Despite COVID-19 Strains, NHI ‘On the Hunt for Skilled Nursing’ Assets

The COVID-19 pandemic has hit the skilled nursing field particularly hard, given the frailty of the residents and the challenges in securing testing and personal protective equipment (PPE) for both them and staff.

But one major health care real estate investment trust (REIT) is optimistic on the possibilities of skilled nursing in the long term.

“We’re on the hunt for skilled nursing,” National Health Investors (NYSE: NHI) president and CEO Eric Mendelsohn said on the REIT’s first-quarter earnings call. “I’m a little worried the rest of the world will be in on the secret.”

The Murfreesboro, Tenn.-based REIT, which owns 148 senior housing communities and 72 SNFs, reported net income of $61.02 million, or $1.37 per share for the first quarter, compared with net income of $35.68 million, or 89 cents per share in the year-ago period.

Like others in the field, NHI also withdrew its guidance for 2020, “due to the lack of visibility caused by this pandemic on our operators and our business.”

In terms of the immediate COVID-19 situation among its operators, NHI has 192 “active resident cases” in 37 buildings, with 97 cases in its SNFs, 40 in the skilled nursing wings of NHI’s continuing care retirement communities (CCRCs), and 55 cases in its senior housing properties.

The properties reporting cases included 20 senior housing properties and 17 SNFs, NHI chief investment officer Kevin Pascoe said on the call.

NHI’s SNF operators are benefiting from the CARES Act, with payments from the Provider Relief Fund averaging $150,000 per building, he added. The 2% Medicare sequestration suspension and the 6.2% increase in the Federal Medical Assistance Percentage (FMAP) have also improved SNFs’ near-term liquidity.

Rent payments for April came in at 99.7%, while NHI has collected approximately 94% of rent due for May thus far, Pascoe said.

Senior housing occupancy has fallen in NHI’s different senior living housing types, and skilled nursing occupancies fell even further than those, Pascoe said, because of the short average length of stay for Medicare patients and the temporary suspension of elective procedures. But there is more government financial support for the SNF sector, he added.

NHI did not give specific SNF occupancy declines, pointing to the two largest of its tenants’ publicly traded status. But Pascoe on the call said it was “broadly” 400 or 500 basis points, “consistent with what our other peers have announced.”

“Overall, we feel very comfortable with the credit in our SNF portfolio,” he said.

Dealmaking overall has stalled, and that is likely to continue for the next several months, Pascoe said.

But that said, Mendelsohn expressed optimism about the incremental value of skilled nursing in response to analyst remarks, citing the Ensign Group’s (Nasdaq: ENSG) solid earnings report and the government programs available for SNFs.

“I’ve been talking up skilled nursing for years when nobody wanted it,” he said. “Nobody liked it. People thought it was a bag of steaming real estate on your doorstep, but, but we liked it. [We’ve] come to find that skilled nursing holds up really well.”

NHI’s stock closed at $50.49, down 2.59%.

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