National Health Investors’ investment pipeline currently is valued at more than $300 million, Chief Investment Officer Kevin Pascoe said Tuesday on the Murfreesboro, TN-based real estate investment trust’s first-quarter earnings call.
“As noted last quarter, we’re starting to see more actionable deal activity and the volume of new inquiries has significantly increased in the last several months,” he said.
Consequently, the REIT is looking at opportunities across the continuum of senior living and skilled nursing, he said. NHI has submitted letters of intent on deals valued at more than $100 million, with yields of more than 8% on average, Pascoe added.
Exceeding expectations
NHI’s first-quarter results exceeded expectations, following “a strong finish to 2023, CEO Eric Mendelsohn said Monday in advance of Tuesday’s call. He added during the call that this was the REIT’s third straight quarter of outperforming expectations.
Because of the strong start, Mendelsohn said, the company raised its full-year guidance, “which implies over 5% FAD [funds available for distribution] growth at the midpoint.
“The increased FAD guidance is broad-based with several factors contributing to the improved outlook,” he said.
According to the CEO, the REIT’s guidance does not include any new investment activity.
He added that the company is positioned for strong organic growth in its senior housing operating portfolio, or SHOP, and through other channels, including deferral repayments and rent step-ups with select large tenants.
Net operating income in the SHOP increased by 54.8% year-over-year to $2.9 million on over 13% revenue growth and 600 basis points of margin expansion.
“Sequentially, NOI increased by approximately 2%, which is encouraging, as we typically expect seasonal weakness in the first quarter,” Mendelsohn said. “Our guidance for 2024 NOI growth remains at 25% to 30%, though continued occupancy improvement coupled with lower move-in incentives have us optimistic that we’ll be at the high end or above the current guidance range as the year progresses.”
Bickford rent reset
Mendelsohn said that NHI reached a favorable outcome April 1 on a Bickford Senior Living rent reset, which increased the operator’s base rent by approximately 10% annually “while preserving our ability to receive rent deferral repayments based on growing revenue in the Bickford lease portfolio.”
The REIT said it recognized strong revenue growth within its National HealthCare Corp. portfolio during 2023. The NHC lease expires at the end of 2026. Mendelsohn said that NHIis working to create a favorable outcome for shareholders.
“For the record, I need to state that the negotiations related to the NHC lease are sensitive. We understand the importance of this lease to shareholders and our unique relationship to NHC,” the CEO said. “So, we do plan to provide relevant information on the process where and when appropriate.”
Investments
During February, NHI funded $15 million on a mortgage loan receivable with Carriage Crossing Senior Living of Bloomington, IL, with an additional $2 million available to be funded contingent on the performance of facility operations until March 31, 2027.
Since the quarter ended, NHI completed the sale of two assisted living communities located in Louisiana that previously had been leased to one of the company’s tenants. The sale was on a cash basis and yielded net cash proceeds of approximately $4.6 million, resulting in a gain of approximately $1.3 million, according to the REIT.
