NHI: Nosediving COVID Case Counts in Nursing Homes Heartening, But Not Yet Leading to Stronger Census

The vaccine rollout at nursing homes and other congregational care settings has brought rapid and substantial declines in COVID-19 case numbers, but leaders at a top landlord in the sector say the desperately welcome trend has yet to have an impact on persistently low occupancy.

“Fortunately, the rollout of the vaccine to over 94% of our communities is having a positive impact, with the number of active resident cases down by approximately 65% since peaking in mid-December,” National Health Investors (NYSE: NHI) CEO Eric Mendelsohn said Tuesday during his company’s fourth-quarter 2020 earnings call. “However, this has not yet translated into occupancy gain, so the road to recovery looks too uncertain for us to forecast with a high degree of confidence.”

Those figures include both the real estate investment trust’s (REIT) senior living and skilled nursing assets; all of the company’s nursing homes have completed at least the first round of two required vaccine clinics, chief investment officer Kevin Pascoe said, with a 64% decline in cases.

The overall numbers translate to less than 1% of the Murfreesboro, Tenn.-based NHI’s unit capacity, the lowest figure since last October, according to Pascoe. But like Mendelsohn, Pascoe emphasized that vaccines are only one part of the census-recovery equation.

“The early positive results from the vaccine rollout have not yet translated in occupancy gains, but in addition to move-in restrictions, we think this is more reflective of seasonality as the winter months typically are the worst from an occupancy standpoint,” he said. “We are hopeful that as the vaccine is more widely distributed to the general population that visitation rights will improve, and we will see occupancy pick up in the summer and fall months.”

As with many of its counterparts in the senior housing and care REIT space, NHI hasn’t had to implement significant rent deferrals for its tenants so far. The company collected 93.9% of cash due in the fourth quarter of 2020 and 97% so far in 2021, with major tenant Bickford Senior Living and another undisclosed operator given reprieves of $750,000 and $450,000, respectively.

But given continued uncertainty about further federal aid and the ongoing trajectory of the pandemic, NHI couldn’t rule out future deferrals over the year to come.

“At this time, we have not reached agreements with any operators on future concessions, but the length and severity of this pandemic is clearly pressuring many tenant operating margins,” Pascoe said. “Therefore, absent a quick upturn in occupancy or significant government support, our internal forecasts incorporate some additional rent deferrals.”

Despite declining to provide 2021 guidance, Mendelsohn took the opportunity to contrast his outlook for the year to come with the COVID-plagued 2020, a year that saw NHI shy away from making long-term decisions about the future.

“We see some light at the end of the tunnel and expect to see occupancy gains this year, which puts us in a better position to make decisions that have a more lasting impact on the company,” he said. “While 2021 will be a difficult year, NHI is well-positioned to weather the storm with multiple levers at our disposal to preserve our conservative capital structure, and set the company up for longer-term growth.”

NHI’s skilled nursing portfolio accounts for about 27% of the company’s annual cash revenue, with National HealthCare Corporation (NYSE American: NHC) and The Ensign Group (Nasdaq: ENSG) as the primary tenants.

EBITDARM coverage for the company’s nursing home assets improved from 2.89 times to 2.94x between the second and third quarters of 2020, Pascoe said, though that gain did include federal relief among those operators that accepted the funds; Ensign, which has continued to log record revenues through the pandemic, notably has returned all of its federal stimulus cash.

Though future government assistance for senior housing and care operators remains under debate in Washington, NHI joined other REITs in predicting that the billions given out thus far indicate an ongoing commitment to the sector.

“The government support for the skilled industry has been tremendous, and we wouldn’t be surprised if there’s not more forthcoming given SNFs’ vital role in the health care continuum,” Pascoe said.