NHI Diversifies Portfolio, Looks to Duplicate Senior Housing Volume

National Health Investors (NYSE:NHI) is working toward scaling down skilled nursing and ramping up on senior housing volume in the coming two years, the health care real estate investment trust (REIT) president and CEO told NIC MAP in a recent interview. Additionally, the REIT has underwritten much more conservatively following 11.1% cuts to skilled nursing Medicare reimbursements in the even of future cuts in that arena.

In an effort to reduce skilled nursing investment to half of its revenues and expand in other areas, NHI is diversifying its portfolio, CEO and President Justin Hutchens told NIC MAP Vice President Michael Hargrave. “We like the need-driven demand characteristics of assisted living and memory care,” he told NIC. “We also like the private-pay aspect of the assisted living business.”

The REIT specializes in “one-off and small portfolio transactions, 2nd mortgages and construction financing,” Hutchens said, which draw a smaller group of competitors than large portfolio transactions.

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Looking toward the future in light of the recent 11.1% cuts to skilled nursing Medicare reimbursement rates, NHI is underwriting more conservatively, with an eye toward potential additional cuts.

“To protect against the uncertainty of SNF Medicare reimbursement we are underwriting with 13% cuts from the CMS fiscal year 2011 Medicare run-rate,” Hutchens said. “This takes into account the 11.1% cuts that have occurred and a potential 2% more which we believe should be contemplated in underwriting.”

Hutchens said he anticipates more deals to get done in the near future on the heels of elevated valuations in 2011 resulting from investor confidence in the sector.

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Read the full interview with NIC MAP.

Written by Elizabeth Ecker