National Health Investors(US:NHI)2021-08-10 18:52Financial Data and Key Metrics Changes - Net income per diluted common share for Q2 2021 was $0.85, down from $0.99 in Q2 2020, primarily due to $9.9 million in deferrals, partially offset by $6.5 million in gains on real estate sales [15] - NAREIT normalized FFO decreased by $0.30 to $1.16 from $1.46 year-over-year [15] - Normalized FAD declined by $8.1 million year-over-year to $52.8 million, driven by higher deferrals [15] Business Line Data and Key Metrics Changes - Collection rate for Q2 was approximately 87%, down from 94% in Q1, impacted by increased deferrals [10] - The entrance fee, skilled nursing, and hospital segments, representing close to 60% of annualized cash revenue, performed well, while assisted living and memory care segments faced occupancy and margin pressure due to staffing shortages [10] - Bickford, the largest assisted living operator, improved occupancy by 240 basis points from Q1 to Q2, reaching 79.6% in July [22] Market Data and Key Metrics Changes - The skilled nursing portfolio, representing 30% of annualized cash revenue, had an EBITDARM coverage of 2.86x, supported by strong tenants [28] - Senior living communities had an average occupancy of 78.5% in Q2, up 80 basis points from Q1, and further improved to 79.9% in July [24] Company Strategy and Development Direction - The company is focused on optimizing relationships with operators and has completed or announced nearly $220 million in dispositions year-to-date, aiming for a total of $250 million to $400 million by year-end [6][8] - The strategy includes selling low-yielding assets and reinvesting in higher-yielding opportunities to return to historic NOI growth profiles [9][29] - The company is considering various options for remaining assets, including retenanting and lease restructuring [27] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of the senior housing industry, despite near-term challenges, and noted steady occupancy growth since March [12] - The company is cautious about providing guidance due to ongoing restructuring but expects to return to growth and dividend increases as occupancy and margins improve [11][17] Other Important Information - The company reduced its quarterly dividend by 18% to maintain balance sheet strength while supporting operators through recovery [11] - The company ended Q2 with approximately $1.4 billion in total debt, with 93% being unsecured, and a weighted average cost of debt of 3.28% [19] Q&A Session Summary Question: Impact of Holiday sales on decision-making - Management indicated that the Atria and Welltower transaction influenced their decision to sell Holiday assets, which had been under consideration for some time [34][36] Question: Disposition guidance and remaining assets - Management confirmed they are running towards the higher end of the $250 million to $400 million disposition guidance, with various options for remaining Holiday assets [42] Question: Coverage ratios and rent deferrals - Coverage ratios do not reflect rent deferrals; they are based on scheduled rents [38] Question: Future of skilled nursing and capital redeployment - Management expressed a desire to increase exposure to skilled nursing but noted challenges in finding suitable properties due to increased market attention on government support [60] Question: Timing of deferral recapturing - Management expects to start recapturing deferrals in early 2022, with a process extending into 2023 [79]