Eric Mendelsohn hedshot
NHI President and CEO Eric Mendelsohn

Weakened rent collection in the fourth quarter has led some analysts to express concerns about how quickly National Health Investors will be able to recover from the COVID-19 pandemic. Yet executives at the firm are defending the real estate investment trust’s resilience amid a challenging year, and they confirm its commitment to the industry and confidence in the growth potential of the senior housing sector.

In its fourth-quarter and year-end earnings report Monday, the Murfreesboro, TN-based REIT reported net income attributable to common shareholders of 83 cents per share. That’s a decrease of 12.6% compared with the same period a year ago. As a result of $21.3 million in gains related to the sale of real estate, however, the firm reported net income attributable to common shareholders of $4.14 per share for 2020, an increase of 12.8% compared with 2019.

“Despite the unprecedented challenges created by the COVID-19 pandemic, NHI performed well in 2020,” Eric Mendelsohn, NHI’s president and CEO, said during the firm’s earnings call Tuesday. “We increased AFFO per share by 3.7%, increased the dividend per share by 5% and maintained our fiscal discipline with leverage below 5.0x net debt-to-EBITDA and an AFFO payout ratio below 85%. We were also able to capitalize on the resilient capital markets to bolster our balance sheet through our ATM and, more recently, through the issuance of our first public bond offering in January at a very favorable rate. We are also pleased to note that we deployed $226.9 million in real estate and note investments during 2020 and our pipeline for 2021 looks promising.” 

Mendelsohn noted, however, that the REIT expects 2021 to be a difficult year given the expectation of further occupancy losses within the portfolio. Rent collection rates weakened in the fourth quarter, with NHI collecting approximately 93.9% of contractual rents due. This, however, improved after year-end to approximately 99.4% in February and 97.3% quarter-to-date. The firm declined to provide guidance for 2021. 

“That may change if clarity improves,” Mendelsohn said.

As disclosed in its third-quarter earnings call, NHI agreed to approximately $5.85 million in rent deferrals in 2020 and approximately $750,000 in January relating to Bickford Senior Living, the firm’s second-largest tenant. The deferred rent pertaining to the fourth quarter of last year and the first quarter of this year totals approximately $4.5 million and is slated to be repaid at an 8% interest beginning in June. These deferrals are what have some financial experts questioning NHI’s challenging fundamentals surrounding the senior housing outlook, according to Omotayo Okusanya and Zachary Silverberg, analysts at Mizuho Securities USA.

“An inability to collect rent starting in the second half of the year would have a meaningful impact on cash flow,” the analysts wrote in a note to investors Tuesday. “With fourth quarter operating fundamentals having weakened as the COVID-19 pandemic worsened, the near-term outlook remains challenging especially given little government support for senior housing. That said, management did provide some optimism as NHI expects positive occupancy inflection sometime in 2021 as vaccine roll-outs progress throughout the year.” 

Check out additional coverage of NHI’s fourth-quarter and year-end earnings call at McKnight’s Senior Living.