National Health Investors released another business update, and the news was not great. The REIT’s occupancy growth had started to slow in the fall of 2021, but its latest December averages showed declines across its three major operators when compared with November’s average. Senior Living Communities dropped by 10 basis points across the nine properties it operates for NHI from 81.9% in November to 81.8% in December. Bickford Senior Living’s 42 properties, the largest of the portfolios, saw a 90-basis point decline from 81.8% to 80.9%. Then, the 17 properties operated by Holiday Retirement fell by 190 basis points from 79.1% to 77.2% month over month, the lowest monthly average since July 2021. The overall occupancy numbers are not so bad compared to its competitors.
Those Holiday properties are currently transitioning to Atria Senior Living, so Atria may have a bit of a turnaround project on its hands at some locations. But Welltower has still not made contractual rental payments since its August 2021 takeover of a group of Holiday-operated properties, totaling more than $16 million of unpaid rent. Earlier this month, NHI announced that it had exercised its rights under the Membership Pledge and Security Agreement between NHI and Welltower Victory II TRS, LLC (the “Pledgor”) dated July 30, 2021 to vest in NHI as the landlord all Pledgor’s voting and other consensual rights over Well Churchill Leasehold Owner, LLC (the “Tenant”) during the continuance of Tenant’s events of default. NHI subsequently filed a motion in the Delaware Court of Chancery to expedite the consideration of NHI’s claims to enforce its rights under the Pledge Agreement, which was granted. So, now NHI is trying to quickly transition the remaining Holiday properties to new operators. It continues to hold an $8.8 million security deposit which it anticipates applying to past due rent in the first quarter of 2022. Hopefully, a resolution is found soon.
The rent deferral woes continue for Bickford Senior Living, which has had $2.0 million of its January rent deferred after NHI previously agreed to defer up to $4.0 million in contractual rent in Q1:22. Two other tenants will defer approximately $400,000 in rent for January too, which should be repaid with interest. So far, NHI has collected 80.4% of contractual cash rent due for January, with just 1.1% expected to be collected and 0.6% related to lower forecasted revenue from transitioned properties prior to the start of the pandemic. Holiday and Bickford make up the lion’s share of the uncollected rent.
Falling occupancy could be expected considering the season, Omicron and staffing constraints. Any internal issues related to the Bickford and Atria properties cannot help either. But any drop in census only lengthens the amount of time it will take for NHI to get back to “stabilized” occupancy levels, whatever those may be.
