National Health Investors, Inc. (NYSE: NHI) is a self-managed real estate investment trust (REIT) that specializes in the acquisition and leasing of healthcare properties. The company's portfolio consists of independent living facilities (ILFs), assisted living facilities (ALFs), entrance-fee communities (EFCs), senior living campuses (SLCs), skilled nursing facilities (SNFs), and a hospital (HOSP).

Business Overview

NHI's business model is centered around two key segments: Real Estate Investments and Senior Housing Operating Portfolio (SHOP). The Real Estate Investments segment focuses on acquiring and leasing healthcare properties, primarily through triple-net leases, to a diverse group of operators. The SHOP segment, on the other hand, involves the direct operation of 15 ILFs located across eight states.

Financials

For the full year 2023, NHI reported net income of $135,654,000, revenue of $319,835,000, operating cash flow of $184,450,000, and free cash flow of $180,707,000. These strong financial results demonstrate the company's ability to generate consistent and reliable cash flows from its diversified portfolio of healthcare properties.

In the first quarter of 2024, NHI continued its positive momentum, reporting net income of $30,657,000, revenue of $81,513,000, operating cash flow of $40,827,000, and free cash flow of $50,975,000. The company's performance was driven by stable cash collections, steady deferral repayments, improving operator fundamentals, SHOP occupancy and revenue growth, and no unexpected rent concessions.

Real Estate Investments Segment

NHI's Real Estate Investments segment, which accounts for the majority of its business, has a diverse portfolio of 163 properties located across 31 states. The portfolio is leased to 25 tenants, with the top three tenants being Senior Living Communities, LLC (16% of total revenues), National HealthCare Corporation (NHC) (14% of total revenues), and Bickford Senior Living (12% of total revenues).

The company's need-driven senior housing properties, which include ALFs and SLCs, have demonstrated strong performance, with EBITDARM coverage improving to 1.35x as of the end of the first quarter of 2024. This represents the eighth consecutive quarter of sequential growth, driven by the continued strong performance of Bickford and other need-driven operators.

NHI's discretionary senior housing portfolio, which includes ILFs and EFCs, has also performed well, with EBITDARM coverage improving to 1.54x. The company's SNF and Specialty Hospital portfolio reported solid coverage of 2.83x, with NHC's coverage improving to 3.8x.

SHOP Segment

In the SHOP segment, NHI has continued to see strong momentum, with first-quarter NOI increasing by 54.8% year-over-year to $2.9 million. Resident fees increased by 13.3%, driven by a 1,000 basis point increase in occupancy to 85.3%. The company's strategy of using rate to drive occupancy growth has been effective, as evidenced by the relatively flat quarterly RevPOR.

Outlook

Looking ahead, NHI has raised its full-year 2024 guidance for Normalized FFO to a range of $190.3 million to $192.5 million, or $4.37 to $4.43 per diluted share. The company has also increased its FAD guidance to a range of $196.7 million to $199.2 million, representing year-over-year growth of 5.4% at the midpoint and 6% at the high end.

The improved guidance reflects several factors, including the recent amendment to the Bickford lease, which increased the annual rent to $34.5 million, the increase in NHC's percentage rent, and the expected SHOP NOI growth of up to 30% year-over-year.

Liquidity

NHI's balance sheet remains a source of strength, with ample liquidity of over $470 million in cash and revolver availability, as well as the full $500 million available under its ATM program. The company's net debt to adjusted EBITDA ratio stood at 4.4x as of the end of the first quarter of 2024, one of the lowest among its REIT peers.

Growth Strategy

The company's growth strategy is multifaceted, focusing on organic opportunities, such as deferral repayments, rent step-ups, and capital investment projects, as well as external growth through accretive investments. NHI's pipeline currently exceeds $300 million, with the company having submitted LOIs on deals valued at over $100 million with initial yields of more than 8% on average.

Conclusion

National Health Investors is a well-diversified healthcare REIT that has demonstrated its ability to generate consistent and reliable cash flows from its portfolio of healthcare properties. The company's strong financial performance, balanced growth strategy, and healthy balance sheet position it well to continue delivering value to its shareholders in the years to come.