NHI Reforms Portfolio, Extends Lease - Analyst Blog

Murfreesboro, Tennessee-based, National Health Investors, Inc. (NHI) recently acquired Charleston House - an assisted living and memory care facility - for $20.2 million. The move is in line with the company's aim of enhancing its private-pay assisted living portfolio through deals with skilled operators.

The 120-unit Charleston House is based in Beaver Dam in Wisconsin. National Health Investors planned to lease the property to Landmark Senior Living Communities at a rate of 7.75%, including an annual fixed increment. The initial lease term will be of 15 years with renewal options.

Landmark Senior Living has been offering the senior citizen with Alzheimer's care, dementia care, licensed assisted living and respite care options since 15 years. The company has its properties in four locations of Massachusetts - Boston, Beverly, Fall River and Spring Field.

On a separate development, National Health Investors announced the sale of its Edison, New Jersey-based senior living facility for $23 million. The 148-bed campus was sold to the existing tenant of the property - Sunrise Senior Living Inc. (SRZ) - through a purchase-option agreement between the parties.

In addition, National Health Investors extended the master lease with a fellow Murfreesboro-based company, National HealthCare Corp.(NHC) , through 2026. The lease extension deal is for 38 skilled nursing and 3 independent living facilities.

Subsequently, National Health Investors sold six skilled healthcare facilities, comprising 650 beds, from the existing portfolio to National HealthCare. The portfolio, which includes four facilities in Tennessee and one each in Georgia and Kentucky, has been occupied by National HealthCare since 1991. The transaction is expected to close on December 31, 2013.

National Health Investors generated per year annual rent revenue of $33.7 million from National HealthCare, as well as an additional percentage of revenue increase over a base year. However, considering the sale deal, National HealthCare's annual base rent will drop by $2.95 million effective January, 2014.

With the lease expansion and sale agreement, National Health Investors has strengthened its relationship with National HealthCare, a premium long-term healthcare centers and home healthcare programs operator with expertise of over 40 years. The deals are a strategic fit and aimed at creating an efficient portfolio through realignments which would lessen the company's concentration risk as well as generate better returns.

Lately, National Health Investors has been very active on portfolio restructuring activity. Accordingly, the company recently penned a purchase and leaseback agreement worth $9 million with Washington-based Milestone Retirement Communities LLC.

National Health Investors, a real estate investment trust (REIT), specializes in financing healthcare real estate through purchase and leaseback transactions and mortgage loans. The company's investments involve skilled nursing facilities, assisted living facilities, independent living facilities, medical office buildings and hospitals.

National Health Investors is expected to release its fourth-quarter 2012 results on February 11, 2013. The Zacks Consensus Estimate for fourth quarter FFO (fund from operations) is currently pegged at 82 cents per share.

Further, the company currently has a Zacks #2 Rank (implying a short-term Buy rating). We also maintain our long-term 'Neutral' recommendation on the stock.

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

NATL HEALTHCARE (NHC): Free Stock Analysis Report

NATL HEALTH INV (NHI): Free Stock Analysis Report

SUNRISE SENIOR (SRZ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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