With the majority of its portfolio optimization complete, National Health Investors is focused on growth opportunities, executives said Tuesday.
Calling the second quarter “eventful,” NHI Chief Financial Officer John Spaid said the Murfreesboro, TN-based real estate investment trust provided $22.9 million in pandemic-related concessions in the second quarter, compared with $7.8 million in the first quarter, primarily due to its lease restructuring with Bickford Senior Living, effective April 1.
Millions written off for Bickford
NHI granted Bickford $5.5 million in rent concessions for the first half of the year, writing off $18 million of straight-line rents receivable and $7.1 million of lease incentives.
Mendelsohn said that NHI is providing Bickford “all of the resources necessary to accelerate the recovery,” and that the REIT is pleased with the early outcomes. Although NHI’s portfolio is in better shape, he said, other components in the Bickford organization — unrelated to NHI’s portfolio — still need attention. As a result, NHI placed Bickford on a cash accounting basis out of an “abundance of caution.”
“We know that we’re not out of the woods yet, as Bickford, like the rest of the industry, continues to deal with elevated operating costs; so we will continue to monitor this relationship closely,” Mendelsohn said. “Our Bickford dispositions and net restructuring puts our company in much better operational and financial health.”
Chief Investment Officer Kevin Pascoe said that the Bickford portfolio has seen “significant” occupancy improvements after three underperforming buildings were sold. Average occupancy in the portfolio increased by 190 basis points (1.9%), to 84.5%. NHI now is working to sell a few more Bickford properties, which should further improve the portfolio’s health, he said.
‘Encouraged’ by senior housing portfolio
Mendelsohn said he was encouraged by the first quarter of operations of NHI’s new senior housing operating portfolio, which transitioned operators twice in less than a year.
NHI settled its lawsuit against Welltower, effective April 1, related to the leases for 17 Holiday Retirement independent living communities. July average occupancy improved at the communities, now managed by Merrill Gardens and Discovery Senior Living, with combined portfolio occupancy growing 90 basis points (0.9%) from June, to 77.1%.
“We know this will be a lengthy recovery and see significant upside for internal growth,” he said “As we gain more confidence in this platform, we see [the senior housing operating portfolio] as another avenue for long-term external growth as well.”
Occupancy in NHI’s 13 entrance-fee Senior Living Communities portfolio improved 60 basis points (0.6%) in the second quarter, to 82.3% — 200 basis points (2%) higher than SLC’s pre-pandemic occupancy. Momentum continued into July in this portfolio, as occupancy increased another 130 basis points (1.3%) from June.
Portfolio optimization
In addition to the Bickford and senior housing operating portfolio transactions, NHI completed more than $356 million in sales, including $288.2 million in senior housing sales, since the second quarter of 2021.
In the second quarter of this year, NHI acquired an Oshkosh, WI, assisted living community for $13.3 million and placed an additional four properties in held-for-sale status.
The second quarter was “quiet” from an investment standpoint, executives said. Pascoe said that the REIT’s investment pipeline is more active than in recent quarters, which he described as “encouraging.” But he said that NHI’s focus is on improving operational performance in its current ventures before expanding.
“Our operational priority right now is to rebuild the sales funnel to drive occupancy,” Pascoe said.
