NHI CEO: Investor Sentiment in Skilled Nursing Has Improved

National Health Investors (NYSE: NHI) executives said this week that oversupply is putting pressure on private-pay senior living operators, but the health care real estate investment trust (REIT) continues to see additional opportunity in skilled nursing.

The Murfreesboro, Tenn.-based REIT reported second-quarter 2018 revenues of $72.96 million, which missed analysts’ expectations by $0.74 million. Its second-quarter earnings per share of $1.38, however, was in line with analysts’ expectations.

“We know it’s a tough environment in the senior housing space right now, but we continue to view these conditions as an opportunity,” Eric Mendelsohn, chief executive officer of NHI, said during the earnings call with investors and analysts Tuesday.

Occupancy in the senior living industry averaged 87.9% in the second quarter of 2018 — the lowest in eight years, according to data from the National Investment Center for Seniors Housing & Care (NIC).

While the majority of NHI’s portfolio consists of private-pay senior living assets, the REIT’s 75 skilled nursing properties represent its second-largest asset class — and Mendelsohn said SNFs continue to be a bright spot for the company.

“From where we’re sitting, we like skilled nursing,” he said. “And we think that investor sentiment has turned on skilled nursing as well.”

Despite the occupancy rate for nursing care hitting 86.2% in Q2, NHI is confident that its operating partners will be able to manage the changes coming from the Centers for Medicare & Medicaid Services (CMS) new Patient-Driven Payment Model (PDPM), which go into effect on October 1, 2019.

“Over time, the operators that we have on the skilled side, they’ve done a really good job of managing through the headwinds that have been facing,” chief investment officer Kevin Pascoe said.

While the company remains very selective on new skilled nursing acquisitions, the pricing on the deals has started to become more attractive.

“We’ve been open for business the whole time, it’s just the market has been much more aggressive than we have,” said Pascoe. “I feel like there’s the opportunity for us to do deals, but at the same time, we’re going to make sure there are good buildings, have good coverage, and have an operator that has a bench and the size to be able to accommodate the new [regulatory] changes that are coming in the industry.”

Written by John Yedinak

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  • NHI President and CEO Eric Mendelsohn: RoboToaster for Aging Media Network
John Yedinak

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