National Health Investors, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. NHI is a healthcare real estate investment trust investing in senior housing and medical facilities through leases, mortgages, and other notes. At quarter-end, its portfolio included 208 real estate properties across 34 states and $289.7 million in mortgage and other notes receivable, net of the credit-loss reserve.
Key financial results
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $73.8 million | $84.3 million | $229.0 million | $251.6 million |
| Net income attributable to common stockholders | $30.8 million | $42.6 million | $105.3 million | $148.0 million |
| Diluted EPS | $0.67 | $0.95 | $2.31 | $3.31 |
| Net cash from operating activities | Not provided for quarter | Not provided for quarter | $157.5 million | $176.5 million |
| NAREIT FFO per diluted share | $1.16 | $1.42 | $3.55 | $4.22 |
| Normalized FFO per diluted share | $1.15 | $1.42 | $3.55 | $4.23 |
| Normalized FAD | Not provided for quarter | Not provided for quarter | $163.6 million | $180.7 million |
At September 30, total assets were $2.91 billion, debt was $1.29 billion, and cash and cash equivalents were $48.4 million ($50.2 million including restricted cash). The $550 million revolving facility was undrawn. Management reported a 4.8x consolidated net debt to annualized Adjusted EBITDA ratio and 5.6x fixed-charge coverage for the nine months. The filing does not provide a clear conventional operating-margin measure.
Changes versus the prior comparable period
- Q3 revenue declined 12.4% and common-stockholder net income declined 27.7% year over year. For the first nine months, revenue fell 9.0% and common-stockholder net income fell 28.8%.
- Management attributed lower rental income primarily to COVID-related rent concessions, Holiday’s nonpayment of rent, and property sales. Nine-month rental income declined $22.1 million; concessions accounted for $17.2 million of the decrease cited by management, with Holiday’s unpaid contractual rent of $4.8 million also contributing.
- Q3 loan and realty losses included approximately $22.5 million of impairment charges on five properties. These were partly offset by $19.9 million of Q3 real estate sale gains; nine-month sale gains totaled $26.4 million.
- Nine-month Normalized FFO per share decreased 16.1%, while Normalized FAD declined 9.5%. Operating cash flow decreased 10.8%.
Outlook, risks, and unusual items
- Tenant and COVID-19 exposure: NHI reported $19.9 million of rent deferrals granted in the first nine months and $5.8 million in Q3. It agreed to defer another $4.5 million of Bickford rent for Q4 2021 and expected up to $4.0 million of further Bickford deferrals in Q1 2022. Management said the scale of future concessions could not be reliably projected.
- Holiday rent collection: After Atria acquired management services for the legacy Holiday portfolio in July, NHI had not received contractual rent under the master lease and placed the tenant on a cash basis. $4.8 million of August–September rent was due but uncollected and unrecognized.
- Operator performance: Senior-housing coverage weakened amid occupancy softness and rising expenses, including wages. At June 30, 2021, reported coverage was 0.86x for need-driven senior housing, 0.97x for Bickford, and 0.94x for Holiday. NHI noted that coverage figures include certain pandemic relief funds where reported by operators.
- Property sales and impairment: NHI sold several assets during the period. Three transition properties were classified as held for sale with $16.6 million of impairment; two other property dispositions resulted in $5.9 million of impairment. Total assets held for sale were $17.4 million.
- Debt and liquidity plans: The $400 million 3.00% senior notes issued in January mature in 2031; the $100 million bank term loan matures in August 2022. Management expected to repay that term loan using cash, asset-sale proceeds, and operating cash flow, and planned to extend the revolving facility before its August 2022 maturity. NHI was in compliance with debt covenants at quarter-end.
- Dividend: The quarterly dividend was reduced from $1.1025 to $0.90 per share beginning with the Q3 2021 declaration. A further $0.90 dividend was declared in November for payment in January 2022.
- Commitments and contingencies: Remaining loan commitments were $91.1 million, remaining development commitments were $9.7 million, and remaining contingent lease inducements were $32.4 million. A $13 million Bickford second mortgage arising from a property sale was not recognized as a receivable or sale consideration pending probable collectability. NHI also reported a $15.5 million Timber Ridge resident-loan lien exposure, with no liability recorded based on subordination and an operator indemnity.
- No new material risk-factor changes were reported. Management gave no formal numerical earnings guidance. It reported $73.8 million of unrestricted cash and $550 million of revolver availability as of October 31, 2021.
Important facts for investors to verify
- Whether Holiday resumes contractual rent payments and how the unpaid rent and cash-basis treatment evolve.
- Collection of existing and planned rent deferrals, particularly Bickford’s, and the operating performance supporting those payments.
- Whether impairments, property transitions, or further dispositions affect portfolio value and recurring rental income.
- Refinancing or repayment plans for the 2022 and 2023 debt maturities, the planned revolver extension, and continued covenant compliance.
- Collectability of the Bickford second mortgage and the timing and funding requirements of NHI’s loan, development, and lease-inducement commitments.