National Healthcare Properties, Inc.NHP
National Healthcare Properties, Inc. Fair Value Disclosure
Fair Value of Financial Instruments
Financial Instruments Measured at Fair Value on a Recurring Basis
Derivative Instruments
Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with those derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by the Company and its counterparties. However, as of December 31, 2025 and 2024, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of the Company’s derivatives. As a result, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy.
The valuation of derivative instruments is determined using a discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, as well as observable market-based inputs, including interest rate curves and implied volatilities. In addition, credit valuation adjustments are incorporated into the fair values to account for the Company’s potential nonperformance risk and the performance risk of the counterparties.
The following table presents information about the Company’s financial instruments measured at fair value as of December 31, 2025 and 2024, aggregated by the level in the fair value hierarchy within which those instruments fall.
| (In thousands) | Quoted Prices in Active Markets Level 1 | Significant Other Observable Inputs Level 2 | Significant Unobservable Inputs Level 3 | Total | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
| Derivative assets, at fair value (non-designated) | $ | — | $ | 569 | $ | — | $ | 569 | ||||||||||||||||||
| Derivative liabilities, at fair value | — | (188) | — | (188) | ||||||||||||||||||||||
| Total | $ | — | $ | 381 | $ | — | $ | 381 | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
| Derivative assets, at fair value (non-designated) | $ | — | $ | 2,554 | $ | — | $ | 2,554 | ||||||||||||||||||
| Derivative assets, at fair value (designated) | 16,652 | 16,652 | ||||||||||||||||||||||||
| Total | $ | — | $ | 19,206 | $ | — | $ | 19,206 | ||||||||||||||||||
There has been no transfer into or out of Level 3 financial instruments during the periods presented.
Real Estate Investments Measured at Fair Value on a Non-Recurring Basis
Real Estate Investments Held for Use
Real estate impairment charges recorded due to the Company’s evaluation of recoverability when events or changes in circumstances indicate the carrying amount may not be recoverable are based on (i) estimated sales prices from signed contracts or letters of intent from third-party offers or (ii) the income approach using discounted cash flow models of the property over its anticipated hold period, both of which generally reside within Level 3 of the fair value hierarchy, and unobservable data such as net operating income and estimated capitalization and discount rates, and giving consideration to local and national industry market data including comparable sales.
The following table presents quantitative information about significant unobservable inputs used to determine the fair value of our real estate assets impaired as of December 31, 2025:
Description | Valuation Technique | Unobservable Inputs | Range | |||||||||||||||||
Impairment of real estate assets | Discounted cash flow | Discount rate | 10.25%-10.50% | |||||||||||||||||
Terminal capitalization rate | 8.00%-8.25% | |||||||||||||||||||
Real Estate Investments Held for Sale
Real estate recorded as held for sale and any associated real estate impairment recorded due to the shortening of the expected hold period due to the Company’s change in intent to hold the asset are measured at fair value on a nonrecurring basis. The Company estimates the fair value of assets held for sale and any associated impairment charges based primarily on sales price expectations, which reside within Level 2 of the fair value hierarchy. The Company did not have any real estate investments classified as held for sale as of December 31, 2025 and 2024.
Financial Instruments Not Measured at Fair Value
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair values of short-term financial instruments such as cash and cash equivalents, restricted cash, straight-line rent receivable, net, prepaid expenses and other assets, deferred costs, net, accounts payable and accrued expenses, deferred rent and distributions payable approximate their carrying value on the consolidated balance sheets due to their short-term nature.
The fair values of the Company’s remaining financial instruments that are not reported at fair value on the consolidated balance sheets are as follows (dollars in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||||||||||||||
| Level | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||||||||||
Gross mortgage notes payable and mortgage premium and discounts | 3 | $ | 374,382 | $ | 362,947 | $ | 788,464 | $ | 747,542 | |||||||||||||||||||||||
Fannie Mae and other secured debt | 3 | 334,739 | 335,158 | 362,216 | 362,974 | |||||||||||||||||||||||||||
Unsecured term loan | 3 | 150,000 | 148,496 | — | — | |||||||||||||||||||||||||||
Unsecured revolving credit facility | 3 | 186,000 | 184,135 | — | — | |||||||||||||||||||||||||||
Total debt | 3 | $ | 1,045,121 | $ | 1,030,736 | $ | 1,150,680 | $ | 1,110,516 | |||||||||||||||||||||||
The fair value of the the Company’s indebtedness above is estimated using a discounted cash flow analysis, based on the Company’s experience with similar types of borrowing arrangements, excluding the value of derivatives.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 17, 2023 | |
| 2021 | Mar 18, 2022 | |
| 2020 | Mar 30, 2021 | |
| 2019 | Mar 24, 2020 | |
| 2018 | Mar 14, 2019 | |
| 2017 | Mar 20, 2018 | |
| 2016 | Mar 21, 2017 | |
| 2015 | Mar 11, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.