A “busy” past several months for Murfreesboro, TN-based National Health Investors included transitioning nine senior living communities to new owners, President and CEO Eric Mendelsohn said Tuesday during the real estate investment trust’s first-quarter earnings call.
He described the properties as “underperforming.”
Five of the buildings are memory care communities that were leased to the LaSalle Group and operated by sister management company Autumn Leaves. LaSalle filed for bankruptcy last week, reportedly citing several lawsuits. The memory care communities, transitioned April 16, now are being operated by Windsor, CA-based Chancellor Health Care, an existing operating partner of NHI.
“It’s a matter of just having somebody that is focused on the day-to-day operations and not how to restructure the company,” Mendelsohn said.
Chancellor now has eight buildings with NHI, operates a Colorado senior living community owned by Ventas, and manages three other buildings for Bridge, he said. Adding more NHI properties “affords them the ability to grow their bench, bring some people onto the team, and really help grow their organization,” Mendelsohn said.
Three of the nine transitioned communities formerly were leased to affiliates of East Lake Capital Management. The so-called Regency portfolio properties are in suburban Nashville, TN, Charlotte, NC, and Indianapolis. NHI said they had “noncompliant leases.” They were moved to new operators in December.
The 135-unit Tennessee building, Maybelle Carter Living, is now being operated by Vitality Senior Living, a new operator for NHI. The community offers independent living, assisted living and memory care.
“Census plateaued in the late first quarter and is trending upward moving into quarter two,” the CEO said. Monthly occupancy averaged 73.3% as of March 31, NHI said.
The 98-unit North Carolina building, The Charlotte, now is operated by Senior Living Communities, an existing partner to NHI. The assisted living and memory care community is closed and expected to open again in June after “extensive renovation,” Mendelsohn said. NHI has committed $3 million toward the renovation and lease-up, he added.
“The opportunity there was to step up the level of finish and really relaunch the building as a Class A-type community and so reposition it,” Mendelsohn said.
Senior Living Communities also is tentatively operating the Indiana independent living community, the 148-unit Cypress of College Park.
“We are actively working to finalize an agreement with a new permanent operator and hope to transition the building by the end of the second quarter,” the CEO said. Until then, he said, the building is “still treading water and negative net operating income.” The community’s monthly occupancy averaged 18.2% as of March 31, NHI said.
The final building that was transitioned was a 120-unit former Landmark Senior Living community in Wisconsin now being operated by BAKA Enterprises, a new operator for NHI.
“They have begun stabilizing the building and improving occupancy,” Mendelsohn said.
“In addition to transitioning the building, we also collected $625,000 in settlement from the previous tenant.”
The Wisconsin community was transitioned Feb. 19. Monthly occupancy was averaging 67.6% as of March 31, NHI said.
“The thing to remember is, in each instance of these buildings, we like the real estate and we like the market,” he said. “Otherwise, we would just sell the building.”
In addition to transitioning properties, NHI said it also has been making new investments, including the $10.8 million acquisition earlier this month of Hampton Manor of Shelby, an assisted living and memory care community in Shelby Township, MI, leased to an affiliate of Comfort Care Senior Living, an existing partner.
The community has 60 assisted living units in operation, with an additional 14 memory care units are under construction, with an expected summer opening.
Chief Investment Office Kevin Pascoe said NHI’s pipeline includes “a large influx in activity of both new and existing customers,” mostly in private-pay senior housing.
The REIT’s net income per diluted common share for the three months ended March 31 was 83 cents, a decrease of 9.8% from the same period in the prior year.