NHI Doubles Down on Goal to Target Value-Add Properties

Murfreesboro, Tennessee-based real estate investment trust (REIT) National Health Investors, Inc. (NYSE: NHI) is capitalizing on its reputation as the “REIT of choice among many regional operators” by announcing that it has financed the acquisition of a 40-unit memory care community in Rye, New Hampshire, with new partner Evolve Senior Living. 

The $10 million investment was secured with a first mortgage with an initial term of five years.

“We have spoken in the past about the potential deals to be had as new developments and inexperienced operators and inexperienced capital play out in the market,” NHI CEO and President Eric Mendelsohn said during the company’s second-quarter 2017 earnings call. The acquisition with Charleston, South Carolina-based Evolve is a prime example of this strategy, he added.

Advertisement

“NHI partnered with the local operator to take advantage of a premium property at a distressed price,” said Mendelsohn.

Holiday optimism 

For the second quarter of 2017, NHI’s posted revenue of $69.8 million signified a 14.1% year-over-year growth, beating analysts’ expectations by $1.43 million.

After experiencing a drop in occupancy in the first quarter of the year, NHI is confident that its portfolio of communities operated by Holiday Retirement will see better occupancy moving forward.

Holiday Retirement—the nation’s largest independent living provider—originally operated under a management model in which its executive directors were live-in managers. Since abandoning this model last year, all of Holiday’s live-in managers have had to move out, which resulted in a loss in occupancy at some Holiday communities during the first quarter of 2017. 

Since that time, though, NHI has started to see an occupancy uptick at its Holiday properties, according to Kevin Pascoe, NHI’s executive vice president of investments.

“[In the] last three months we’ve seen consecutive net occupancy growth in the portfolio, with July ending over 91%, so we still are watching closely, but the leading indicators for occupancy are positive right now,” Pascoe said on the earnings call.

Embracing value-add opportunities

With the recent acquisition with Evolve Senior Living under its belt, NHI looks forward to securing similar deals, according to Kevin Pascoe, executive vice president of investments.

“I think the idea that we have with each of our relationships [is] to try and help them grow over time, so it’s our expectation that we can help them into the future,” Pascoe said. “There are some other deals in the marketplace that would be similar in terms of just value-add we think we might be able to get some better pricing on.”

And as the lending markets begin to “tighten up,” Mendelsohn believes that NHI will encounter similar deals moving forward.

“NHI is well positioned to take advantage of these opportunities with a competitive cost to capital, excellent operators and deep relationships in the senior housing industry that lead to healthy deal flow,” said Mendelsohn.

At the close of market Wednesday, NHI’s stock was valued at $76.06 per share, up 0.67%.

Written by Carlo Calma

Companies featured in this article:

,