NHI Continues SHOP Momentum With ‘Plenty of Dry Powder’ for New Investments in 2024

National Health Investors (NYSE: NHI) is continuing to build on momentum gained through stronger results for its senior housing operating portfolio, with an eye toward more growth in 2024. 

Occupancy for the Murfreesboro, Tennessee-based real estate investment trust’s (REIT’s) 15-property SHOP segment has ticked up in recent quarters, ending March at an average rate of 86.3%. At the same time, the segment’s net operating income (NOI) totaled $2.9 million in the first quarter of 2024, representing a gain of $1 million compared with the same period in 2023.

Those first-quarter results represent the third consecutive quarter of outperformance for the company, according to NHI CEO Eric Mendelsohn.


“We believe our portfolio is in great shape and positions NHI for strong organic growth through multiple channels,” Mendelsohn said during the call with investors and analysts Tuesday.

NHI also reset the fees paid by Olathe, Kansas-based Bickford Senior Living which is its among its largest tenants by share of NOI, with more on the way among other tenants.

At the same time, NHI is eyeing an investment pipeline of about $300 million, with letters of intent on deals valued at over $100 million.


“We have plenty of dry powder to execute our growth initiatives with over $970 million in capacity right now,” he said. “We’ve been advising sellers and borrowers for several quarters that the higher for longer rate environment could be a reality. It seems to be a certainty at this point.”

The REIT beat expectations for the first quarter, and its pipeline – though quiet so far in 2024 – is “accelerating,” wrote Juan Sanabrina and John Kim, analysts with BMO Capital Markets.

NHI’s stock closed at $65.65, 2% higher than the previous close.

SHOP leading the way

NHI first formed its SHOP segment in 2022. In the time since, the company has grown occupancy with the help of its major operators for the segment, Discovery Senior Living and Merrill Gardens.

NHI reported a 54.8% increase in NOI for the segment since the first quarter of 2023 and a 1,000 basis point increase in average occupancy in that time.

With occupancy surpassing the 86% mark on average, the company’s leaders have their eyes on a new target of 90% census. To get there, the company plans to make “tailor-made” changes at each community respective to its market.

“We’re doing some more short term incentives on the front end. As we have more residents stabilized into the building, then you’re going to see that fall off,” Pascoe said. “It’s a matter of getting the capital deployed, making sure that we keep the cadence that we have right now on move-ins – that’s been pretty steady so far.”

The company has in the past invested CapEx dollars to turn the portfolio into a “jewel box,” but to that end, “it’s been longer to get some of the CapEx projects done,” Pascoe said.

“Getting the subcontractors and so forth lined up and performing the work, again, has taken a little more time than we probably would have liked,” Pascoe said. “But so far, we’re seeing good cadence.”

Mendelsohn added that it has been “a bit of an experience getting these Holiday buildings turned around and assigned to different operators and CapEx programs completed.” But he noted that the properties “perked up nicely” thanks to those efforts, and as a result he feels confident that the company is ready to expand the segment soon.

“If we’re going to go with a new operator, the profile would be much the same as Merrill Gardens or Discovery, our current shop operators,” Mendelsohn said. “And by that I mean, deep operating experience, a balance sheet so that they can co invest with us as joint venture partners, and a great rep reputation.”

Pascoe noted NHI is looking at opportunities across the entirety of the continuum of care for senior housing and skilled nursing, as well as products including loan leasing and joint venture possibilities.

“We’re looking at opportunities across the continuum of senior housing and skilled nursing and across multiple products including loan lease and joint venture opportunities,” he said.

Another bright spot for NHI was that Bickford Senior Living, once a more troubled tenant in NHI’s portfolio of operators, is now on better footing in 2024. As such, NHI reset the company’s average annual rent from $31.4 million to a new total of $34.5 million through April 1, 2026.

“We have committed approximately $8 million in NOI-producing investments to the Bickford portfolio, which should enhance property cash flow and coverage over the next couple of years,” Pascoe said.

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