Kevin Pascoe

The severe flu season and supply issues that seem to be affecting occupancy among some senior living operator don’t appear to be having as much of an effect in National Health Investors’ portfolio, leaders of the real estate investment trust said Friday during an earnings call.

Executives at REITs HCP and Ventas, on their recent earnings calls, have listed new supply, wage growth pressures and a tough flu season as potential factors affecting move-ins and income this year.

“Fortunately, we are not seeing widespread impacts of the flu or over-development affecting the portfolio at this time,” NHI Chief Investment Office Kevin Pascoe said. Occupancy in the fourth quarter for both senior housing and skilled nursing properties “held steady,” he said.

Wage pressure is a concern, however, Pascoe said — “the top concern of our operators,” in fact, “and is something that has been monitored closely.”

Pascoe credited “good fundamentals” with sparing many operators in NHI’s portfolio from flu concerns. “They’re able to keep the pipeline for their respective building good to be able to … get new move-ins as people pass on or what have you,” he said. “I can’t speak to other people’s portfolios, but what we’re seeing is, things have been stable thus far, and we’re happy to see that they’ve been weathering the storm as other people have been having a little more choppiness.”

Although it is too early to predict how occupancy will fare in the first quarter, Pascoe said, “Leading indicators are OK at this point, nothing that we’re overly concerned about.”

In addition to wage pressure, NHI President and CEO Eric Mendelsohn said that the REIT is watching new supply. “While new competition from construction is also on our radar, we haven’t seen the widespread drops in occupancy that’s been reported elsewhere,” he said.

Holiday Retirement

Pascoe said occupancy appears to be improving at Holiday Retirement, which was affected in 2017 by a management model change from live-in community managers to more traditional employees. Through the fourth quarter, occupancy continued to improve, as the company’s average occupancy increased 10 basis points in sequential quarters, he said.

“It’s one where we’re still watching very closely how they’re doing, but the indicators that they’ve shown us are that occupancy has improved. We’re very happy with that,” Pascoe said. “We’re comfortable that they’re doing what they said they would do, in terms of, they’re able to get the leads, get conversations, get people to move in. And that’s the basis of their business. It’s the hospitality business, which is based on driving occupancy, and what we’ve seen … from third and fourth quarters was slightly positive.”

Holiday, he pointed out, recently was No. 2 in J.D. Power’s first-ever ranking of senior living operators. “Kudos to the team for their achievement,” he said.

The country’s largest independent living community operator accounts for 14% of NHI’s cash revenue, Pascoe said, whereas Bickford Senior Living represents 15% and a partnership with National HealthCare Corp. accounts for 15%.

Mendelsohn also provided an update on an unnamed operating partner “working through a technical default.”

“I’m pleased to say that things are trending in the right direction. Rent continues to be paid in full. They’ve made significant improvement in the terms of their account payable, substantially decreasing their accounts payable since October,” he said. “Over the last 90 days, they’ve increased occupancy 340 basis points, for a January ending occupancy of 91.2%.”

Accounts receivable, home office and operational efficiencies also are improving, Mendelsohn said. “We continue to stay in close communication with the operator and are encouraged by the progress we’ve seen over the past few months.”


In December, Pascoe said, NHI expanded its relationship with Discovery Senior Living through the acquisition of the Country Club of Woodland Hills, a 200-unit independent living and assisted living community in Tulsa, OK. “NHI’s total investment of $35.1 million includes $500,000 for capital improvements, which is expected to be fully funded by the end of 2019,” he said.

Also in December, NHI acquired Spring Arbor of Durham, an assisted living and memory care community in Durham, NC. “The community was part of a purchase option negotiation with NHI’s tenants on Senior Solutions, when NHI purchased two communities in North Carolina in February 2017,” Pascoe said. “NHI’s investment will include the purchase price of $7.55 million and up to $650,000 for an expansion and improvement to the existing building.”

In January, NHI announced a $14.4 million acquisition of a 121-bed skilled nursing facility in Waxahachie, TX, that was leased to an affiliate of the Ensign Group. “The acquisition is the second of four that NHI had previously committed to,” Pascoe said, adding that the facility, which opened in November 2016, joins 16 other Ensign skilled nursing facilities in Texas in the portfolio.

Regarding the pipeline, he said, “We see opportunities to grow with both new and existing customers. The prospects for new investments remain healthy, with a large amount of private-pay senior housing opportunities under review.”