Eric Mendelsohn hedshot
NHI President and CEO Eric Mendelsohn

Despite strong rent collections in October and November, Murfreesboro, TN-based National Health Investors may be in for some tough quarters ahead as its senior housing portfolio faces additional stress due to COVID-19 surges among its tenants. 

In its third-quarter earnings report Monday, the real estate investment trust reported net income attributable to common shareholders of $42.6 million, or 95 cents per share. That’s compared with $42.76 million, or 97 cents per share, a year ago. The company reported revenue of $84.3 million for the quarter, compared with $81.68 million in the third quarter of 2019.

NHI collected 96.2% of contractual rents due for the third quarter and 97.8% of contractual rents due in October. Subsequent to the end of the third quarter, however, the REIT began discussions with Bickford Senior Living regarding additional rent deferrals for the fourth quarter and the first quarter of next year as a result of the ongoing impact from the pandemic. These additional deferrals may include $3 million for November and optional deferrals of up to $750,000 each for December and January. The additional deferrals in discussions are expected to bear interest at 8% per year with repayments over 12 months beginning in June, the company reported.

“NHI has expected some additional deferrals as we move into 2021, and we’ve worked hard to position the company and its balance sheet in anticipation of further stresses, but we do not believe these conditions are permanent and the suffered occupancy losses will begin to resolve themselves sometime in 2021,” said Eric Mendelsohn, NHI’s president and CEO.

Earlier this month, Moody’s Investors Service assigned an investment grade issuer credit rating and a senior unsecured debt rating of ‘Baa3’ with a negative outlook to the firm.

The REIT’s third-quarter results and announcement of deferrals also has analysts Omotayo Okusanya and Zachary Silverberg at Mizuho Securities USA anxious that tenant credit risk is getting worse as the pandemic continues. 

“Our concern, as seen with NHI’s results, is that there is likely to be material deterioration in senior housing fundamentals before things are “back to normal” with a vaccine,” the analysts wrote in a note to investors.

Check out additional McKnight’s Senior Living coverage of NHI’s third-quarter earnings here.