National Health Investors’ third-quarter results exceeded its expectations, due to strong rent collections, record repayment of rent deferrals and no unexpected rent concessions for operators, according to President and CEO Eric Mendelsohn.
Operating metrics continue to trend higher, bolstering confidence in organic growth opportunities, he said.
Overall, operators repaid $2.3 million in rent deferrals in the quarter, and the company received $1 million in discrete payments from two cash-basis accounting tenants. Net operating margins in the Murfreesboro, TN-based real estate investment trust’s senior housing operating platform, or SHOP, also expanded, due to quarterly occupancy growth of 350 basis points from the second quarter.
“We’ve made great strides to enhance the quality of our portfolio while maintaining our strong financial discipline,” Mendelsohn said. “As industry fundamentals continue to become more favorable, NHI is in a great position to participate in what we expect to be many years of future exceptional growth.”
Bickford shows improvement
Driving third-quarter performance was Bickford Senior Living’s average occupancy gains through the quarter, including 85.2% in September, a 400 basis-point-gain from April and the highest since the start of the pandemic. Bickford also repaid more than $750,000 in previously deferred rent and expects to repay a similar or higher amount in the fourth quarter.
Chief Investment Officer Kevin Pascoe said that Bickford’s occupancy trends are “excellent,” with third-quarter average occupancy up 220 basis points to 84.2%.
Mendelsohn said that Bickford’s improvements, along with the SHOP segment’s performance, have “made me a believer that there is pent-up demand.”
Bickord has repaid $1.5 million through the third quarter. NHI has granted deferrals of $38.1 million, including $20.5 million to Bickford and $17.6 million to other operators, since 2021.
SHOP performance promising
The real estate investment trust’s SHOP segment “continues to bear fruit.”
Pascoe said that the portfolio sustained operating and financial improvements with Discovery Senior Living and Merrill Gardens, with monthly occupancy building momentum since February.
SHOP average third-quarter occupancy increased 350 basis points to 79%, ending on a strong note in September with occupancy increasing to 81.2%, an increase of more than 600 basis points from a February low, and the highest reported month since November 2021. Pascoe said the segment is setting up for a positive fourth quarter, as preliminary results indicate further gains in October occupancy to 82.2%.
“SHOP had its fair share of challenges and is not generating the performance expected up to this point,” Mendelsohn said. “That said, we are starting to see more consistency with the third straight quarter of operating and financial gains.“
Mendelsohn said that SHOP is an important vehicle for organic growth and serves as a platform for external opportunities. To that end, he said, the company is committed to dedicating the resources necessary to make those communities “best in class.”
Operator challenges persist
NHI said that it is amending its lease with Discovery on eight properties and continues to work closely with other operators. Pascoe said NHI is in negotiations with Discovery affiliates, providing temporary rent reductions for two properties, resulting in a 10% to 12% reduction in 2024-based rent.
The company completed the sale of three properties last week, with one remaining for sale. The properties were underperforming, Pascoe said. NHI is targeting limited additional property sales.
“With industry trends steadily improving, we are seeing fewer tenant issues, allowing our team to shift more resources to the few remaining challenges,” he said.
