NHI Grows Bickford Senior Living Portfolio as Tenant Trouble Eases

National Health Investors (NYSE: NHI) grew its holdings with Bickford Senior Living and reported further improvement at one of its previously troubled senior housing tenants, executives said during an earnings call Tuesday.

The Murfreesboro, Tennessee-based real estate investment trust (REIT) posted normalized funds from operations (FFO) per diluted common share of $1.35 for the first quarter of 2018, an 8% gain over what it logged in the first quarter of 2017. That total beat analysts’ expectations by 1 cent.

NHI is one of the largest private-pay senior housing owners in the nation. Its portfolio spans 147 senior housing properties, 73 skilled nursing properties, three hospitals and two medical office buildings across 33 states.

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Betting on Bickford Senior Living

One rising star in NHI’s senior housing portfolio is Olathe, Kansas-based operator Bickford Senior Living.

NHI on May 1 announced that it leased to an affiliate of Bickford five newly acquired assisted living and memory care communities in Columbus, Ohio; Cleveland, Ohio; and Erie, Pennsylvania. The $69.7 million acquisition expanded Bickford’s relationship with NHI to 52 leased properties and three more in development. Bickford also took over an underperforming four-property portfolio of senior living communities in Minnesota on Oct. 1.

“We’re delighted to once again expand our relationship with Bickford Senior Living,” NHI President and CEO Eric Mendelsohn said. “This recent acquisition is another great example of NHI’s ability to facilitate growth for its operating partners.”

Bickford currently comprises 16% of NHI’s cash revenue, making it NHI’s most prominent tenant along with Charlotte, North Carolina-based operator Senior Living Communities, which also comprises 16% of NHI’s revenue.

“We love our relationshop with Bickford, we want to try to grow more with them to the extent we can,” said Kevin Pascoe, NHI’s chief investment officer. “I think the task that we have then is to continue to grow the portfolio with other customers, as well.”

Holiday Retirement, which makes up 14% of NHI’s cash revenue, saw its occupancy decline between the fourth quarter of 2017 and the first quarter of 2018. Still, the Winter Park, Florida-based provider’s occupancy rate was stable when compared with its results this time last year. It’s also making good progress on new resident leads and move-ins, and finished the month of April on a “positive note,” Pascoe said.

Meanwhile, one of NHI’s previously troubled tenants—a yet-to-be-named senior living portfolio that makes up about 4% of the company’s revenue—appears to have turned a corner. The REIT sent a letter of forbearance to the tenant last October due to noncompliance issues related to lease coverage and being in arrears to some vendors.

“They continue to make progress on occupancy,” Pascoe said. “We’re very happy with their progress. We wouldn’t say they’re back to stabilization, but they’re on the right trajectory.”

Looking ahead

As crosscurrents of rising interest rates and supply issues continue to plague the senior housing industry, NHI will focus on conservative underwriting and accretive acquisitions in the weeks and months ahead, Mendelsohn said.

Mendelsohn also touted the recent $1.95 billion acquisition agreement between Welltower Inc. (NYSE: WELL) and Quality Care Properties (NYSE: QCP) as proof that skilled nursing still holds value for the senior living industry. Under that deal, Welltower will own the real estate of major post-acute provider and former QCP tenant HCR ManorCare in a joint venture with ProMedica.

He also said The Ensign Group’s (Nasdaq: ENSG) strong first-quarter 2018 earnings were gratifying to see.

“Our takeaway is that skilled nursing still has a place on the senior housing spectrum,” Mendelsohn said. “We continue to see interesting opportunities for well-funded, low-leveraged REITs like NHI.”

NHI’s share price rose 1.2%, to $70.33, by the time the markets closed Tuesday.

Written by Tim Regan

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