• Net Income per Diluted Share: $0.65 for Q3 2024, compared to $0.68 in Q3 2023.
• NAREIT and Normalized FFO per Diluted Share: Decreased 4.6% to $1.03 for Q3 2024.
• FAD (Funds Available for Distribution): Increased 2.5% to $49.4 million in Q3 2024.
• SHOP NOI Growth: Increased 30.4% year-over-year and 2.5% sequentially for Q3 2024.
• Occupancy Rate: SHOP occupancy at 88.6% for Q3 2024.
• Recent Investments: Closed over $205 million year-to-date, including a $121 million acquisition of 10 senior living communities.
• Pipeline Opportunities: $59.8 million in board-approved deals expected to close soon, with an additional $350 million under evaluation.
• Net Debt to Adjusted EBITDA Ratio: 4.4 times as of the end of Q3 2024.
• Dividend Declaration: $0.90 per share for shareholders of record on December 31, 2024.

• Warning! GuruFocus has detected 2 Warning Sign with NHI.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• National Health Investors Inc (NYSE:NHI) reported strong fundamentals with improving occupancy and EBITDARM coverage across major asset classes.
• The SHOP occupancy showed significant growth, reaching 88.6%, which is close to the level where rate growth can be driven.
• NHI closed on investments totaling over $205 million year-to-date, with an average initial yield of approximately 8.4%.
• The company has a robust pipeline of investment opportunities, with $59.8 million in board-approved deals expected to close soon.
• NHI's balance sheet remains strong, with a net debt to adjusted EBITDA ratio of 4.4 times, well within their leverage policy.

Negative Points

• Senior Living Management, a cash basis tenant, notified NHI of their inability to pay lease and interest obligations, requiring a quick management transition.
• Net income per diluted common share decreased to $0.65 from $0.68 compared to the same period last year.
• Normalized FFO per diluted common share decreased by 4.6% compared to the prior year's third quarter.
• Cash rent and interest income recognized for the third quarter was down approximately $2.9 million sequentially.
• The SHOP portfolio's margin was below expectations, with a slight decline of 10 basis points sequentially.

Q & A Highlights

Q: What are your preliminary thoughts on PACS and NHIS coverage post the prestige transition? A: Kevin Pascoe, Executive Vice President, Chief Investment Officer, stated that PACS is a smaller customer, representing less than 3% of revenue, with coverage over 2 times on an EBITDARM level. The properties recently transitioned, so full financials are not yet available, but no major revenue changes are expected. The situation is being monitored closely.

Q: Can you comment on the expected yields and the mix between fee simple and SHOP related in your pipeline? A: Kevin Pascoe explained that the pipeline includes a mix of debt, triple net lease, and SHOP investments. Expected yields are generally 8% or more, depending on risk and product type. As more SHOP investments are made, yields may compress slightly, but they remain confident in their current investments.

Q: Regarding the Spring Arbor portfolio, can you comment on the assets' RevPAR and the portfolio's breakeven occupancy? A: Kevin Pascoe noted that the Spring Arbor portfolio has strong RevPAR for its local markets, with breakeven occupancy typically in the 80% to 85% range. The properties are trending ahead of that, with room for growth, which is why an earn-out was offered for potential value creation.

Q: How do you view the potential impact of the recent election on your business, particularly regarding changes to the ACA? A: D. Eric Mendelsohn, President and CEO, expressed cautious optimism, noting that the previous administration had a favorable regulatory climate for the industry. He anticipates similar conditions under the new administration, which could be beneficial.

Q: With Andy Adams retiring, will there be an opening for another board member, and what's the update on the search for an independent board member? A: Eric Mendelsohn stated that the search for a new independent board member is ongoing, with a small group of finalists. The new member will be presented for the next proxy season. Whether Andy's seat will be replaced is still under discussion.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.