National Health Investors (NHI) 9 Aug 232023 Q2 Earnings call transcript

Greetings, and welcome to the National Health Investors Second Quarter 2023 Earnings Call. [Operator Instructions].

As a reminder, today's call is being recorded, Wednesday, August 9, 2023.

I would now like to turn the conference over to Dana Hambly. Please go ahead.

to company's Health quarter results welcome to conference of and the review for you, the Investors National call XXXX. Thank the second

CEO; Officer; call, Pascoe, Chief Officer; Accounting the today Eric Travis, President On are and David Chief Spaid, John and Investment Officer. Chief Financial Mendelsohn, Kevin

financial of covered a were results the released media. The accessibility market well by press on call closed notice as conference as in release after been that's a the the yesterday of this listen-only basis

any reminder, conference which a this As statements forward-looking call, are in are facts, statements. not historical

NHI NHI to risks date represent the and other cautions the of disclosed NHI's are XX-Q investors future that various periodic uncertainties guarantees and urged quarter of as XX, of made its any ended Securities forward-looking the this Form review statements reports information factors may Commission, not statements judgment with disclosures including risk June or for Exchange conference involve performance. call. by and forward-looking All in NHI's are and Investors the filed carefully XXXX.

findings of SEC's or sec.gov at at on NHI's available website Copies website on nhireit.com. the are these

other related provided In NHI's financial measures, in earnings SEC. Listeners are are review provided reconciliations addition, earnings to in that those non-GAAP information filed all terms of in release which provided which the release X-K certain call reconciliations have schedules, with the used this tables release. together and been Form and in on are with encouraged

I'll our Eric now CEO, Mendelsohn. the turn to call over

for today. joining us you. Thank and thanks, everyone, Hello,

SHOP of in to making our progress optimization, through the operations improvements strategic are our and return positioning growth We on balance sheet. portfolio

well stable deferral experience generally increased results as repayments. quarter cash collections second as Our

the two operators, impacted quarter million concessions first specific approximately senior to of share per the quarter $X.X by when XXXX. one-time compared However, housing was or $X.XX totaling to

this discuss, of which senior to in post-pandemic results. quarterly As housing tenants struggling we often our our era, variability are some introduces

housing senior the of CCRC while as and not remain our fundamentals has need-driven outlook improve and changed long-term SNF SHOP Our pillars in platforms portfolios, stability.

we quarter, previously the that $XX.X properties, for to significant opportunistic million negative to one Since gain. including concessions. the future was a our likely not property sale property CapEx and of have of and for seven disposition completed was an sale a held led This first needed was cash of rent end for was sold which substantial the tenant, that would flow

our and efforts currently We growth our have of properties to This coverage, particularly improved reported to We X.XX through evident for four the energy attention out since benefits to breaking sale, just reflects see improved housing and allows shift initiatives. optimization, year-over-year times. the where need-driven XX% portfolio highest which impact significantly sequentially for by EBITDARM by senior category. optimization held separately of other this and is our portfolio ever XX% the dispositions coverage. the tenants This us from more is which

inflation from to Favorable move quarter us in of SHOP $X.X moderating to and continue NOI million the coverage XXXX. will that portfolio improved occupancy trends The $X.X optimism wage higher. million first give

recently, improved have results. a provide more will and a moment. point midway Kevin in occupancy, just CapEx trends move-in gain generating our July the encouraging expectations, are details with XXX initial below through performing campaign sizable still in While basis we

in sheet and SHOP at times X.X leverage profile NOI potential upside improving We revolver of unchanged. capacity. are half longer-term remains anticipate financial and than great $XXX the and in view million with our shape second of balance XXXX, the of our more The just

are look which starting opportunities, growth external to increasingly attractive capital on focused as more very becomes scarce. are We

fell tries financing through deals We are equity that at opportunities of and direct the seeing lack in form rates more the for interest financing. higher impact second of of

in concessions. press last in John detail more this his higher-than-expected which during guidance, updated quarter's adjusted guidance our night's reflects remarks. prepared the we release, outlined will As discuss

want the quarter's in quarters. this better and shortfall I that therefore, results fourth and assure taken investors expect address have third to we action immediate to

long-term to of Our industry our view have external we powder support dry the opportunities. growth and internal remains and plenty of incredibly optimistic,

the details on more over turn call operations. Kevin to to now I'll provide Kevin? our

of I'll since XXXX, Eric. four major proceeds of million. $XX as you, senior skilled of properties properties classes nursing the sale. sale the second the seven the for concentrate just comments on first quarter, We held Thank leaving operators. XX housing we of disposition and net my performance the the end and and sale for of Since $XXX completed of investment million properties as of well on for our proceeds quarter activity asset net closed

cost low generated The process capital, in of yields deploy that a very are great effectively single-digit complete, coverage. properties given thin and acquisition this moving to market. pipeline we low with our lease in leverage seems an buyer's changes our NOI position be reflect These capital. starting towards the environment to a to With is

confident in are announce before We the we year. of we'll activity LOIs multiple investment so have end process, the new

a one Shifting we basis second excluding approximately $X.X in to first lower XX%. cash in management. from two less This million the collected and to and million housing Overall, accounting. on approximately asset $X.X the $XXX,XXX Relative of tenants. tenant contractual collections impact senior approximately cash were concessions collections operator included quarter from rent quarter discrete approximately to items,

including noted, additional taken shortfall, to management address allocating the selling we action Eric As flow cash negative resources have properties. asset and

third fourth actions, benefiting confidence that and gives are We improve. these from results us which will quarter already our

XX-month reflect generally we coverage to the represent from times in occupancy quarter EBITDARM XXXX. of do better experienced trends gains the driven trailing Remember times, metrics not that X.XX and sequentially increased housing. and by second in the margin for X.X results company coverage senior

times, of points X.XX representing XX.X% at XX% basis year-over-year cash need-driven senior growth. XXX-basis platform, nursing. saw in which occupancy skilled a Reviewing straight fifth XXX-basis we Total and in the again annualized quarter is with by to improved increase increase point XXX point on trends of a NOI, housing positive coverage the sequential

XXXX, which to XX% by times, compared full of X.XX part by the Bickford's April impact in points basis second driven and improved now average was first at move-ins and occupancy rent Bickford week throughout quarter, to The third the improved strong June with the quarter XXXX spot quarter the end at XX.X%. at occupancy continued of XX quarter was occupancy last reset. into reflects net increase XX.X%. of the The monthly large

a quarter. over the the repaid $XXX,XXX Bickford higher expected in deferrals second with quarter, in during amount similar third were

properties, of second and of Bickford, XXXX at straight coverage improvement. coverage reported which is X.XX -- other across second XX of Aside the for sequential is reported which sixth from highest NOI. account which quarter coverage increasing We the the need-driven annualized XX% approximately is the quarter since the times,

occupancy we While XX%. actions, has times result most the concessions. difficult and This where environment for The but in our class rent is our slow fewer coverage, fundamentals, at efforts these asset coupled just trend encouraging progress been is steady, remains financial, with optimization have focused. industry over improving reported operators think even of will X been direct improving at the with

second. to Continuing first from by largest NOI, coverage this entrance-fee for tenant, group excellent senior housing times times, quarter, portfolio, with our adjusted our discretionary in entrance-fee sequentially driven improved the accounts including the SLC, from XX% sales continued X.XX communities. into X.XX which XX% of

by first X.XX performance SLC, at which This entrance-fee in coverage, this list. the quarter. sales worry times properties was Our bumpy variable X.XX refunds, is of driven our business know entrance-fee quarter-to-quarter other nature from on senior entrance-fee the but due be We a our not this higher times. the largely sequentially discretionary from can communities couple reflects housing refunds excluding to of of to and declined certainly

points to deferral repaying represents start which second reported XX% early has improved the NOI, This rent specialty to basis far one provided SNF of late Since solid of operator the the XX% thus times, amount. The unchanged the which and XXXX a has of XXX the of in portfolio, repaid pandemic, XXXX SNF SNF occupancy started is than balance XXXX. annualized NHI at and operator half more only XX%. X.XX coverage hospital deferral and adjusted sequentially. by year-over-year in

the rule staffing of our we've the NHC to including their and which any potential portfolio, happy in change, us but all mandate. operators, gives with ability adapt to performance SNF obviously new confidence a ENSIGN been anchor

SHOP experiencing sequential NOI $XXX,XXX is below margin progress initial of we performance and projections. are our generate But X% which in the represents our making are a pressure, Lastly, did still improvement. we adjusted NOI, and portfolio portfolio, the

monthly year. to proved gradually margin move-in The a quarter for for of points month indicate June our from July basis results throughout preliminary the straight XXX fourth the to building basis This occupancy to XX.X%. bodes first improved and points net easily increased another and XX.X%. move-in as strongest well that to June occupancy monthly pipeline XXX be year, the been XX.X%, has increased through The sales month and

trends in our that provides and generate internal runway source building portfolio dollars high a the an recent growth This external long this of view can for range. conviction a us The in growth. while in margins give teens with excellent NOI platform the mid-XX% longer-term

and I'll now financial over John results discuss guidance. turn to our call the to

Kevin, everyone. you, hello, Thank and

quarter, net ended respectively. quarter the $X.XX, June diluted per NAREIT FFO the was XX, $X.XX, For FFO share, July $X.XX second -- income, our normalized per our common In and XXXX, were million. $XX.X FAD and share

and results forecasted mixed but with concessions. quarter both higher collections second were deferral than performance Our SHOP improving better

quarter lower first quarter noted recall, $X.X QX in to But FAD Our the the first Real by our we segment Investments results concessions for beneficial Estate the our included quarter compared second million by quarter remarks, declined in two million was compared of as rent second first further of XXXX. two to cash approximately million. operators. approximately XXXX, to totaling discrete and collections higher impacted items FAD When $X.X $X.X quarter

increase lower in capital partially to from from SHOP These offset rent rent were $XXX,XXX sequential FAD the increases five and annual of approximately rent collection defaults escalators. operators, of an expenditures, by recurring impacts

quarter portfolio Eric second mentioned, XXXX. $X.X the of SHOPS's improved million million to the As quarter the from first in NOI $X.X modestly in

on of for sold the additional were four five properties previously properties, proceeds assets which approximately the million sale Subsequent and to of proceeds, quarter, held end of for with we six million. assets quarter, second During closed net book sale gains and the million we for value. $X.X one in $XX.X second property $XX.X for net leaving million held in net $XX.X in in

Last XXXX the night, first rates. offset Interest flat, the average attributable to compared interest higher second quarter our was to total lower guidance. we expense debt, full-year largely updated by quarter in

Our the rates guidance continuing paid remainder loan of and and quarters. Ridge of the includes repayment the February with Timber rent asset improvement to additional amortization earn out balances, consistent and concessions, prior reflects higher interest lease attributable second levels incentive for experienced additional repayments, in first expense the in It deferral XXXX. dispositions in higher

The our adjusted plus recently a includes QX, not We primarily assets slight reduction and and does fulfillment investments, $XX.X second includes higher-than-expected deferral $XXX higher million. in FAD lower-than-expected our to include range sold to of $XXX.X our the announced customer is guidance better-than-guided collections. driven unidentified previously million not million expense, any of Our additional by incremental offset in it interest all but continuing commitments, concessions, guidance guidance, investments. cash basis by in collections which quarter

for to a X.X% midpoint of also to lease range our $XXX.X We per amortization well changes normalized updated rental as reflects guidance On million. of this The FAD which $XXX.X a revenue, as a $X.XX, incentives. FFO straight-line range to and changes down adjusted $X.XX. the to of share to from rent basis, normalized our noncash FFO the million includes equates

at to and quarter of over million outstanding we $XXX ample second first quarter, $XXX debt providing leverage revolver end million EBITDA. was net the on times cash For unchanged $XXX in our the revolver, million July, X.X the adjusted had availability. of our ratio At liquidity from

available under ATM also our million We full have program. a $XXX

The loan entered of of interest a loan were two-year spread the quarter. a the at September to very participating announced, As over bears time XXXX. credit loan proceeds in used capital. we syndicate paid grateful strong SOFR loan. same now scarce a to increasingly at off support term variable previously of term maturing a show the off We're banks, a term as into million nine The during pay $XXX new second term new

on to estate real while execute our now which We in creates believe a preserving external decision this sheet, the validates we optimize pandemic growth. strategic our a early advantage strong portfolio balance as

second our ratio payout FAD was Finally, XX.X%. quarter

$X.XX shareholders record payable announced dividend November we on declared share XX, our and September a As Directors XXXX. Board night, X, for last of XXXX, of per

Operator, remarks. Once lines all call you thank for please prepared This the joining today. again, our for the open concludes questions.

get And on from to first question BMO our Go from [Operator Instructions]. ahead. Markets. the Juan we'll line Sanabria Capital

Hi, good morning.

trending being a road, that but about it question upwards. Just a you generally bumpy deferrals. on guys kind I of talked recognize

So asset I think going negative for that situation looked kind the other sold I that held just surprise improve sequentially? coverage that the going of any curious choppy a kind be what forward. was as that forward, but happened aren't guess, assets incremental at mentioned should still had And to Eric, an given recovery. may there are sale, like of disposition candidate you

it's Juan, Eric.

questions We've and for You assets. lumpy assets got of had and couple no. any about there. lumpy, One held a other is assets The sale. answer smallish deferrals four was

we I think the million. estimated total over value slightly $XX

they since and deferrals. so a had lowering to deferrals, And are do our more and frankly, this negative that exposure user very was an we're and deferrals a we there major towards was far it. over don't seemed a heading case, building at of We it prudent to gain to tenant had deferrals. In opportunity concerned, as were very this sell cash granting a want flow

took that. we advantage of So,

wasn't one already target I list building on be the would default? that why guess disposition

Because that had that and in run that would good good we it it make but it running market an we to wasn't well, have well. building, building hated was and didn't operator -- if a a sell we I market operator really was the money.

-- a right operator well-funded just themselves time. and presented at So the

an was our it tenant. one us that exposure So, this opportunistic helped transaction lower to

set? expand just of then at loans kind The just or mix investments fee and opportunity overall follow-up, could the you're well a traditional simple mix pipeline. between you of as on hoping size And the maybe of as as the assets looking the

action We're focused our classes housing Sure. senior a Kevin. more we as kind is that Juan, side. But looking housing absolutely the seen in in is that of side. have play Skilled other everything now said on right the more at anything needs-driven we it's have senior as asset the and little still well this portfolio. on nursing

-- But been traditionally for interesting. structure which a the Some plays, more have fit and the right basis-type operator, is haven't market right us. with right been

side, structure the to the want we own absolutely estate. still On real

assets that pipeline So, there want always not working will lending develop pipeline. than may good term. may out And be to we have we've able been where have we it's acquire -- that us there's opportunities assets afford are some think the There yield can to true. some lending what not to instances to good some is be element to you more where likely we as long that of towards not see a

now, for good opportunity it's the for But portfolio. a

And us So, acquisitions possible. it's towards of the to going execute, is today that's then, to still before, us which eye it buy the pipeline future finding the estate set be a It's kind but a an up mix, much able real kind as for of be what you've as just seen from for right whether with again, acquisition. opportunity. to to rebuilding or

Thank you.

with KeyBanc our next the Instructions]. Austin Wurschmidt Go ahead. [Operator to We'll get from Capital question line on Markets.

you even to the that return expect the on expectation you some a give you've rate run based do or that moving completed, XQ So, improve of July around going sales additional and based that, deferrals in to of some for you Can results have figure sales forward? kind the just on pipeline? your direction forward

of this our I'll we're to do the best. that strategy an we them. put as And Austin, are end guidance, was second Spaid. is Concessions still to John quickly quarter. can my part move to but as in in trying

quickly is And to tenants rents one quarter, can. subsequent we we're happening to payoffs the get recover us as trying of to in on have the cash them that as payment we stream we're So, slow during that trying things even basis quarters. back and is those

owed the they consistently that. some on recover senior and to that second the what then have moving owe to housing pay paid rents the our us So that's weren't is not quarter part the industry do time to to and guidance us that And forward. bumps, in that them continues we they're missing that risk able upside NOI then our were can of to the get

working achieve can So, as we as to hard that. we're

stable. hit to like need moment. can Or you guess they continues That's been at about doubting and Got the think, they year climb? a language then Occupancy, over a Coverage this it's feel do update was added And improve, remain wanted helpful. sort it. I What's you the for there a on since that I to worst going I are they're to Bickford it the latest other hurdles But point? concern. of through now still of there?

is this Austin, Sure. Kevin.

do. What seeing continue what coverage I it the and portfolio through to needed to think improving. occupancy is heal, you're improving, NHI

work to. the needed done we we've So, that

some seeing that some We good of them Bickford debt other hold. that, with any their portfolio, them and think to if is makes as properties still to But opportunity whether for think steward element and there's to their of around. some continue business properties the there's or now, can always there's some net that work sense reviewing financial they partners some maximize for it on make move maybe I to for in sense sell

them completely quarter-over-quarter. doing as not like wouldn't they're feel you we're improve good relationship, But to NHI, I them as So, continue to as -- as relates with what business. see And our I structure, I on said, couch and footing. they're a it done pretty our

comment. Thank the you. Appreciate

Austin. Thanks,

Markets. with Juan Please question other the our Sanabria with on line follow-up ahead. next go proceed BMO We'll from Capital

they lose not Just your those no them. curious with because operator other whether about relationship or I debt. Eric, I I was a there of bit cautious -- guess, the on assets may their longer outside bit if comments. to solvent, ability an be curious now Is on sounded transitions those Bickford element expand if little of given other little you mean eventually you those risks pay are is profitable could just waning? that a more

doing portfolio has question, They have it through It simple our fault venture. their would ratcheted and Look, and Juan. pharmacy. a is of great, that no variable home have for own, our they That's money-making a only their had do up. debt and them would be if health, buildings be their And very other rate that debt. buildings fair

So, they them to debt, have unforeseen or refinance or with due either them run that banks their expenses to them working better. HUD sell they're to and

would that getting and they're on And that of portfolio, what I that things our better. doing based all closely. are is So, we're monitoring ongoing, say with slightly

And that. tweak a dispositions and Okay. then down had Thank a bit of little that you you mentioned the just -- higher expected, for in you than drove were guidance.

one So, that was of drivers. the

I those on the curious, flow Just that through guess, those yields on the P&L second associated rent in dispositions quarter. in dispositions of the terms with

Dana, But I right, think reason give remember, to leading yield. we're update, a that dispositions Juan, is these why refer table they're our information in can that making to, regarding you to concessions. there's business you one

So, that are them. from a true yield is considering that yield concessions really resulting

big of balance is need. a delivering strong we And strategy the returns our have are make part capital sheet when we so invested sure isn't that been that's we a things maintain when to --

got license a year would too there in that problematic are the the was law states some became in because say little if in property it we I operating. one waited move this -- state long. changes bit it to that of accelerated And more one the the

noise of bit really to put right this weigh possibly faster sort little move changes hard, a all soon year that as an disposition the against along working in law as because in we're now the end that this that risk to Juan, state can. we we So, and of

thinking that to element with that had we little was And move this it there a just asset guidance be to down to not contributor -- of out. our much But particular associated operator became some operator just opportunity risk too there year. moving bit some were FAD it a because was this

that That's I your as seeing seeing either of just through guys or operators more competition, a topic, And either final What some cetera, and more the independent helpful. seen set? senior's with price broadly season. comment fees, guess, And a distress between should question, of or earnings living given are broadly It's in you or any we've part broadly, say. discounting, competitor been then I you are of assisted? obviously, the et waiving housing

I Sure. need-driven the This again. FAD would is faster. Kevin that rebound more say we've seen

in within both also we've our macro, but think seen that I portfolio.

communities occupancy, been talked we've months manager have which months, associated to to slower the think rebuilding helpful been their having on but of our XX As you about that's not over has pipeline. XX respond changes a for last independent with them also couple

as we prepared seen like sales of we've teams and job some our operating those have good done comments, noted and rebuilding recently, living, funnels. the More the gains feel partners in in a independent

should we're on, So, going we do think and on there's concessions assisted I continue. element thinking, independent. believe an that that both of

through the addition well I then increases least, we in in to on. but markets or are some the at as of already there trying building, are priority. look at absolutely that going at rates, customers has our occupancy know at would that think of the relates as data the to concessions some NICMAP, looking in to the independent but suggest other and the our communities, And been full it it we get Street buildings there's and looking even that in

concessions happen. there are going that is there again, sure starting make move-ins, to we're getting net to which, So, on

to rates communities. to fill increase with that But you're is challenging So, it trying been as piece. we've pleased

Thank helpful. you, very

Thank you.

And other Markets. KeyBanc Wurschmidt the from line we'll follow-up get question to on with Austin our Capital next

of kind on commented the Bickford refinancing. debt You

it's I'm So, we And just amount debt? a I there it I when receive wondering, now, And the while of the about in the they like. now sense around time-line little a could works any been talking feels follow-up. of HUD had financing? mean a for are is significant

debt they The I The think trying so environment. all for get takeout, current specific So, There debt difficult. on. makes Bickford other can capital very very the to to what They've out level a extend think their we it's those on relates that had HUD have focused better sense, it now, to to ability to Kevin this I is source again. to which at take agree, there were it that banks HUD is -- it the on several to is able as they've executions operations a buildings, far. got stable be be right

couple are they to get much need will a in to belief help that accomplish be that done, get it better a does, financial or their position some but underway. They've that relates more closed. got more is Once My execution they there them that to that debt. those ultimately is as can stable it

So, little to is I it's it's that's bit executable, a plan think something their take -- time. something more but going

Got is helpful. renew And me. as it. NHC I leases? early That's far the can the as negotiations Eric, plan I then renewal just the last share the one believe mean and you XXXX or anything for there to -- on

are discussions ongoing. their that Just

or Would the announced you completed that get anything of this year? expect before end could

probably by of probably end the of a thing. next-year That's year. the type not It's

Appreciated thank you.

to on question Connor Please go get next with line from Wells We'll our ahead. is Fargo. Siversky the

It's a of for of dropped was if some Connor these today. And here. from Q&A as apologies you portion topics in the touched advance I on guys

area seen the in any skilled perspective? living better of Or are exist of an at this the living in allocate NAREIT, senior your assisted this the to and from earnings housing from So, midst opportunities throughout we've commentary is some the like independent where present? some would that capital of there of to nursing within weakness cycle or

Kevin. is This

of attention it our think be late. I been stands, As as is more has a going to lot are on which the the slightly it needs-driven better yields currently where is product, the

could on be independent side. I some the opportunities think there

stable make sure get something a we before our we to though, foremost, investment lot want and closer we more First there. do portfolio to

though, To operating see seen and That independent new haven't partner an That's relationship we that us, partners a said yields where sorry, operating or cost capital on living. to with some be the to with we still. whether would that. a enticing explore could absolutely operating our some partner bring implied very of it's current that date, closer communities existing probably we -- new

So, there's not We're margin. efforts our to tending focus elsewhere. an accretive

your bit capital plans little more great, it XH over 'XX sticking for And sounds That's Kevin. here. about a allocation, with

Specifically, additional debt side? do you any anticipate paying any on the activity or equity down

to our in initial do and the to our name, of the then a the our improve that eliminated So, we're total our I growth demonstrate plan. great has towards is And would back trying deploy get is cost that leverage noise we what from of be growth That lower so acquisitions. back, right we're terms equity that that now, in more shape and capital. little could would leverage think

get have a And stream authorization our start equity we we remind And I we $XXX to then do into of once repurchase steady stock. entertaining investments, that would would million again. a then tapping you

have particularly the So, just table, on to given to leverage always able that's we since some be do that.

That’s thank very you, guys. helpful

or we questions on Please continue no presentation the closing And have remarks. line. further with the any

today, at and Thanks, for time see of and everyone, many interest we'll your you NAREIT.

ask lines. for everyone. Thank good you for thank you, you your disconnect very Have your day, today. call much, and to conference participation and you thank everyone. the That conclude We does a