National Health Investors Inc (NHI) Q4 2024 Earnings Call Highlights: Strong NOI Growth and ...

• Cash Rent Increase: Nearly 9% year-over-year growth.
• NOI Growth: 12.5% in Q4 and approximately 32% for the year.
• Investments: Over $150 million in Q4 at an initial yield of 8.5%; $235 million for the year at an average yield of 8.6%.
• Balance Sheet Leverage: Decreased to 4.1 times from 4.4 times in Q3.
• Net Income Per Share: $3.13 for the year, unchanged from the prior year.
• NAREIT FFO Per Share: Increased 3.6% for the year to $4.55 and 13.8% for Q4 to $1.24.
• Normalized FFO Per Share: Increased 2.5% for the year to $4.44 and 2.8% for Q4 to $1.12.
• FAD: Increased 8.7% for the year to $204.2 million and 10% for Q4 to $52.1 million.
• Shop Occupancy: Improved by 620 basis points to 89.4%.
• Shop NOI: Increased 12.5% year-over-year to $3.2 million in Q4.
• REVPOR Growth: Increased 60 basis points in Q4.
• Dividend: $0.90 per share declared for Q1 2025.
• 2025 Guidance: NAREIT FFO per share expected to increase 1.8% to $4.63; Normalized FFO per share expected to increase 4.3%.

• Warning! GuruFocus has detected 2 Warning Sign with NHI.

Release Date: February 26, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• National Health Investors Inc (NYSE:NHI) reported a nearly 9% year-over-year increase in cash rent, driven by solid organic growth and increased investment activity.
• Shop occupancy accelerated, contributing to a 12.5% NOI growth, with investments of over $150 million during the quarter at an initial yield of 8.5%.
• The company announced over $235 million in investments at an average yield of approximately 8.6%, marking its most active year since 2019.
• NHI delivered growth in annual NAREIT FFO, normalized FFO, and FAD for the first time since 2020, exceeding the high end of its original February guidance.
• The balance sheet leverage improved, ticking down to 4.1 times from 4.4 times in the third quarter, indicating strong financial management.

Negative Points

• The Discovery Senior Living properties have not performed as expected, leading to evaluations for transitioning the properties to another operator.
• NHI's guidance includes assumptions for additional costs and concessions related to normal asset management transitions, dispositions, and loan repayments.
• The company is facing challenges with the SLM portfolio, including a $14.5 million mezzanine loan that is still in flux and may impact future financial performance.
• Deferred rent collections are expected to slow down significantly in 2025 compared to 2024, with only about $4 million baked into the guidance.
• The interest rate environment has increased the cost of capital, which could weigh on future investment opportunities and financial performance.

Q & A Highlights

Q: Can you provide details on the rent and interest income generated from SLM in 2024 and expectations for 2025? A: Rent and interest, including our mezzanine loan, are expected to be about 55% in 2025 compared to 2024 on a full-year basis. Rent alone is projected to be around 70% of the previous year's levels.

Q: What are the assumptions behind the 12% to 15% growth guidance for the shop segment, and are there plans to transition some assets from triple net to shop? A: The growth is based on continued occupancy momentum and REVPOR increases. We are considering transitioning some triple net senior housing assets to shop structures to capitalize on long-term potential with existing or new operators.

Q: Can you explain the acquisition guidance of $225 million, given the existing pipeline and LOIs? A: The guidance includes expected closings of properties under LOI, with a high degree of confidence in hitting the target. The pipeline is larger than the guidance, indicating potential upside.

Q: How do you plan to handle the Discovery portfolio if it doesn't meet the rent reset targets? A: We are evaluating options, including retenanting buildings or converting them to shop or RIDEA structures to potentially increase NOI.

Q: Are there plans to expand the skilled nursing portfolio, and how might potential Medicaid cuts impact your business? A: We are open to expanding the skilled nursing portfolio if opportunities arise at the right price and with the right operators. It's too early to determine the impact of potential Medicaid cuts, but the market remains robust.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.