National Health Investors, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; comparison is the three months ended March 31, 2021. NHI is a healthcare real estate investment trust (REIT) investing in senior housing and medical facilities through leases, loans, and joint ventures. At quarter-end, its portfolio included 186 real estate properties and 15 mortgage and other notes receivable across 32 states; 20 properties were classified as held for sale.
Key financial results
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $71.3 million | $80.9 million | Down 11.8% |
| Rental income | $64.6 million | $74.7 million | Down 13.6% |
| Net income attributable to common stockholders | $8.4 million | $35.3 million | Down 76.2% |
| Diluted earnings per share | $0.18 | $0.78 | Down $0.60 |
| NAREIT FFO per diluted share | $1.05 | $1.23 | Down 14.6% |
| Normalized FFO per diluted share | $1.10 | $1.24 | Down 11.3% |
| Normalized FAD | $52.7 million | $59.6 million | Down 11.5% |
| Cash provided by operating activities | $38.7 million | $56.9 million | Down $18.2 million |
Margins: The filing does not present a headline operating-margin measure. Net income was substantially reduced by real estate impairment charges.
Cash, debt, and liquidity: At March 31, cash and cash equivalents were $36.1 million; debt carrying value was $1.249 billion, versus $1.243 billion at December 31, 2021. NHI had $615 million available on its $700 million revolving credit facility and reported compliance with debt covenants. Management reported a 4.9x consolidated net debt to annualized Adjusted EBITDA ratio. The filing’s Adjusted EBITDA reconciliation reports fixed-charge coverage of 6.4x; a separate narrative passage cites approximately 6.6x.
Material changes and unusual items
- Q1 included $24.6 million of real estate impairment charges, compared with no impairment charge in Q1 2021. These were the principal cause of the sharp decline in GAAP net income.
- Rental income fell by $10.2 million. NHI cited additional rent concessions, property dispositions, lower straight-line rent, and operating changes; the $8.8 million Holiday lease deposit recognized as rental income partly offset the decline.
- Interest expense declined 21.4% to $10.2 million, primarily reflecting debt repayments and the expiration of interest-rate swaps. Interest income from notes receivable increased 10.8% to $6.7 million.
- NHI sold two properties during the quarter for net proceeds of $13.2 million and recorded a $3.0 million gain. At quarter-end, 20 properties with $132.0 million of net real estate value were held for sale; 12 were newly classified during Q1.
- The $700 million unsecured revolver replaced a $550 million facility on March 31. NHI also repaid a $75 million term loan using revolver proceeds and amended its $300 million term loan to transition its benchmark from LIBOR to SOFR.
Outlook, management commentary, and risks
- Dividends: Management said full-year 2022 operating cash flow was expected to cover dividends at the then-current rate and that it did not expect to borrow to pay them. The quarterly dividend was $0.90 per share, down from $1.1025 in the comparable 2021 period. A $0.90 dividend was subsequently declared for payment in August 2022.
- COVID-19 concessions: Pandemic-related concessions totaled approximately $41.4 million at quarter-end, including $35.9 million of contractual deferrals expected to be repaid. NHI granted $6.3 million of deferrals in Q1 and agreed to defer approximately $1.8 million of Q2 rent; further concessions could materially affect results, and their extent was not predictable.
- Bickford: Outstanding rent deferrals were $26.0 million. Discussions contemplated minimum repayments of approximately $3.0 million annually, with possible reductions tied to performance and property sales. Effective April 1, Bickford’s master leases were amended, with rent of approximately $28 million annually through April 2024 and subsequent rent reset to fair market value, subject to a stated minimum.
- Holiday/Welltower: The parties settled the litigation, terminated the master lease effective April 1, and released approximately $6.9 million of escrowed funds to NHI. Fifteen independent living facilities transitioned into two NHI-majority joint ventures; other properties were sold or transitioned to an existing operator. The new operating structure adds exposure to operating performance and third-party property managers.
- Management reported declining senior-housing coverage, driven by softer occupancy and rising expenses, including wage pressures. At year-end 2021, portfolio coverage was 1.54x overall, while Bickford was 0.82x and Holiday 0.86x; these ratios are based on the latest available operator data and can include pandemic-relief funds.
- Other principal risks include tenant and borrower credit and concentration, healthcare regulation and reimbursement, refinancing and variable-rate exposure, real estate impairment, and the continuing effects of the pandemic. A 50-basis-point rate increase was estimated to raise annual net interest expense by approximately $1.9 million, assuming debt balances were unchanged.
- After quarter-end, the board approved a one-year share repurchase plan for up to $240 million. Repurchases are discretionary; the plan does not require NHI to buy shares.
Most important facts for investors to verify
- Whether tenants—especially Bickford and the former Holiday portfolio—resume reliable rent and deferral repayments, and how the new joint ventures perform.
- Whether the $24.6 million of impairments and the $132.0 million held-for-sale balance lead to further write-downs or proceeds different from carrying values.
- How much of reported rental income and cash generation depends on nonrecurring items, including the $8.8 million Holiday deposit, and whether operating cash flow supports the dividend.
- Near-term debt maturities, floating-rate exposure, covenant headroom, and the impact of the new SOFR-based facility terms.
- The reported fixed-charge coverage figure: the filing’s reconciliation gives 6.4x, while its narrative cites approximately 6.6x.