National Health Investors, Inc. (NHI) is a self-managed real estate investment trust (REIT) that specializes in senior housing and medical facility investments. With a diverse portfolio spanning 31 states, NHI has established itself as a prominent player in the healthcare real estate sector.
Company History and Evolution
Founded in 1991 as a Maryland corporation, NHI began as a specialized REIT focused on the acquisition and leasing of healthcare properties. The company initially concentrated on purchasing skilled nursing facilities, assisted living facilities, and independent living communities, which it then leased to experienced healthcare operators under triple-net lease arrangements. Over the next two decades, NHI steadily grew its portfolio of healthcare real estate assets through strategic acquisitions and investments.
A key milestone in the company's early history was the acquisition of National HealthCorp, L.P. in 1991, which significantly expanded NHI's holdings of skilled nursing facilities. As the company evolved, it diversified its portfolio to include other healthcare property types, such as entrance-fee retirement communities and hospitals. Throughout its history, NHI has faced various challenges, including navigating changes in government reimbursement policies for skilled nursing and other healthcare facilities, as well as managing tenant credit risks. The company demonstrated resilience during the Great Recession of the late 2000s, which put financial strain on many of its healthcare tenants. NHI responded by working closely with its operators to restructure leases and provide additional capital support where necessary.
In the 2010s, NHI continued to diversify its portfolio, increasing its investments in assisted living, independent living, and specialty hospital properties. The company also began exploring joint venture and RIDEA (REIT Investment Diversification and Empowerment Act) structures to gain exposure to the operations of its senior housing assets, in addition to the real estate ownership. These strategic moves helped NHI adapt to evolving trends in the senior housing and healthcare industries.
Portfolio Composition
NHI's portfolio includes a wide range of property types, including independent living facilities (ILFs), assisted living facilities (ALFs), entrance-fee communities (EFCs), senior living campuses (SLCs), skilled nursing facilities (SNFs), and hospitals. As of December 31, 2024, NHI had gross investments of approximately $2.95 billion in 172 healthcare real estate properties, along with a portfolio of 16 mortgages and other notes receivable totaling $289.2 million, excluding an allowance for expected credit losses of $20.2 million.
Financials
Financially, NHI has demonstrated a strong track record of performance. For the fiscal year ended December 31, 2024, the company reported total revenue of $335.18 million, up from $319.83 million in the prior year. Net income for the year was $136.64 million, compared to $134.38 million in the prior year, representing a 1.7% increase. The company's operating cash flow (OCF) for 2024 was $207.77 million, while free cash flow (FCF) was $203.70 million.
For the fourth quarter of 2024, NHI reported revenue of $85.75 million and net income of $43.24 million. The company achieved year-over-year revenue growth of 7.9% in Q4 2024.
NHI's NAREIT Funds from Operations (FFO) per diluted common share increased 3.6% to $4.55 in 2024, while Normalized FFO per diluted common share rose 2.5% to $4.44. The company's Funds Available for Distribution (FAD) increased 8.7% to $204.2 million for the year.
Investment Strategy and Performance
NHI's balanced approach to investment has allowed it to navigate the challenges faced by the senior housing industry. The company's portfolio is diversified across property types, tenant operators, and geographic regions, mitigating concentration risks. Additionally, NHI's focus on both need-driven and discretionary senior housing assets provides exposure to different segments of the market, helping to offset volatility.
One key area of focus for NHI has been its Senior Housing Operating Portfolio (SHOP) segment, which was established in 2022. This segment comprises 15 independent living facilities located across eight states, with a combined 1,730 units. The SHOP segment contributed $12.2 million in net operating income (NOI) during 2024, an increase of 32% compared to the prior year. The company has seen strong occupancy and margin improvement in this segment, highlighting the potential for growth through its operating platform.
NHI's external growth strategy has also been a key driver of its performance. In 2024, the company announced investments of over $237.5 million at an average initial yield of 8.6%. This included a mix of real estate acquisitions, mortgage loans, and mezzanine financing. NHI's strong balance sheet, with a net debt to adjusted EBITDA ratio of 4.1x as of December 31, 2024, provides the company with the flexibility to continue pursuing accretive investment opportunities.
Industry Outlook and Challenges
Looking ahead, NHI remains optimistic about the long-term fundamentals of the senior housing industry. The aging population, increased life expectancy, and growing demand for specialized care are expected to drive sustained growth in the sector. NHI is positioned to capitalize on these trends through its diversified portfolio, strategic partnerships, and disciplined investment approach.
However, the company is not without its challenges. The senior housing industry has faced headwinds in recent years, including labor shortages, rising costs, and the lingering effects of the COVID-19 pandemic. NHI's tenants and operators have had to navigate these complex market conditions, which can impact the company's financial performance.
Additionally, NHI's close relationship with one of its largest tenants, National HealthCare Corporation (NHC), has raised some concerns among investors. One of NHI's board members also serves on NHC's board, which could create potential conflicts of interest. The company has stated that it has implemented measures to address these concerns, but the situation remains an area of focus.
Liquidity and Financial Position
NHI maintains a strong liquidity position, with $24.29 million in cash and cash equivalents as of December 31, 2024. The company also has access to $368.80 million under its $700 million unsecured revolving credit facility. NHI's debt-to-equity ratio stands at 0.84, calculated as total debt of $1.15 billion divided by total equity of $1.38 billion. The company's current ratio is 0.96, while its quick ratio is also 0.96, indicating a solid short-term liquidity position.
Operational Segments
NHI operates through two reportable segments: Real Estate Investments and Senior Housing Operating Portfolio (SHOP).
The Real Estate Investments segment includes real estate investments, leases, and mortgage and other notes receivable in various healthcare facilities. As of December 31, 2024, this segment had gross investments of approximately $2.60 billion in 172 healthcare real estate properties across 31 states, leased primarily under triple-net leases to 27 tenants. The portfolio comprised 106 senior housing communities, 65 SNFs, and 1 hospital. The mortgage and other notes receivable portfolio totaled $289.20 million, excluding a $20.20 million allowance for expected credit losses.
The SHOP segment consists of two ventures that own the operations of 15 ILFs located throughout the United States, operated on behalf of NHI by independent managers. As of December 31, 2024, the SHOP segment had gross investments of approximately $358.40 million in these 15 properties with a combined 1,730 units.
Geographic Distribution
NHI's investments are spread across 31 states in the United States. The two states with the highest concentration of investments are South Carolina (11.6%) and Texas (10.1%), highlighting the company's geographic diversification strategy.
Future Outlook and Guidance
For 2025, NHI has provided guidance indicating continued growth. The company expects NAREIT FFO and normalized FFO per diluted common share to reach $4.63 at the midpoint, representing increases of 1.8% and 4.3% respectively over 2024. FAD is projected to reach $221.7 million at the midpoint, an 8.6% increase over 2024. The SHOP segment's NOI growth is expected to be in the range of 12% to 15% over 2024.
NHI's 2025 guidance includes $225 million in new investments at an average yield of 8.1%. The guidance also factors in the continued collection of deferred rents and the fulfillment of existing commitments. While the guidance includes preliminary assumptions for the annual NHC percentage revenue rent increase and the Discovery PropCo May 1, 2025 rent step-up, NHI does not believe the Discovery portfolio will be able to meet the 5% target yield.
Conclusion
In conclusion, National Health Investors is a diversified REIT with a focus on the senior housing and medical facility sectors. The company's balanced investment approach, strategic partnerships, and operational expertise have enabled it to navigate the complexities of the healthcare real estate market. With a strong financial position, diversified portfolio, and positive outlook for 2025, NHI remains well-positioned to capitalize on the favorable demographic trends and deliver value to its shareholders. While challenges persist in the industry, NHI's commitment to prudent capital allocation and disciplined investment decisions should continue to drive long-term growth and stability.