Activist investor Land & Buildings cautioned National Healthcare Corp. Tuesday to “tread carefully” when re-negotiating its contract with real estate investment trust National Health Investors when its lease expires at the end of next year.

The master lease between NHC and NHI originally was signed in 1991 and includes 28 skilled nursing facilities, five assisted living communities and three independent living communities operated by NHC, according to L&B..

Calling the lease “egregiously one-sided,” L&B highlighted what it sees as three potential negative scenarios relative to the renegotiation. L&B holds a 1.3% stake in the Murfreesboro, TN-based REIT.

The activist investor said that if NHC and NHI renegotiate the lease at fair market rents “well before” the end of the lease in December 2026, then the new lease is estimated to be 64% higher than the 2024 full-year rent amount. Additionally, according to the investor, the new lease could reduce NHC’s earnings before interest, taxes, depreciation and amortization by 19% and increase NHI’s annual funds from operations per share by 12%.

Second, L&B said, if NHC does not reach an agreement with NHI by the end of 2026, then the new monthly holdover rent for NHC would be 150% of the current rent “and NHC would risk losing all the properties and associated EBITDA at any moment should NHI lease the portfolio to another operator.”

Lastly, Land & Buildings said, if NHI decides to lease the properties to a third party, then NHC would lose as much as $50 million in annual EBITDA and NHI could see even more upside to earnings.

“This cozy relationship between NHC and NHI was orchestrated by brothers Andrew Adams and Robert Adams at the expense of NHI shareholders,” L&B said. “The Adams brothers each ran one of the companies while sitting on each other’s boards and populated the boards primarily with local Murfreesboro, TN, loyalists. However, we believe the days of NHC taking advantage of NHI are numbered.”

L&B spent a portion of this year embroiled in a proxy fight to replace board members Robert Adams and James Jobe with James Hoffmann and A. Adam Troso, maintaining that the REIT’s board is too closely tied to one of its NHC. Ultimately, the activist investor fell short of the necessary votes and the REIT-nominated candidates won the election.

In addition to NHC, NHI’s portfolio as of the first quarter included communities managed by Bickford Senior Living, Discovery Senior Living, Encore Senior Living, The Ensign Group, Health Services Management, Life Care Services, the PACS Group, Senior Living Communities and Spring Arbor Senior Living.

NHI had not responded to a request for comment by the production deadline.