National Health Investors turned in a mixed second quarter but appears to see more tailwinds than headwinds as it approaches 2024. They are not out of the woods with some of their providers yet, and deferrals are still a bit of a problem, but census levels are rising, margins are increasing and they are seeing some coverage ratios increasing. Investors, however, focused on a slight decrease in earnings guidance for the rest of the year and rent deferrals, sending the share price down by 6.4% after the release.
The REIT’s small SHOP portfolio (15 properties) posted a nice $200,000 increase in NOI from the first quarter to $2.1 million. The operating margin increased by 170 basis points from the first quarter to 17.9%, and the portfolio has had four straight months of increasing occupancy, hitting 75.6% in the second quarter. In July, census increased by another 170 basis points with the strongest move-in growth they have seen this year. While the SHOP portfolio has not done as well as management had expected, it certainly is moving in the right direction.
Moving to the larger portfolio, year-over-year occupancy increased by 280 basis points to 81.7%, made up of a 240-basis point increase in seniors housing and a 330-basis point increase in its skilled nursing portfolio. Its Bickford portfolio of 39 properties, which had seen some of the bigger problems in the past two years, improved its June occupancy by 80 basis points over May and 150 basis points over April, reaching 82.7%. And spot occupancy at the end of July was 83.7%, the same as last June, so the decline seems to have been reversed. The same cannot be said for Senior Living Communities (SLC), where occupancy declined by 20 basis points in June to 80.9%, which is down from 83.6% last November. At least Bickford repaid about $350,000 in rent deferrals in the second quarter, but the outstanding balance remains quite large.
During the second quarter, NHI sold six properties for net proceeds of about $39.1 million, and so far in the third quarter they sold one assisted living community in Oregon for about $2.9 million in cash. As of June 30, there were just five properties that were classified as held for sale, representing $600,000 in rental income in the second quarter.
The road will be bumpy for the rest of the year, and most likely into 2024, but management is ready for more growth as it sees most of its problems slowly going away.
