NATIONAL HEALTH INVESTORS INC Q3 FY2024 earnings call

• Strong fundamentals with occupancy and EBITDARM coverage improving across major asset classes. SHOP occupancy at 88.6% approaching rate growth potential. - Senior Living Management tenant notified of payment issues, but new management secured for affected properties quickly. - Year-to-date, closed over $205M in investments, including $121M acquisition of Spring Arbor portfolio. Sourced opportunities over $1.9B, with board-approved LOIs of $59.8M. - Asset management: Except for SLM, positive EBITDARM coverage and occupancy. Bickford showed improvement. SHOP momentum with NOI growth and occupancy approaching 90%.

SHOP: Third quarter NOI increased 2.5% sequentially and 30.4% year-over-year; year-to-date, SHOP NOI has increased by 40.9%. Senior Living Management: One cash basis tenant had payment issues, but new management was secured for affected properties. Entrance fee and skilled nursing portfolios: Together generate approximately 58% of NOI. Discretionary senior housing portfolio had coverage of 1.64x (sequential), SNF portfolio had coverage of 3.04x (sequential improvement).

• Tightened SHOP NOI growth guidance to 28%-30% from 25%-30%. - Completed equity offering, amended revolving credit facility, strong balance sheet with net debt to adjusted EBITDA at 4.4 times. - Dividend declared: $0.90 per share.

• Senior Living Management tenant payment issue and related transition risks. - Potential impacts from healthcare policy changes, including ACA and state-level regulations. - Market risks related to cost of capital and competition affecting yields.

Q: On PACS, what are preliminary thoughts and coverage post transition?

A: Kevin Pascoe said PACS is a small customer, less than 3% revenue, coverage over 2 times on EBITDARM level for prior operator, recent transition so no long run rate yet but monitoring closely.

Q: What are expected yields in the pipeline and mix between fee simple and SHOP related?

A: Kevin Pascoe said pipeline has range of investment opportunities, generally 8% or more yield, mix depends on deals, target 8% or more yields.

Q: On Spring Arbor portfolio transition, comment on assets RevPAR and breakeven occupancy?

A: Kevin Pascoe said they did underwriting, RevPAR strong for local markets, breakeven occupancy in 80%-85% range.

Q: On SLM, timeline of cash flow from two cash flowing buildings?

A: Kevin Pascoe said minimal rent initially due to transition needs like PTO, payrolls, but expecting more rent over next 30 days.

Q: Timeline of announcing new Chairman?

A: Eric Mendelsohn said likely after Andy's retirement end of year, stay tuned.

Q: Concerns from election on healthcare policy?

A: Eric Mendelsohn said cautiously optimistic, some threats from letters may lessen, previous CMS head was industry friendly.

Q: How far along in discussions with NHC?

A: Eric Mendelsohn said discussions ongoing, engaged Blueprint for advice.

Q: Thoughts on shop occupancy and rate push?

A: Kevin Pascoe said goal is 90%+ occupancy, expecting mid-single-digit revenue increase this year, margin expansion as occupancy stabilizes.

Q: Labor costs in SNF and senior housing?

A: Kevin Pascoe said labor expense growth stabilized, SNF minimum staffing requirement may change, labor steady in SHOP.

Q: Board member search update?

A: Eric Mendelsohn said search for independent board member down to finalists, presented next proxy season.

Q: State level healthcare policy concerns?

A: Eric Mendelsohn said watching local legislature driven subsidy programs for skilled nursing.

Q: Deals with PACS in pipeline?

A: Kevin Pascoe said no current deals with PACS, just starting to get to know them.

Q: Investment pace and overhead?

A: Eric Mendelsohn said annual run rate 200-400M, hiring Senior Vice President of Legal Affairs to beef up staffing.

Q: Shop NOI growth cadence?

A: Kevin Pascoe said waiting for buildings to stabilize at >90% occupancy before forecasting growth, expecting early to mid-2025.

Q: Shop strategy difference from peers?

A: Kevin Pascoe said combination of price sensitivity of mid price point model and need to climb out of prior operator's trough, used pricing to drive occupancy.

Q: Length of stay in SHOP?

A: Eric Mendelsohn said length of stay lighter than desired but stable, on par with industry, influenced by pandemic.

Q: Impact of Republican sweep on SNF Medicare Advantage?

A: John Spaid said cautiously optimistic, previous CMS head was industry friendly.