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National Health (NHI) Notes Higher Rent Receipts, Occupancy Down

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Despite the coronavirus outbreak-led market disruptions, National Health Investors, Inc. (NHI - Free Report) , commonly known as NHI, issued a business update related to monthly contractual rent collections and average occupancy from its three largest senior housing operators — Bickford, Senior Living Communities or SLC and Holiday.

Particularly, its rent collections continue to remain strong, with December rent collections coming in at 96.3%, up from November contractual rent of 87.7%. Moreover, fourth-quarter rent collections improved from 92.7% (as of Nov 16) to 93.9%.

Bickford, which operates 47 properties for the company, had rent deferrals amounting to $750,000 or 2.8% of contractual cash due for December and $3.75 million or 4.6% of fourth-quarter contractual rent due for the December-end quarter.

The remaining balance of uncollected rent for December and the fourth quarter is primarily in connection to a previously-disclosed additional tenant concession and lower projected revenues from properties transitioned before the start of the pandemic.

Notably, NHI’s senior housing business has been adversely impacted by the COVID-19 pandemic. The company has witnessed incidences of COVID-19 outbreaks. This along with probable slower move-ins and a high level of move-outs is anticipated to have resulted in occupancy erosion at its senior housing portfolio.

In fact, Bickford, reported occupancy of 79.5% in November, declining 110 basis points (bps) from October’s reported occupancy of 80.6%.

Holiday, operating 26 properties for NHI, also witnessed a decline in monthly occupancy. Occupancy as of November end was 70%, falling 80 bps and 150 bps from 77.8% and 78.5% in October and September, respectively.

Lastly, SLC, which operates nine properties for NHI, witnessed a monthly occupancy decline of 150 bps to 77.1% in November.

Although strong rent collections from senior housing operators are expected to support top-line growth, unfavorable occupancy trends in its senior housing portfolio will likely impact fourth-quarter earnings.

Apart from the coronavirus outbreak-led occupancy woes, the senior housing market has been reeling with high-supply conditions in certain markets and rising labor costs. This is concerning for NHI because elevated supply usually curtails landlords’ pricing power and limits growth in occupancy level.

Moreover, shares of this Zacks Rank #3 (Hold) company have lost 13.7% over the past year, wider than the industry’s decline of 3%.

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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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