NHI CEO: Why seniors housing should care about healthcare reform

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Eric Mendelsohn
Eric Mendelsohn

Even if seniors housing operators won't be directly affected by legislation that partially or fully replaces the Affordable Care Act, the reform efforts still are important to them, National Health Investors President and CEO Eric Mendelsohn told analysts Tuesday during a first-quarter earnings call.

“We're all just sitting in the bleachers watching, aren't we? We don't know where it's going to end up,” the Murfreesboro, TN, healthcare real estate investment trust leader said when an analyst asked for his thoughts on federal action to repeal and replace the ACA.

Through the independent, assisted living and memory care communities in its portfolio, Mendelsohn added, NHI doesn't have much direct exposure to the act, and the skilled nursing facilities in the portfolio mostly deal with the Medicare program.

“But I think it just behooves us as a nation and as a population to do the best we can to take care of people who need insurance and need care, because if they are not well cared for, they will end up in Medicare or hospitals or some sort of subsidy program that does affect our operators,” he said. “So while we don't have a direct stake in ACA, we definitely have an above-average interest in what's going on and where it ends up.”

Also at the federal level, talk of potential tax code changes has aided share prices for some operators, Mendelsohn said, “based on, among other things, the assumption that any tax change as an operating company would fall to their bottom line. So, that's been good. And if I was an operator, I'd be issuing equity to take advantage of that to either lower leverage or promote growth.”

Holiday occupancy issues

NHI executives also provided an update on the occupancy challenges experienced by Holiday Retirement communities as they transition from having live-in property managers to having more traditional executive directors. REIT representatives previously had discussed the change in a Feb. 17 earnings call for the fourth quarter of 2016.

“The transition is ongoing, and NHI has been in regular communication with Holiday about its transition as well as its plan to move its corporate offices to Florida,” said Kevin Pascoe, chief investment officer. Holiday represents 15% of NHI's cash revenue, he added.

“The occupancy through the transition has softened a bit,” Pascoe said. “It was around 90% last quarter, down a little bit through the transition. They've had good leasing volume. They just [need to] make sure they get the buildings back to where they were. But they've had got move-in activity for the quarter.”

Mendelsohn reminded analysts that the occupancy formula has changed at the communities that have gone through the transition, given that they now have two additional units available for lease, units in which property managers formerly lived.

All units where managers formerly lived are now available to the public at the Holiday communities in NHI's portfolio, Pascoe said. “About 60% of those have been leased,” he added.

Occupancy at Holiday communities had arisen in New Senior Investment Group's May 5 earnings call, too. Holiday is the largest operator in New Senior's $3.3 billion portfolio, representing 77% of the REIT's NOI, with 51 triple-net lease properties and 65 managed properties, according to supplemental information released by the New Senior.

NHI completed $133 million in real estate acquisitions and loans in the first quarter. Revenue of $66.39 million for the quarter was up 12.5% year-over-year and beat analysts' expectations by $0.47 million.

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