NHI, Discovery Entering $128M, 6-Property Joint Venture

National Health Investors (NYSE: NHI) is strengthening its relationship with Discovery Senior Living.

The Murfreesboro, Tennessee-based health care real estate investment trust announced a $128.4 million joint venture with the Bonita Springs, Florida-based provider to acquire six properties in Indiana, Maryland and Pennsylvania.

NHI is also committed to a $6 million senior mortgage for an additional property in Indiana, which the joint venture will have the option to purchase at stabilization. The facility consists of 52 assisted living units and 22 memory care units. The loan is scheduled to be closed by June 30.

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The portfolio has significant upside, Discovery Senior Living CEO Richard Hutchinson told Senior Housing News in an email. Several of the assets in the deal have completed a full renovation, while the remainder are operationally positioned as leaders in their markets.

The total occupancy of the assets is in the low-to-mid-90s, allowing Discovery to push rents through new residents and marketing, and identifying operational efficiencies.

The portfolio also contains some small expansion capabilities, which the joint venture will leverage when the timing is right, Hutchinson said.

“Discovery will continue to focus on evolving the service offerings in these communities consistent with our emphasis on providing our residents an exceptional customized lifestyle,” he said.

The newly announced JV continues NHI’s pivot to acquisitions in 2019. The REIT switched operators on nine distressed properties in the first quarter of 2019, completed a $10.8 million deal for a Michigan assisted living facility and has a robust pipeline of acquisition opportunities. In April, NHI transitioned operations for five properties from Autumn Leaves to Chancellor Health Care.

Last month, Irvine, California-based health care REIT HCP (NYSE: HCP) acquired nine Discovery communities for $445 million in a joint venture deal.

That portfolio includes 1,242 units at seven communities in Florida, one in Georgia and another one in Texas. The communities currently have an average occupancy of 79% and the deal has an initial capitalization rate in the low-4% range, and HCP will receive a purchase option to acquire each project at a 6.25% cap rate on stabilized net operating income (NOI).

The transaction HCP deal was structured as a joint venture and expanded the role of Discovery in the REIT’s growing senior housing operating portfolio (SHOP).

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