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D. Eric Mendelsohn

Hello and thanks to everyone for joining us today. We ended the year on a strong note as the fourth-quarter results exceeded our expectations with contributions from across the portfolio. Our cash rent increased by nearly 9% year over year on solid organic growth from rent step-ups and deferral repayments as well as increased investment activity.
Shop occupancy continued to accelerate through the end of the year, which helped to generate 12.5% NOI growth and we announced investments of over $150 million during the quarter at an initial yield of 8.5% while our balance sheet leverage ticked down to 4.1 times from 4.4 times in the third quarter.
Reflecting on the full year's results, we benefited from similar trends. Our hard work performed during the portfolio optimization contributed meaningfully to 2024. This included over $11 million in total deferral repayments and approximately 17% growth in Bickford's cash rental income. Shop NOI increased by approximately 32%, which was above the high end of our guidance, driven mainly by improved occupancy and 350 basis points of margin improvement.
From a capital allocation perspective, we announced over $235 million at an average yield of approximately 8.6%. This was our most active year since 2019, and the momentum is clearly building. As a result, the company delivered growth in annual NAREIT FFO, normalized FFO, and FAD for the first time since 2020. And while that growth is not linear, we exceeded the high end of our original February guidance for the full year. John will provide more details in his comments.
Looking forward to 2025, we expect growth to continue as reflected in guidance. As noted a moment ago, our 2024 results were bolstered by rent step-ups and deferral repayments resulting from the effects of COVID era restructuring. While we still expect some benefit to accrue from the 2025 financial results, we are looking for other avenues to support internal growth.
Specifically, we're considering select opportunities to transition triple net senior housing assets to shop structures where we see excellent long-term potential with existing or new operators. The senior housing industry has exceptional tailwinds, so we believe this strategy is a capital efficient way to improve shareholder value by increasing our overall exposure to senior housing operations and working with strong partners to generate greater cash flow and higher real estate valuations.
We also continue to see significant organic upside in our existing shop platform with the portfolio operating at close to 90%, we plan to strategically increase REVPOR to further drive margin expansion. After 32% NOI growth in 2024, we're guiding to 12% to 15% in 2025.
Turning to our outlook on external growth, the balance sheet is in great shape and very supportive of funding significant investment opportunities. We were able to be advantageous in the equity markets last year by raising net proceeds of approximately [$262 million] (technical difficulty) on a forward basis of which approximately $119 million remains available to settle.
As John will detail in his comments, we are including $225 million of incremental investments in our guidance, reflecting our high conviction in the near-term outlook. While we're not including any investments beyond that, I think it's safe to say that we'd be disappointed if we did not surpass last year's total of $237.5 million. We're off to a good start in 2025. We closed $21.2 million sale lease back in January, have $152.3 million undersigned LOIs, and in addition, we have an active pipeline of approximately $190 million.
In closing, I'm pleased with the execution in 2024, and I'm very optimistic that 2025 will be an even more productive year. While the interest rate environment has weighed recently on the cost of capital, we still have the capacity and ability to move more quickly than other capital providers to the senior housing sector who have either scaled back their exposure or exited the industry entirely. As operators rush to take advantage of the most favorable industry fundamentals in the history of senior housing, NHI is competitively positioned as the partner of choice, which convinces us that we're in the early days of multiple years of exceptional growth.
Before I turn the call over, I want to briefly comment on the recent filing in which Land & Buildings has nominated two candidates for election to our Board of Directors at the upcoming annual shareholder meeting. The company and the Board take information received from shareholders very seriously. As such, the Board has made significant changes over the last several years which reflect its commitment to its fiduciary responsibility and in direct response to shareholder concerns. We appreciate everyone's interest and hope that you'll understand that we have no further comment on this matter.
I'll now turn the call over to Kevin to provide more details on our operations. Kevin?

Kevin Pascoe

Thank you, Eric.
Since our last call in November, we have announced investments of $53.1 million at an average initial yield of 9%. This included $28.1 million in real estate acquisitions at an average yield of 8.1% and a $25-million loan at 10%. We have $152.3 million in Board approved deals with an average yield of 8.2% that are expected to close in the first half of this year. This includes a mix of senior housing sale lease back and real estate acquisitions as well as mortgage and construction loans with purchase options. We also have an actionable pipeline of approximately $190 million in investments which have a reasonable chance of closing within the next 12 months. Not included in this figure are portfolio deals including shop deals.
Turning to asset management, I want to comment specifically on a master lease on six properties in a partnership with Discovery Senior Living. As you will recall, we amended this lease in November of 2023 with a scheduled May 1, 2025, reset to a minimum of a 5% yield on gross investment. While we have seen NOI growth, the buildings have not performed as expected, so we are evaluating several options, including transitioning the properties to another operator. These properties generated $4.5 million in 2024 base rent and approximately $1.2 million in deferral repayments. While no final decisions have been made, we currently model a slight increase in the base rent, but not the levels contemplated in the 2023 amendment. We expect to provide a more detailed update on this portfolio as we continue our evaluation.
Now turning to the results, we had another good quarter with improving EBITDARM coverage and cash collections as well as solid contributions from acquisitions and shop growth. The need-driven operators again had positive coverage trends with EBITDARM at 1.41 times. Bickford's coverage adjusted for the April 2024 rent reset was 1.63 times while the other needs driven and its coverage improved sequentially to 1.22 times from 1.15.
We made good progress on repositioning the SLM portfolio and expect that we will have recaptured a significant portion of that NOI by the end of 2025. Of the four leased properties, one was transitioned to the William James Group in October with cash rents commencing April 1. Two properties in Louisiana are now under triple net lease effective in January of this year, and the remaining property was sold for $9.7 million in net proceeds, of which NHI provided $9.4 million in financing at 8.5% during the full quarter.
Earlier this month, we took ownership of the Florida property that secured our $10 million mortgage note and are leasing it to mainstay. We are still evaluating options on the $14.5 million mezzanine loans on which we carry a substantial reserve and we'll provide more details when available.
Our entrance fee and skilled nursing portfolios continued to show great performance. The discretionary senior housing portfolio, which includes our entrance fee portfolio, had coverage of 1.7 times compared to 1.6 times in the sequential period. The SNF portfolio reported solid coverage at 3.05 times, which improved sequentially from 3.04 times. Recall that the SNF coverage is largely driven by NHC, which is calculated using a fixed charge coverage at the corporate level as opposed to a facility level EBITDARM.
Lastly, in shop, the momentum we saw throughout the year continued through the fourth-quarter. NOI increased 12.5% year over year to $3.2 million. Resident fees increased by 8.1% year over year, driven by occupancy improvement of 620 basis points to 89.4%. The margin improved 90 basis points to 23.2%, which was the strongest result since the second quarter of 2022.
With the portfolio occupancy approaching 90%, we are starting to strategically target REVPOR growth as the primary driver to margin expansion. For the quarter, REVPOR increased 60 basis points. While small, this was actually the largest REVPOR increase since we started operating the shop platform. We see plenty of runway for organic upside and shop and target NOI growth of 12% to 15% this year.
And with the expectations for several 100 basis points of margin improvement over the long term, we expect elevated NOI growth for the foreseeable future. The portfolio is expected to show normal seasonal patterns with occupancy and NOI dipping in the first quarter and improving throughout the year.
I'll now turn the call over to John to discuss our financial results and guidance. John?

John Spaid

Thank you, Kevin, and hello, everyone.
For the year ended December 31, 2024, our net income per diluted common share was $3.13, unchanged from the prior year. Our NAREIT FFO results per diluted common share for the year and quarter ended December 31, 2024, compared to the prior year periods increased 3.6% and 13.8% to $4.55 and $1.24, respectively. In the fourth quarter, we recognized the non-cash non-operating gain of $6.3 million related to our forward ATM equity activity that is reflected in net income and NAREIT FFO. I'll talk more about this item in a moment.
Our normalized FFO results per diluted common share for the year and quarter ended December 31, increased 2.5% and 2.8% to $4.44 and $1.12, respectively as compared to the prior year periods. FAD for the year and for the quarter end of December 31 compared to the prior year periods increased 8.7% and 10% to $204.2 million and $52.1 million, respectively.
Sequentially compared to the third quarter, cash rent for the fourth quarter increased $2.6 million largely attributable to $2.3 million in new rent associated with the Spring Arbor portfolio acquisition, but also due to higher sequential deferred rent collections. Those increases were partially offset by other changes, including $300,000 in lower cash rents attributable to the SLM default.
NOI from our shop portfolio for the year and quarter ended December 31, increased 32% and 12.5% to $12.2 million and $3.2 million respectively, compared to the prior year periods. Loan and realty losses for the year increased $3.9 million compared to the prior year. The increase was primarily due to the increased reserves on the mortgage and loans related to the SLM default.
During the fourth quarter, we disposed the two properties that were previously classified in assets held for sale and recognized $5 million in gains on sales of real estate. The company ended the year with no properties classified as held for sale.
For the year, we made investments of approximately $237.5 million and an average initial yield of 8.6%. Our financing activities included forward overnight and equity transactions totaling approximately $272 million in gross proceeds on 3.7 million common shares at a price of $72.54 before fees. We also retired $75 million in senior notes utilizing proceeds from our revolver. We additionally recast our $700-million revolver, extending the facility's maturity date into 2028.
As we previously mentioned in our third quarter earnings call, after closing the Spring Arbor investment, we delivered 1.8 million shares under our August forward overnight equity offering for approximately $122.4 million in proceeds.
As we previously mentioned, our investment activity continues to be very active. Subsequent to the Spring Harbor closing through January of this year, we closed an additional $53 million in investments and an average yield of 9%. As a result of our investment pipeline during the fourth quarter, we activated our ATM and sold on a forward basis 989,000 common shares and an average price before fees of $76.14 per share.
As we closed the additional investment activity just mentioned, at the end of the year, we settled 266,000 common shares of the ATM forward equity at an adjusted forward price of $75.22 per share after fees for proceeds of approximately $20 million.
Including the remaining escrowed, August overnight equity forward proceeds at the end of the year, we had total escrowed forward equity proceeds are approximately $118.7 million available to us in exchange for the future delivery of $1.68 million of common shares and an average price of $70.53 per share.
I mentioned in my summary of offering results, the $6.3 million gain on forward equity sale agreement recognized in the fourth quarter associated with our ATM equity activity. This gain was recognized because our forward equity arrangement was deemed not to satisfy all the accounting requirements for equity classification during the time we were raising equity during the quarter. The accounting treatment moves some of the equity from paid in capital to retained earnings via the income statement, so it's more presentation and substance and should be viewed through that lens.
Our balance sheet ended the fourth quarter and year in great shape. Our net debt to adjusted EBITDA ratio is 4.1 times for the fourth quarter, well within our stated 4 to 5 times leveraged policy. We ended the year with approximately $425 million in available ATM capacity, and as I mentioned, we continue to have approximately $119 million in remaining equity forward proceeds available to us. At the end of January, we had $327 million of availability on our revolver.
For 2025, we're focused on the company's liquidity needs as we continue to make investments and plan for the retirement of our maturing debt. We intend to exercise our right to extend our $200 million term loans maturity date into 2026, and we will retire our other maturing 2025 debt totaling $125.8 million. We are monitoring long-term bond rates and continue to expect to tap the public bond market in 2025 to further improve our liquidity.
Let me now turn to our dividend and guidance. As we announced last night, our Board of Directors declared a $0.90 per share dividend for shareholders a record March 31, 2025, and payable on May 2, 2025. Last night, we also issued our full-year 2025 guidance. Our guidance for NAREIT FFO and normalized FFO per diluted common share at the midpoints is $4.63 or 1.8% and 4.3% increases respectively over 2024.
Our guidance for FAD at the midpoint is $221.7 million or an 8.6% increase over 2024. Our guidance this year includes the impacts from escrowed forward equity proceeds during the year. So because our confidence in our pipeline has led us to raise significant forward equity, today we are including in guidance our view on our future 2025 unidentified investment activity. Our 2025 guidance includes $225 million in new investments and an average yield of 8.1%. The timing for the investments is generally assumed incredibly over the year.
In the future, we may discontinue giving guidance for unidentified investments should we discontinue obtaining equity on a forward basis. Our guidance includes shop NOI growth in the range of 12% to 15% over 2024. Our guidance includes the continued collection of deferred rents and the fulfillment of our existing commitments. It also includes our preliminary assumptions for the annual NHC percentage revenue rent increase and the Discovery PropCo May 1, 2025, rent step up. We expect NOI from the Discovery base rent will increase this year, but we do not believe the portfolio will be able to meet the 5% target yield set under the lease. The anticipated Discovery lease modification will likely result in change in the portfolio's GAAP revenues.
Finally, guidance continues to include assumptions for additional costs and concessions related to normal asset management transitions, dispositions, and loan repayments.
So once again, thank you all for joining our call today. That concludes our prepared remarks. So with that operator, please open the lines for questions.

Question and Answer Session

Operator

(Operator Instructions)
Rich Anderson, Wedbush.

Richard Anderson

So on the _____ SLM, if you could just triangulate that for me, John, how much rent and interest income did you generate in 2024 and how much are you expected to generate in 2025 inside the framework of your guidance?

John Spaid

So we're talking about rent and interest or just rent (multiple speakers)--

Richard Anderson

The whole -- rent and interest.

John Spaid

So rent and interest including our mezzanine loan would be probably closer to 55% 2025 versus 2024, on a say full year -- full quarter over full quarter basis when we get to the end of the year.

Richard Anderson

Okay, so run rate by the fourth quarter.

John Spaid

Yeah, but the mezzanine loan and Kevin can talk more about this is still in a state of flux that can improve materially.

Richard Anderson

Well before Kevins joins in, what about on just rent? Would it be (multiple speakers)--

John Spaid

Yeah, so (multiple speakers) about 70% of rent, right, I was trying to get to that.

Richard Anderson

Okay, can you guys comment on the mezz piece? I know it's a TBD at the moment, but any more color there, $14.5 million?

Kevin Pascoe

This is Kevin, as you said, it's TBD, but we're looking at several alternatives. We know that the company SLM is going through a sale process. We're negotiating with them on what a recovery would look like assuming that they execute the sale, financing right now is still not terribly easy to come by, particularly on distressed properties, but there are a few in there that are producing NOI, so we expect to -- my expectation is that we have some element of a recovery. We're still in terms of dollar size, don't know. We're looking at alternatives in terms of, what can we do? Is there a buy opportunity or for us to step in and help a prospective buyer if it's somebody that we want to work with. So we've got a lot of options on the table, so it's still to be continued.

Richard Anderson

(multiple speakers)

John Spaid

I got one more comment if I can make on this. It's a little bit of an apples and oranges equation to. If you think about it, what we're trying to do is collect our principal on the mezzanine loan. And then of course we will redeploy it, but if we can collect that principle, depending on how much we collect, we could recoup some of our credit loss reserve, and then redeploy the proceeds. At the very least, it would go to pay down right now our 5.5% cost revolver.

Richard Anderson

Okay, second question, you're not talking about Land & Buildings, so I understand that, but on NHC that expires in 2026. I know it's not too soon to be talking about that. It's over 3 times on a corporate level, I guess at the property level, it's got a two handle on it. You may not comment on that. Maybe you will, but what's the market in your mind for those assets in their markets in terms of what would be appropriate market coverage should you get a fair deal out of that lease expiration.

D. Eric Mendelsohn

Rich, this is Eric.
The market is very robust for these buildings. They're in good markets. A market coverage in my opinion would be [1.3, 1.4], and with a new operator you'd have to account for transition trauma and NHC under the lease and this is all publicly in their -- publicly listed lease. NHC does have the right to retain personal property, so you'd have some CapEx or FF&E costs on a transition, but there's room to maneuver there and we're having active discussions now with NHC and other interested parties.

Operator

Juan Sanabria, BMO Capital Markets.

Juan Sanabria

Just with regards to shop, hoping you could talk about the piece parts to guidance with regards to assumptions behind occupancy and rate behind the 12% to 15%, and then maybe as part of that if you could expound upon the comments made by Eric at the top of the call about considering some transitions that sounded like of existing operators from triple net to shop.

Kevin Pascoe

Hey Juan, this is Kevin.
In terms of how we're looking at performance for shop over the year, we had good momentum throughout 2024. I feel like we ended the year on a high note. As we also talked about in our prepared remarks, we have some seasonality in the first quarter, and then we're looking back at getting momentum on occupancy throughout the balance of the year and being able to push REVPOR over that period. So when we take in those pieces, we think that we can continue to grow it again the 12% to 15% that we mentioned on a year-over-year basis.
There might be some opportunity, there we're evaluating some more operational structures and how there might be some cost savings here and there. Overall though, it is going to be more of a revenue play and a lot of it is just reducing the incentives and as they continue to burn off, we'll see the REVPOR climb a little bit higher. We talked about it going up a bit quarter over quarter. We'll be looking to see that continue to improve throughout the year.
So I think we've pushed our operating partners to be able to -- continue to deliver better performance. We're still continuing to put CapEx into these buildings, which the delivery of that will also help as we look at REVPOR and performance. We've got some more work to do on that. I mean, I think that's just how we were building the forecast for the year and thinking about where we can go with this portfolio.

Juan Sanabria

Great. And then I was just hoping you could comment on Bickford. It looks like the second half of the year from the late summer. I saw a deterioration in the occupancy from the same store pool that you disclosed in the press release just what's driving that any pause or thoughts or concerns around that loss of momentum?

Kevin Pascoe

I think there's a little -- there's a couple of things in there. One, they pulled forward their rate increases, so you had a little bit of move out just from a price point standpoint. On the whole though, it's still a net positive for Bickford from NOI look at the portfolio, and then you have some seasonality as well that I think started creeping in there in some of the winter months.
So I think they can still be successful throughout the year. They are known for delivering higher acuity care. It's going to be at a higher price point, so some of the people that moved in that were maybe on the edge in terms of affordability decided to move out, but they've done a really nice job or continued to do a really nice job of selling the care that they deliver, but I think that's part of the occupancy piece that you're seeing there.

Operator

Omotayo Okusanya, Deutsche Bank.

Omotayo Okusanya

Kevin, hoping you can help me understand the acquisition guidance a little bit better. It's $225 million built in, but it sounds like you have $150 million-plus or so already otherwise and a pipeline of $190 million. So could you just help us reconcile a little bit that $340 million versus guidance of $225 million, especially when you still have another 10 months to go in the year.

John Spaid

Sure, this is John, Tayo. How are you doing? Let me take that one.
Yeah, so in our guidance is our expectation to close a number of those properties in the LOI, but they're under LOI, so they're not definitive agreements just yet. So we have a high degree of confidence that we're going to be able to hit the number in our guidance. Our guidance is a combination of sale lease backs as well as additional mortgage loans. That's how we got to the weighted average yield. We expect to under promise and over deliver on that number and you're right, we have quite a bit more in our pipeline than in our guidance. So there's some upside there clearly.

Omotayo Okusanya

Okay, that's helpful.
And then second question also on deferred rent collection. I think it helped us through that as well, the balance is $21 million or so. You collected about $11 million in 2024. Just help us understand what's big into 2025 and if there's any potential upside there as well.

John Spaid

Yes, there is an upside. Recall though that some of the equations on that $21 million include some deferral credits that if the operators perform or exceed performance, they might get some credits, but generally our guidance is still in line with what you saw in the fourth quarter for the collection of deferrals and are primarily Bickford. Let me back up a minute. Actually, there are approximately $1 million -- a little over $1 million a quarter -- the fourth-quarter was a little ahead of what we forecasted.

Omotayo Okusanya

So you have about $4 million baked in for '25 relative to the $11 million from 2024.

John Spaid

That's right.

Omotayo Okusanya

And the reason for the big slowdown is--

John Spaid

Well, it depends on the source of the deferrals, right? And there was quite a few extraordinary collections in 2024 that looks very difficult to repeat in 2025. For example, Chancellor paid the $2.5 million number. There were some others, including some from Discovery, that we don't think that are going to be repeatable in 2025, so that's just our guidance right now.

Omotayo Okusanya

Got it, that's helpful.
Then one more for the road, Discovery, how ultimately do you expect that to play out if you just help us go through different scenarios for that just giving some of the earlier comments about the profitability of not quite getting to where you need to get the work that you were expecting.

D. Eric Mendelsohn

Tayo, this is Eric.
Is your question regarding the future of the collectability of deferral payments?

Omotayo Okusanya

It's a combination of both things. It's the future of the deferrals and also, if you couldn't get the or you're not going to get the direct reset you were expecting at the reset date, I think there was some conversation of you are expecting to step up in rent anyway, but longer term this idea of where you're going to -- they're going to continue to be an operator. Do you potentially see you guys transitioning to someone else, what would that look like? Just trying to think about the ultimate scenarios for that portfolio.

D. Eric Mendelsohn

Right, okay, so your question is deferrals and then rent resets and then operators who aren't able to make the rent reset hurdles (multiple speakers) --

Omotayo Okusanya

--at that point.

D. Eric Mendelsohn

Yeah, so at that we would investigate either retenanting the building, sometimes it's one building and a group of buildings, that's the problem. Maybe you sell that one building or retenant that one building. And as we said in our prepared remarks, we're also doing an analysis to see if converting it to shop or RIDEA would result in greater NOI, so everything's on the table in that instance.

Operator

Austin Wurschmidt, KeyBanc Capital Markets.

Austin Wurschmidt

Eric, commentary continues to be very positive around investments, but I guess when you break out the investment pipeline from the $350 million last quarter and then what's under LOI in that future pipeline, it's really unchanged. So just curious what your confidence level is that you can continue to backfill that pipeline and what the right size that we should be thinking about on a future pipeline basis where the right level is?

Kevin Pascoe

Hey Austin, this is Kevin.
I would tell you that when we're looking at the $350 million that you quoted, you're right, it's a similar size, but it's a different opportunity set. We continue to look at a bunch of different opportunities. I can tell you that if we look at the total funnel, it's a couple billion dollars in terms of what we're looking at any given time, which again continues to churn week over week and month over month.
So I feel pretty good about the opportunities that we're seeing in front of us. It's really just whittling it down to the ones that we think are executable and then moving on from those that are not. So it may look like a stagnant number, but I can tell you with certainty that it's a pretty new opportunities set each week to month, and we just whittle it down (technical difficulty) to the ones that we think are actionable. So as the market sits today, I feel pretty good about our outlook.

Austin Wurschmidt

That's helpful comments.
And then with respect to the larger portfolio opportunities outside of that pipeline, I mean, would you care to size up, I guess, the number of opportunities or investment volume that that includes and what your confidence level is that maybe you're able to close one or more of those opportunities?

Kevin Pascoe

Well, I don't know that I can say anything different than other than what we talked about in the prepared remarks, which is our portfolio deals are not or shop deals are not included in what we talk about from our investment pipeline as I just mentioned, we're looking at a couple of billion dollars' worth of stuff at any given time. So I feel good about the opportunity for us to be able to get down the path on some of those, but we're not at a place where we want to give you guidance based on something that would be a pretty meaningful change to the company, so we're holding back on that.

John Spaid

Hey Austin, this is John.
Let me add another two cents to that. In the fourth-quarter and a little bit recently, there's been a lot of movement in everybody's cost of capital, and we're very sensitive to deploying capital that's accretive. So if you think about it, we're always looking at the opportunities set and in the long-term interest rates in our stock price. And so despite some of the increased cost of capital that we've seen here recently, that opportunity set is still penciling out well on a creative basis.

Austin Wurschmidt

That's all helpful. And then just the last one for me this I think got asked maybe looked over a little bit from an earlier question, but the presentation last (inaudible) did highlight potential shop conversion opportunities, and I'm just wondering if you could size up, how big that could be from a gross investment or in place NOI perspective and whether or not the Discovery triple net assets are a consideration for conversion with a new operator.

D. Eric Mendelsohn

Hey Austin, this is Eric.
Yes, the Discovery portfolio is definitely a possibility, and so are others. We have other operators that are currently running RIDEA portfolios for other REITs, have a strong back office, which is one of the criteria we're looking at and would be a good partner for us to start our RIDEA journey.

Operator

John Kilichowski, Wells Fargo.

John Kilichowski

Maybe just going back to that last question talk about sizing the opportunity. How about the earnings impact of any shop transitions here? I know that there's probably some elevated CapEx and some transition time associated with those, so I'm not sure if there's maybe upside the '25 guide or if this will likely roll through to '26.

John Spaid

Hey John, this is John Spaid.
Yeah, we're very sensitive to that as a matter of fact, and it ultimately comes down to earnings growth, NOI growth, transition trauma, and like you said, CapEx requirements. So the opportunity sets vary depending upon the current coverage ratios over the current rent. So obviously, if we convert something that's well covered. Suddenly all that EBITDAR, if there's no transition trauma, could be very accretive. But there's -- whenever there's a transition to a new operator, there's going to be some trauma. So we'll have to work through that and communicate that properly to you. And then of course, we'll also communicate to you what our expectations are for the CapEx requirements as well. So every opportunity sets a little different.

John Kilichowski

Okay and then how about when might you all start including shop acquisitions in your pipeline guide and then maybe help us understand what the total opportunities set, what is the end of '25 look like in terms of total shop exposure in your portfolio?

D. Eric Mendelsohn

This is Eric.
I could see it being 5% to 10% of our portfolio by the end of this year or early next year.

Operator

Farrell Granath, Bank of America.

Farrell Granath

I was curious just in terms of your acquisition pipeline, are you looking to at all expand your skilled nursing portfolio?

Kevin Pascoe

Hey there, this is Kevin.
We're absolutely looking. It's just a matter of getting an opportunity at the right price with the right operator. We have very good skilled nursing operators now. We would love to do more with them. That said, the market's been pretty frothy, we think from a pricing perspective, and we've been pretty rigorous around our underwriting criteria in terms of our expectations of credit and coverage. So we haven't seen anything lately that we were ready to act on, but we continue to look -- we would love to see that percentage of investment in our portfolio tick up a little bit if we could get something of reasonable size to add, but right now, again, it's just -- we haven't seen those opportunities, but we would absolutely take a look.

Farrell Granath

Great, and I was hoping to get a few comments just with current news, the house passing their budget through a vote, and then with the senate having their own budget outlined with possible cuts to Medicaid, any thoughts on how maybe that would impact your business or going forward in your negotiations?

Kevin Pascoe

Sure, this is Kevin again.
It's something we're watching, but it's, I think too soon to tell. It seems to be teed up that it may affect those programs. That said, from what I've seen so far, it's not explicitly outlined in the bill, so we'll be working with our operators to make sure we understand and our other resources that have closer intel to what's going on in Washington. Anecdotally though, what we've heard from our other resources is that it has not cooled the market in terms of skilled nursing and buyers' interest or pricing. So we'll see where that goes, but to date, it still remains a pretty robust market.

Farrell Granath

(inaudible) one more from me about within your guidance, do you have any bad debt or credit loss assumptions baked in?

John Spaid

We do, and you got to keep in mind we the last say two years you're in 2022 to 2024, our mortgage and loan receivables have grown right at 8%, and as that grows, there's always going to be a certain level of credit loss reserve taken against that growth. And so our guidance continues to assume growth, which includes growth in mortgage and loans.

Farrell Granath

And sorry, is there a base point associated with that?

John Spaid

Oh, sorry, I don't have that for you. There is in there, but there's a little bit of squishiness to that number depending on what we're talking about mezzanine loans or mortgage loans. So it's basically an average number. I think what you should do is just use -- 2024 was an unusual year because of the SLM reserves, but if you were to go back a couple of years and look at the, average CECL reserve on our mortgage and loan portfolio then and then make an assumption of what our growth might look like, you get a pretty good number.

Operator

(Operator Instructions)
Juan Sanabria, BMO Capital Markets.

Juan Sanabria

Hi, thanks for the follow-up time.
Just going back to shop and incremental investments, I think John, you made an allusion to that be a transformative potential transaction. So does that mean that you're like -- you're looking at potentially buying a platform, so to speak, where you'd have a bigger like asset management capability as part of that to oversee a shop investment? I'm just trying to tease out what you implied by that.

John Spaid

I don't think I made that implication. One thing I would point out in Kevin's remarks and Eric's remarks too is we are looking at some fairly large portfolio transactions that are not included in our pipeline numbers. Those are so difficult, they're so material, they're so difficult to really determine whether or not they're real yet that, it's hard for us to talk about those. But no, in my guidance was not really any transformative shop (multiple speakers)--

Juan Sanabria

I wasn't necessarily talking about what's in guidance, but just what's being contemplated strategically for the business is like, is it a platform or is it more assets that are under a shop structure I guess is the question.

D. Eric Mendelsohn

Hey Juan, this is Eric.
I would say that it's more smaller portfolios, maybe 3s or 4s. We definitely would add to our asset management talent pool. We're almost at that point now anyway, just the pace of acquisitions we've been doing last year and this year. So we'll make appropriate overhead and headcount adjustments along the way. And you know our usual cadence before the pandemic was $20 million to $400 million a year. That's a lot of 2s and 3s and 4 portfolio deals. That's our sweet spot.

Juan Sanabria

Right, and then just as a follow-up to a prior question about any potential delusion from triple net to shop conversions. I guess, are those contemplated conversions being done out of a position of strength or weakness meeting is are the conversations or strategies around leases without great coverage. I just -- I'm confused why a tenant under a lease would choose to give up that upside if they're quote-unquote, in the money with the rent coverage that they have.

D. Eric Mendelsohn

That's a fair question, Juan. You're absolutely right.
If there is coverage on a lease and we wanted to convert it to shop, there would definitely have to be a conversation about profit sharing and promotes or bonuses and management fee. The reason though that people would be interested in having that conversation is they probably have personal guarantees or other strong credit in place that is meaningful to them and converting to shop would mean less of that, so.
And whether or not it's from a position of strength or weakness, you're right about that as well. I mean, it's a conversation that we would have in both instances if a lease isn't working out or the coverage is just above break even, then we need to have a conversation about changing operators, what the CapEx looks like, what a new joint venture partner might do for us, and whether the operations can improve based on all of that.

Juan Sanabria

Okay, thank you for that.
And just one last quick one for me. The guidance has like a shop CapEx number. Is there anything over and above that deferred CapEx or redevelopment type CapEx that has been spent or is intended to be spent to help the pricing power of the asset?

John Spaid

There is. The number that's in our guidance is a recurring CapEx number. The number that we're continue to deploy in our current shop portfolio is closer to $10 million and we're repositioning those assets to get at that NOI improvement.

Operator

Thank you. That concludes our Q&A session. I'll now hand the conference back to Chief Executive Officer, Eric Mendelsohn, for closing remarks. Please go ahead.

D. Eric Mendelsohn

Thanks everyone for your time and attention today, and we'll look forward to seeing you at NIC or other investor conferences.

Operator

Thank you. Everyone, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.