Occupancy and revenue growth in its senior housing operating portfolio, or SHOP, contributed to a fourth straight quarter of outperformance for National Health Investors, President and CEO Eric Mendelsohn said Wednesday. The second quarter exceeded expectations, he said.
Other performance drivers for the Murfreesboro, TN-based REIT, Mendelsohn said during a second-quarter earnings call, were stable cash collections, steady deferral repayments, improved operator fundamentals, and no unexpected rent concessions.
Investment activity ramping up
Mendelsohn said he was “very excited” about the company’s recent investment activity and its growing pipeline. Year to date, he said, the company has closed on $56.6 million of investments and has sourced investment opportunities totaling more than $1.8 billion.
In addition, the REIT has signed letters of intent on investment opportunities totaling $155.4 million, which primarily are senior living and are expected to close this year, and is evaluating a pipeline of $270 million, according to Chief Investment Officer Kevin Pascoe.
“We’ve patiently spent multiple years positioning our company to return to the level of acquisition growth we experienced prior to the pandemic,” Mendelsohn said. “With ample dry powder, an improved cost of capital and more realistic seller expectations, we expect that external investment activity will be a significant driver of cash flow growth in the foreseeable future.”
In June, NHI acquired a 110-unit assisted living community in Wisconsin from Encore Senior Living for $32.1 million. NHI added the community to an existing master lease with Encore. Also in June, NHI funded $95.5 million on a mortgage note receivable secured by two properties with Compass Senior Living.
SHOP continues to perform
In NHI’s SHOP, net operating income increased by 39.9% year over year. Mendelsohn said that he is encouraged that occupancy continues to increase and that he remains confident in a higher growth rate for this year and the longer term upside.
Resident fees increased 13.5% year over year and contributed to 420 basis points of margin, the REIT reported. SHOP occupancy improved by 170 basis points for the quarter, ending at 87.7% in June, and July occupancy ticked up to 88.2%. Pascoe said that as occupancy climbs closer to 90%, move-in discounts will be reduced.
Rental income increased $4.8 million (7.9%), primarily from an increase in pandemic-related rent deferral repayments of $4 million, including a $3.5 million lump sum payment from an operator.
Net operating income from the SHOP portfolio was $3 million, $800,000 higher than the same period in 2023, primarily due to increased revenues from higher occupancy in the company’s SHOP.
“Our growth profile is multifaceted — both internally and externally — and is supported by an increasingly bullish demographic environment characterized by a favorable supply-demand dynamic,” Mendelsohn said. “We believe we positioned the company to succeed through all stages of the business cycle and are therefore generally agnostic to the short-term ripples in the economy.”
He added that he is excited about the future as he has ever been and is convinced that the company is “in the early days of exceptional growth for several years to come.”
Bickford continues to improve
Bickford Senior Living occupancy declined by 50 basis points from the first quarter, Pascoe said. Early second-quarter occupancy declines flattened out and started to turn positive, and the third quarter is off to a good start for the operator, as occupancy increased 60 basis points from June, to 85.8%, he added.
Pascoe said the REIT estimates $1 million in quarterly repayments from Bickford for the second half of the year. Including Bickford, the company has $24.3 million in net deferrals that it expects to realize in repayments and other transactions this year.
As previously announced, effective April 1, the combined rent for the Bickford portfolio was reset to $34.5 million annually, with nominal increases through April 1, 2026. As part of the lease amendments, NHI agreed to fund up to $8 million of capital improvements on various properties.
