portfolio cloeup
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With optimization of its portfolio largely complete, National Health Investors President and CEO Eric Mendelsohn said that the real estate investment trust has reached an inflection point with greater visibility.

A year after the REIT announcing its plans to optimize its portfolio through $250-$450  million in sales, lease restructuring and tenant transitions, Mendelsohn said the Murfreesboro, TN, company has completed $262 million in asset sales, including $214 million in sales of underperforming senior living properties. He said that NHI expects to complete another $100 million in sales of several other underperforming properties in the first half of this year.

It’s been a busy year and quarter for NHI, Mendelsohn said. Although operators in the REIT’s portfolio continue to deal with operational challenges, and the many moving pieces of its portfolio optimization made forecasting difficult, he said that NHI now is in a better position to forecast those challenges.

“We are grateful to be turning the page on this chapter of our history as we look to take advantage of our strong financial position to reignite our growth rate,” Mendelsohn said, adding that NHI has made “steady progress” on its portfolio optimization and expects that the majority of its initiatives will be reported in the first half of the year. 

Chief Investment Officer Kevin Pascoe said the REIT’s senior housing portfolio experienced the most disruption during the pandemic and was the focus of most of the company’s optimization efforts. 

Bickford lease restructured

Calling Bickford Senior Living a “valued partner,” Mendelsohn said NHI restructured the REIT’s lease with the operator effective April 1. The move is designed to create a more sustainable relationship over the long term and provides more capital for Bickford to reinvest in and maintain its buildings, he said.

“Their success will be our success as well,” he said.

In March, NHI transferred one Pennsylvania assisted living community from Bickford to Pittsburgh-based IntegraCare under a triple net lease.

NHI also restructured and amended its four master lease agreements with Bickford as it continues negotiations regarding the company’s repayment of $26 million in rent deferrals as of March 31. NHI is in discussions with Bickford to begin minimum monthly payments totaling $3 million per year, with the deferral balance subject to reduction by up to $6 million based on Bickford achieving certain performance targets and selling some properties.

Pascoe said that NHI is still in the process of selling some Bickford buildings. During the quarter, $5.5 million in rent concessions were granted to Bickford, but no rent concessions were made in April and none are forecast for May, Pascoe said. 

15 Holiday communities transitioned

In another milestone, NHI transitioned its remaining Holiday Retirement properties in April to Merrill Gardens and Discovery Senior Living. Mendelsohn said the types of joint ventures, combined with traditional strategies, make NHI a formal competitor in senior housing.

As of April 1, NHI had moved six Holiday Retirement properties to Merrill Gardens and nine to Discovery Senior Living through joint ventures. Pascoe called the joint ventures another avenue for growth in the senior housing industry, adding that the company’s near-term focus is on investments in its own organization to ensure that enough resources are placed for its senior housing operating portfolio.

“We need to make sure we get these joint ventures right before looking to expand the platform,” Pascoe said.

Still a seller’s market

In other business development, NHI exercised its purchase option to acquire The Courtyard at Oshkosh, WI, a 53-unit assisted living and memory care community operated by Encore Senior Living, for $13.3 million. The company also transitioned three Illinois memory care communities to Encore.

Pascoe said that although he is seeing improvement in the REIT’s pipeline, he still characterizes it as a “seller’s market.” 

During the first quarter, NHI granted $9.8 million in rent concessions, collecting 79.7% of contractual rent due.

In April, NHI granted $1.3 million in rent deferrals to three operators. The company collected 94.1% of contractual cash rent due in the month.

Senior Living Communities’ occupancy for March was 81.8%, up from 77.8% in March 2021. Bickford occupancy was at 79.4% in March, compared with 75% in March 2021. Holiday occupancy stood at 76.2% in March, compared with 75.2% in March 2021.