An analysis released Wednesday from investment banking firm Mizuho Securities USA includes a downgrade of real estate investment trust National Health Investors to “underperform” from “neutral.” The change stems from concerns around the larger senior housing operators in NHI’s portfolio, which either have tight rent coverage or already have been granted rent deferrals.
Mizusho sees occupancy continuing to deteriorate in the senior housing sector due to the latest COVID-19 wave and expects fundamentals to continue to worsen at NHI’s three largest tenants — Bickford Senior Living, Holiday Retirement and Senior Living Communities — which account for approximately 42% of annualized revenues.
“The likelihood of further rent deferrals and even rent abatement or lease restructurings is rising, and the earnings as well as dividend impact could be meaningful given the tenant concentration risk,” the analysis stated.
In a separate report on the skilled nursing sector Wednesday, Mizuho also downgraded Omega Health Investors and Sabra Health Care REIT to “neutral” from “buy.”
“While we continue to believe the U.S. government will support the sector through the COVID-19 pandemic, we are entering a new administration and it is somewhat unclear if future stimulus packages will provide additional funding as robust as the CARES Act,” Mizuho wrote.
The firm added that a slower-than-expected vaccine rollout in the U.S. also is likely to delay the recovery of the skilled nursing segment. Moreover, analysts there remain particularly cautious over the rise of the home health segment as the preferred post-acute care setting by hospitals and patients alike in lieu of a traditional skilled nursing facility, given the current public safety concerns amid the COVID-19 pandemic.