our fixed rate debt was due primarily to the overall change in interest rates.

At ~~September 30, 2020,~~March 31, 2021, the fair value of our mortgage and other notes receivable, discounted for estimated changes in the risk-free rate, was approximately ~~$319,418,000.~~$320.8 million. A 50 basis-point increase in market rates would decrease the estimated fair value of our mortgage and other loans by approximately ~~$9,581,000,~~$14.5 million, while a 50 basis point decrease in such rates would increase their estimated fair value by approximately ~~$1,645,000.~~$3.1 million.

Common Stock Price Volatility

Our compensation committee has historically granted stock incentive awards to employees in the form of stock options. Compensation expense is recognized for stock options 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 and the market value of our publicly traded common stock on the date of grant. This expense is reflected in the “General and administrative” expense line item in our Condensed Consolidated Statements of Income. In addition to the market value of our common stock, one of the inputs into this model that significantly impacts the fair value of the options is the expected volatility of our common stock over the estimated life of the option. We estimate expected volatility by using the most recent historical experience.

Since the COVID-19 pandemic began in March 2020, our common stock has experienced periods of elevated volatility in its trading. The stock option grants in 2021 included an increase in expected volatility in the estimation of fair value of stock options that resulted in a higher fair value and related stock-based compensation expense for these awards when compared to prior years.

The fair value of the stock option awards granted on February 25, 2021 was $14.54, using the closing market value of the common stock of $69.20 on the grant date and an estimate of expected volatility of 48.1%. This fair value is $9.00 per share greater than the weighted-average fair value of stock options granted in the first quarter of 2020 which has increased the amount of stock-based compensation expense that will be recognized for the current year grant compared to prior year. See Note 9 to the Condensed Consolidated Financial Statements for more discussion.

Item 4. Controls and Procedures.

Evaluation of Disclosure Control and Procedures. As of ~~September 30, 2020,~~March 31, 2021, 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 Securities and Exchange Act of 1934) to ensure information required to be disclosed in our filings under the Securities and Exchange Act of 1934, is (i) recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms; 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 ~~September 30, 2020.~~March 31, 2021.

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.

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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 ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Our health care facilities are subject to claims and suits in the ordinary course of business. Our lessees 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. While there may be lawsuits pending against certain of the owners and/or lessees of our 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.

Item 1A. Risk Factors.

During the ~~nine~~three months ended ~~September 30, 2020, other than as noted below,~~March 31, 2021, there were no material changes to the risk factors that were disclosed in Item 1A of National Health Investors, Inc.’s Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

To reflect the outbreak of COVID-19 and its actual and potential impact on public health and our business, we have added the following risk factor not previously disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2019:

Actual or perceived risks associated with public health epidemics or outbreaks, such as the Coronavirus (COVID-19), has had and is expected to continue to have a material adverse effect on our business and results of operations.

The Coronavirus (COVID-19) has had a negative impact and is expected to continue to have a negative impact on the business and results of operations of the operators of our properties and on the Company. Revenues for the operators of our properties are significantly impacted by occupancy. Building occupancy rates have been and will likely continue to be adversely affected by COVID-19. It has been reported that COVID-19 appears most dangerous for seniors, and the mortality rate increases with age. The occupancy at our properties could significantly decrease if COVID-19 or other public health outbreak results in early resident move-outs, our operators delay accepting new residents due to quarantines or otherwise, or potential occupants determine to postpone moving to a senior housing facility. A decrease in occupancy or increase in costs is likely to have a material adverse effect on the ability of our 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 addition, actions our operators take to address COVID-19 are expected to materially increase their operating costs, including costs related to enhanced health and safety precautions among other measures, which could have a material adverse effect on the ability of our operators to meet their financial and other contractual obligations to us, including the payment of rent. The federal, state and local governments have implemented or announced assistance programs in connection with COVID-19 that have benefited or in the future may benefit certain of our operators, but such government assistance may be insufficient to offset the downturn in business of our operators. In some cases, we may have to write-off unpaid rental payments, incur lease accounting charges due to the uncollectibility of rental payments and/or restructure our operators’ long-term rent obligations and may not be able to do so on terms that are as favorable to us as those currently in place. Furthermore, infections at our facilities could lead to material increases in litigation costs for which our operators, or possibly we, may be liable.

COVID-19 has also caused, and is likely to 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 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

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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.

If these developments continue or increase in severity, such developments are likely to have a material adverse effect on our business and results of operations. The extent to which COVID-19 could impact our business and results of operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and scope of the outbreak, new information that may emerge concerning the severity of COVID-19 and the actions taken to contain COVID-19 or treat its impact, among others.

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Item 6. Exhibits.


Exhibit No.			Description
3.1			Articles of Incorporation (incorporated by reference to Exhibit 3.1 to Form ~~S-11~~S-3 Registration Statement No. ~~33-41863, filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation S-T)~~333-192322)
3.2			A rticles of A mendment to Articles of Incorporation of National Health Investors, Inc. dated as of June 8, 1994, (incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-3 Registration Statement No. 333-194653 of National Health Investors, Inc.)
3.3			Amendment to Articles of Incorporation ~~(incorporated~~(incorporated by reference to Exhibit A to the Company’s Definitive Proxy Statement filed March 21, 2009)
~~3.3~~3.4			Amendment to Articles of Incorporation approved by shareholders on May 2, 2014 ~~(incorporated~~(incorporated by reference to Exhibit 3.3 to the Company’s Form 10-Q filed August 4, 2014)
~~3.4~~3.5			Restated Bylaws (incorporated by reference to Exhibit 3.3 to the Company’s Form 10-K filed February 15, 2013)
~~3.5~~3.6			Amendment No. 1 to Restated Bylaws dated February 14, 2014 ~~(incorporated~~(incorporated by reference to Exhibit 3.3 to the Company’s Form 10-K filed February 14, 2014)
~~3.6~~3.7			Amendment to Articles of Incorporation approved by shareholders 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, f~~iled~~filed in paper - hyperlink is not required pursuant to Rule 105 of Regulation ~~S-T~~S-T))
4.2			Indenture, dated as of March 25, 2014, between National Health Investors, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee ~~(incorporated~~(incorporated by reference to Exhibit 4.1 to the Company’s Form 8-K filed March 31, 2014)
4.3			First Supplemental Indenture, dated as of March 25, 2014, to the Indenture, dated as of March 25, 2014, between National Health Investors, Inc. and The Bank of New York Mellon Trust Company, N.A., as Trustee ~~(incorporated~~(incorporated by reference to Exhibit 4.2 to the Company’s Form 8-K filed March 31, ~~20143)~~2014)
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 dated January 26, 2021)
4.5			First Supplemental Indenture dated as of January 26, 2021, among National Health Investors, Inc. Regions Bank, as trustee, and the subsidiary guarantors set forth therein (incorporated by reference to Exhibit 4.2 to Form 8-K dated January 26, 2021)
31.1			Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2			Certification of Principal ~~Certification of Principal~~ Financial ~~Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002~~ Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32			Certification of Chief Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS			XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH			Inline XBRL Taxonomy Extension Schema Document
101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

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SIGNATURES

Pursuant to the requirements 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.
		(Registrant)


Date:	~~November 9, 2020~~May 10, 2021	/s/ D. Eric Mendelsohn
		D. Eric Mendelsohn
		President and Chief Executive Officer
		(duly authorized officer)



Date:	~~November 9, 2020~~May 10, 2021	/s/ John L. Spaid
		John L. Spaid
		Chief Financial Officer
		(Principal Financial Officer)

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Operator	Date	Properties	Asset Class	Land		Improvements		Total
Bickford Senior Living	Q1	1	SHO	$	1,588	$	13,512	$	15,100
Life Care Services	Q1	1	SHO	4,370		130,522		134,892
Autumn Trace	Q2	2	SHO	344		13,906		14,250
The Courtyard at Bellevue	Q3	1	SHO	504		11,796		12,300
				$	6,806	$	169,736	$	176,542


	as of September 30, 2020					Revenues1
	Number of	Real		Notes		Nine Months Ended September 30,
	Properties	Estate		Receivable		2020			2019

Bickford Senior Living	48	$	534,376	$	33,458	$	39,142	16%	$	39,356	17%
Senior Living Communities	10	573,631		38,870		38,972		15%	36,914		16%
Holiday Retirement	26	531,378		0		30,529		12%	30,283		13%
National HealthCare Corporation (NHC)	42	171,297		0		28,362		11%	28,670		12%
All others		1,451,204		219,861		114,567			100,663
		$	3,261,886	$	292,189	$	251,572		$	235,886


	September 30, 2020		December 31, 2019
Revolving credit facility - unsecured	$	288,000	$	300,000
Bank term loans - unsecured	650,000		550,000
Private placement term loans - unsecured	400,000		400,000
HUD mortgage loans - secured, non-recourse	41,542		42,138
Fannie Mae term loans - secured, non-recourse	95,444		95,706
Convertible senior notes - unsecured	60,000		59,697
Unamortized loan costs	(6,018)		(7,076)
	$	1,528,968	$	1,440,465


	Properties	3Q19	4Q19	1Q20	2Q20	3Q20	September 2020
Senior Living Communities	9	80.3%	80.4%	80.3%	79.1%	79.0%	78.9%
Bickford	47	86.0%	86.3%	85.2%	82.5%	81.7%	81.8%

Holiday	26	87.6%	87.0%	87.3%	83.5%	79.6%	78.5%