NHI - Earnings call transcript Q1 2018 | National Health Investors, Inc.

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Colleen Schaller

Hello, everyone. This is Colleen Schaller, Director of Investor Relations. Welcome to the National Health Investors Conference Call to review the Company's Results for the First Quarter of 2018.

On the call with me today is Eric Mendelsohn, President and CEO; Roger Hopkins, Chief Accounting Officer; Kevin Pascoe, Chief Investment Officer; and John Spaid, Executive Vice President, Finance. The results as well as notice of the accessibility of this conference call on a listen-only basis over the internet were released this morning before market opened and a press release has been covered by the financial media.

me which that are are let this statements forward-looking start, call, conference not we remind any you in statements. As historical facts, risk not investors uncertainties cautions that forward-looking may NHI any and of guarantees involve are future performance. statements or as NHI's conference statements date the judgment forward-looking of of All represent this call. XX-Q various in to factors the Exchange NHI Commission, for the made risk in NHI's the its XX, are urged disclosures with and Investors periodic other Securities disclosed information and Form carefully review March ended by reports filed quarter including XXXX. www.sec.gov on Copies website on filings are of www.nhireit.com. these the available SEC's at website at or NHI's

are has terms encouraged provided certain other filed all with X-K review in addition, measures, turn the earnings on to reconciliations to call which together used provided call In I now which those are information release NHI's earnings in will non-GAAP SEC. tables financial been over the Mendelsohn. Listeners the in with in this related release Form release. that provided are reconciliations Eric and of schedules, and

Eric Mendelsohn

year-to-date, XX Hello, growth to of you, a glad its us Kevin join great acquisition Senior could facilitate our Living. NHI’s operating will is off to of once This partners. we another are discuss for with XXXX I’m and later pleased relationship start over Thank you we to today. report executed to delighted are ability investments that everyone as Colleen. recent expand again with is Bickford great example million

we rates which share will conservative Ensign’s and and this and issues recent of more gratified on results word highly senior we normalized currents state acquisitions. we and discovery, of increase period about favorable. to both continue housing; were the rising our financial QCP quarterly accretive FFO Roger momentarily. We transaction reported underwriting first results give results per to are that an AFFO the at for X% on see A of focus quarter Looking In the note, price remain. interest supply cross color normalized in year-over-year.

away nursing take on that skilled the has housing spectrum. still is place a Our senior

see through to I like continue Roger. walk the will Roger to the well-funded leveraged REITs We lower call financials. opportunities over now Hopkins NHI. interesting the turn for

Roger Hopkins

$X.XX a reflect Thanks, impacts everyone. of quarter as XXXX our for first to increased year the one had X% also XXXX. first in Eric. $X.XX great quarter AFFO ago. diluted the compared increased $X.XX $X.XX Normalized those investments, FFO announced same X% to ago. share to We one Normalized diluted first in year compared Hello to the per for per quarter share results period new and of the

a quarter to in mix senior our of We Form maintain first million loan revenues demographic construction, renovating to needs profile, capital of XXXX. develop of make we or our over X.X% in new our many expanding meet $XX an are or total of to debt equity adults. the in same commitments outlined to [indiscernible] continue as quarter Whether provide for in tenants totaling NHI deploy actively facilities growth in Several XX-Q. fund a to careful the leverage NHI’s showed of the its the acquisition and access forms. and low growing

year less XXXX, an quarter when were ago. million, our one same and than administrative the $X.X general period of to For first expenses increase compared the $XX,XXX

quarter Our $X.X was expense non-cash compensation share first million. based in the

growth on April of AFFO a due [indiscernible] these our to convertible and back on also a of related share in of incentivized XXXX loss annual notes transactions. is opportunistically per and dividends a We basis. portion bought NHI’s recognized $XXX,XXX

morning will and rent straight to gives accounting escalators our we share the quarter for line our dividend required. no regular per line income a announced performance, is $X of on estimate AFFO convention our and which cash normalized in our record rent investments This XXth, of actual ratio non-GAAP of our straight the providing FFO measure used non-cash Our to with payout range, the currently Friday making excludes its credit will second payout shareholders which thereby NHI low of to low calculation lease we in normalized investments. is XX% from monthly XX% excess be new be AFFO review to ratio for June range and be

previously Moving unchanged. onto remains guidance, for guidance announced XXXX our

second release our the of this expected press previous Our end with call guidance our XXXX. pipeline it. the We report to in per shown we active investments diluted a fund guidance share $X.XX John to turn will in Spaid, now I of likely who of AFFO more uses normalized capital. the equity to to clarity give $X.XX and When will over range earnings we volume further of our August, capital the discuss will by our morning. debt $X.XX to quarter as normalized in results and allows for FFO and range $X.XX which investment affirm

John Spaid

Roger. you, Thank

March ended million our leaving at debt $XXX years, of quarter times, the outstanding debt available at us X.X NHI quarter times. average capacity. charge annualized revolver debt net metrics the weighted of For cost X.X% ratio million with debt coverage at first capital were ended average maturity on our fixed to X.X with revolver, on $XXX EBITDA X.X XXst, weighted and

high price After we not did $XX.XX program, bonds from but down did conversion now in XXXX. $XX.X of at NHI’s note of $X.XX the use convertible convertible for make dividend, at adjusting quarter the QX $XX.XX NHI’s end aftermarket first million [bond] During equity stands value we acquire our (Ph).

will the continue debt in April down, it bonds matures when As ratchet cost instrument convertible we of declared XXXX. dividends conversion per of the of increasing the to $X.XX price share,

call net over positioned the the five bonds turn to to continues NHI for of feature. allowing ratio, discuss a at our million in future par be currently will Pascoe reduce EBITDA future total us debt conversion convertible leverage end four We value now I $XX our have investments. to With Kevin to the bonds purchased of exposure lower to to now to our the accretive time portfolio. well

Kevin Pascoe

Thank you, John.

Looking the end of X.XX portfolio, times. at the overall EBITDARM quarter the coverage was at fourth ratio

and was portfolio’s up at portfolio slightly performance X.XX housing steady Our at our remains X.XX times senior times. skilled

As of in into we winter effects we higher and and some move expenses see volumes. typically that included quarter, first the the tour look lower seasonal

the the into to of Moving the out occupancy continues spring, which some improve these our lead increasing the so expenses normalize identified effects far April. with to we broader year seasonal and what the as seen compliance, tenant month with and into winter tend with of we've traffic consistent months portfolio. through Despite improves, this is

continue a ratio look at the a larger positive cash XX Taking closely working Living still feel has to operating the are times trajectory. on We XX% with operator, be X.XX Bickford for months an represents Senior coverage December of our trailing our leases, ending XXst. revenue EBITDARM of they but which

can in Last rate acquisition XX our reset has well fixed Erie, Cleveland, costs As in again Pennsylvania. NHI good with were the announced are for Eric the we located will of three be and living acquired XXX,XXX a a Ohio to were communities total Columbus million rebuild capital initial today. allowance complete transition of with are transaction escalators XX.XX get an mentioned, maturity. Bickford. at five to located week, years we This X.X% for Bickford we communities capitalized the in and rent includes expand relationship and The markets assets fair units a leased an million. market below These and commitment and add through annual also and a try expenditures. once new Bickford affiliate and of a is planned $X.XX This assisted for replacement value period year to opportunity in memory opportunity care The through these acquired to communities five. of value are happy totaling if they good XXX improvements. capital once

ratio Senior XXXX Turning to line which basis and end. trailing revenue, is were month Communities, cash has their our XX% year-to-date calendar X.X of on performance XX the of been as quarter expectations. represents a solid Entry fees with year XXXX coverage times Living for fourth in EBITDARM

was began finished to April revenue quarter my of has on XX% EBITDARM occupancy the ratio quarter positive with seasonality, fourth first corporate XXXX. fourth for some has comments April of the times. as cash of versus National note. our quarter, represents quarter and and end. accounts down cash of our earlier coverage Healthcare Looking partnership an of charge Corporation the Consistent X.X at see a coverage move-in Retirement Holiday a with portfolio positive times first our to X.XX XX% and lead flat for revenue but activity on and NHC fixed

on projects remains asset to with active to this very next expect and pipeline, Turning review the classes we under our close Ensign development two it month. various

but growth the remain our With strong is fundamentals, experienced will to the slight senior some seen conservative call housing in very assets smaller markets, market for for competitive. rate focused We I expansion have and over secondary that, hand operators Eric. still back cap on ultimately accretive local underwriting, shareholders. We marketplace

Eric Mendelsohn

And that you, the Thank with for questions. will now we Kevin. open line

Operator

line [Operator Vanacore with proceed. question Please the comes Instructions] from of Chad first And our Stifel.

Chad Vanacore

Hi there.

what Roger bit. sorry Straight a decreased bit I’m said. line So, sequentially a or it like looks had I missed it up rents was

should So and forward? going there change basis that think how any a we quarterly was about there on

Roger Hopkins

to rent investment your line beginning. Chad, in going highest, to new develop schedules the be a is straight for upon

less have straight you rent. line So in our are less as of portfolio these assets age to and going

it’s and that we investment. because So when spreadsheets track it’s are it’s every of for a math get building subtract AFFO, something to to you unless just function we hard

Chad Vanacore

up right? thinking Roger shouldn’t that add push straight not am about I or this line

Roger Hopkins

term. be the lease Straight income will in line the of beginning a highest

Chad Vanacore

sequentially? But declined it looks it

John Spaid

this at is Chad, John. a it. can take So, Maybe I shot

escalators the what that eventually negative. rents they set our all flip for to for from is So positive portfolio happens have

beginning the add to its of term a XX negative it year in they year through midpoint as number. So to if progresses the about lease, lease rent then a the flips

basically revenues over it’s pulling down, actually it’s because the period. So entire distributed evenly

them. book no with we they CPI, straight that when line like escalators get have is Ensign book for we this don’t to leases have rent Group, So that

you effect. are So, seeing that I think that’s why

Chad Vanacore

straight saying a there grow. sequential as you right? about new that I leases straight should which largely you saying So line line decrease time thinking I’m decline rents that What leases make these am sign should are over but rent is here, mature. is

John Spaid

increase a unless escalator. has and no Well it CPI

Roger Hopkins

did wouldn’t so we see it. lease, Ensign So, an you

John Spaid

contribution. So, it straight any line wouldn’t have

Chad Vanacore

expansion were expanding your then around there. running and beyond getting Okay just NOI, in forma how are? and know over comfortable then relationship that’s And where what with already needed XX% are its Bickford, pro relationship is with you that the that I right total to that you

Kevin Pascoe

Hey Chad its Kevin.

basis at with to them right pro the want XX% new the level. that’s that to Bickford, a love grow we with forma extent our We acquisition more including we on relationship would and So be try can.

customers other can as then task relationship that have think see I to way with to grow is the we well with have the that we Bickford. the continue we to portfolio continue

I extent opportunities the think good we value the for relationships that. foster We we can to have them. solid to and want a we find

we are So have, relationships, other going think the I do but so to continue to of can to be is think our we the mindful that. just we to continue I challenge grow for us concentration

Chad Vanacore

Alright.

expansion So, look for you Kevin? further there could

Kevin Pascoe

With Bickford?

Chad Vanacore

Yes.

Kevin Pascoe

Well by deal so overtime to to we we of opportunistic is that still have recently then the added And relationship ongoing, are going similar closed. got more developments nature, would rest just those. the the from that be there nature the have to in get

just they perfect the for it that we became looked and talked building. size, the the fit know You market. When various type right that’s very choice these clear the to of were around unit them operators for

Chad Vanacore

can Alright technical that situation rents. and default. But progressing? last have me pay wrong if correct me, might to you remind it How operator thought mentioned this. was I’m you I is just a on then quarter continuing

Kevin Pascoe

payment So them. been continue progress, We've make remains missed they current, time. rents not talking still this a entire there to have about

continue progress. very right on they stabilization, are progress I wouldn’t they the that their but we make are say on So they are trajectory. to back with to occupancy, happy

Chad Vanacore

thanks well for hop back into queue. questions. taking Alright, the I will

Eric Mendelsohn

Chad. Thanks

Operator

from with Please next Capital the Daniel question of Bernstein One. comes proceed. [Operator Instructions] line The

Daniel Bernstein

Nursing. about you thinking of morning. the I go or actually here did this some review nice XQ, are are kind some for yields how good Skilled. Senior you about comments cap Housing Housing Senior want for Hi XQ, Skilled investment both seeing and over year, level made the rates the that pipeline you and to in but Obviously just you

at. get offensive is scaling kind pipeline trying where to investments just your what are So looking and of of you

Kevin Pascoe

Dan Sure its Kevin.

the I year the of month. a That comments, talked to in projects for think level expect on quarter good of two Ensign development about. my identified we will close still mentioned or as we investment few the investment, like at full Well in we kind a of later gamut opportunities about whether I it, feel in expect we when last Skilled have you this Housing, we - level opportunities the Nursing, have on of we Senior would opportunities. terms maybe portfolio type some be its if some more Health new psychiatric looking hospital continue Behavioral to what

seeing yield opportunity expansion been and little then credit yields, there on the maybe we I So about makes those right initial X%-ish, expect is out who for period Senior be in that bit are wide kind a be would a it of to or the on of a and range yields us higher finding and higher on other cap rate talked right then and asset what working coverage there the depends And bit and on with secondary with our we really bit discovery markets, what fit a us, for little levels then in those. the for on those. of rate little the Skilled, see still think classes, we Housing have are would investment so kind to to of just sense cap we

belt to under this again of the are investment feel month. information good in what trying mix yield but as I much and out things we we have opportunities pretty is, that as will at can this figure few So shortly as a take have we and like some and got our we here right point

Daniel Bernstein

leads I value those guess you assets, value add further, around, a but probably in you are are and that managed, bit of stabilized. you under you turning bought assets not seeing The are more than more say type

understand are risk those to terms out trying on just acquisitions? going the where in of I’m you So spectrum again

Kevin Pascoe

I us add set is to mixed not important there value pursuing. value say bag balanced terms still would is mean to in Stabilized it’s opportunity, I think keep opportunity something we a at. is to of that I it these turn and that is are that there, actively buildings. Bickford what is we definitely think the definitely but are interesting I add a some looking this around, can very

in make try the what want we stabilized of terms sure in a development and matter. So value-add have portfolio that to of we we or balance good or have for

are of But of table kind just mixed it a in and what there. we is is of us actively it’s again out think bag the terms for pursuing. I So, all on something

Eric Mendelsohn

And Dan this is Eric.

New still a quarters developments are a and new was building, on did hunt for development on We loan what a the broke we new did back like lot new or a couple deep in in that receivership. buildings, where we Hampshire a discounted

Daniel Bernstein

in see another that the if type arrow to heading question, where agencies rating been to want side? quiver makes diversified rating sense. talked on that an you more to tenants, stand or more larger of could capital to credit do towards guess One kind you and a their the to have the you then I need Okay investment grade or have seem get by public of on any you debt we issue add

John Spaid

in One I Sure is and monitoring our in is closer Dan threshold I property say of public we any bond that and do terms at XXX would are would think The to this is we like well to that debt. is, to positioned if role chose. size the are moment, we be we probably What that now XXX issue to think John. million twofold. new will million constantly

the term. interest that in and that think of XX of particularly [indiscernible] about in issued where rates year are are think around terms sent kind So, usually about

to we investments our will as have make and that’s on table on debt really So off some we revolver. is. And the term eventually all

are we something that’s So [indiscernible].

Daniel Bernstein

sounds it and I good. you off will Alright, hop to later. talk guys

Eric Mendelsohn

Thanks Dan.

Operator

KeyBanc The from the [Operator with of comes next Instructions] Markets. proceed. line question Sadler Jordan Please Capital

Jordan Sadler

and you afternoon good Thank morning rather. good

So like you back base the touch on it’s deal. Bickford

there. think would it then - be the was Bickford consistent on might EBITDARM, what curious the X.XX like yield and based looks if GAAP your coverage Just that below be so I at or currently is pro times underwriting forma what

Kevin Pascoe

Kevin. Sure this is

kind on call, building. have is at some in are mentioned I capital of transition some and to we the So as a going going time where period the of there improvements

then would through time. P&L of some is really are and a they them period. we we get through to as things And be period get operations. seeing feel for standpoint are So coverage expect the kind Once there say it opportunity to Expenses in flowing lines like transition along kind from a they I would into expecting. way for improve beyond, some of the any that, two what will what be portfolio of we and good initially year of I is the

but And be in a to sure why have time, you we Roger reset will the so to rent it that would in so over making the still addition addition, like we feature we coverage we if would in is them. coverage the are - to at expect at for which same to rent have time you will market be lease, we the buildings add? way

Roger Hopkins

We consider north escalators it’s impact of to could yield, the of going our the Yes. fixed GAAP X%. in

Jordan Sadler

the escalators are What Roger?

Roger Hopkins

X.X%. - X%.

Kevin Pascoe

addition X.X% we that yield. They not that’s are GAAP which rent into to be have factored fixed reset would the then and in

opportunity So for a an it be there is little to better. bit

Jordan Sadler

Okay.

anything but like a else obvious speak sense operating the that obviously or as coming capital of the to understand, it, can sort opportunities just I is Now underwrote which Kevin, a assets guys here renew if they upside Bickford? were leases. is were where give curious you there the is presumably not LTC that of money were any there maybe so not they you owned Sunrise these upside in, from what I’m why to you for us operated is component making a and decided way a can

Kevin Pascoe

think Sure, to as felt That plays rather maybe little to to I cost expense Sunrise mean of model like the it capital as than a I bit pass the into is some used where later does. side, similar but sooner could that savings model to you to higher one I overall operations care on do I operating the Bickford transaction, that is component Bickford’s the related efficient some relates buildings. see said, think know and then one they it what through were more the

feel take in again and more was it that buildings like on through can ability are the cash they then systems and expenses up So as is line management fully implement buildings pass to and overtime. think the there just to to well, really from that they care for the median building, but their opportunity procedures, I think some style very continue that residents I an improve and of the will and they flow season

Jordan Sadler

when And the the passed buildings, you tenants Okay. directly? say mean on you to to

Kevin Pascoe

corporate just Well things through we facility with P&L, just allocations, that Bickford. of that the wouldn’t nature, see

Jordan Sadler

of you, Okay, got right course.

paid sense. Ridge, makes window guys, how then Timber trending quarter. opens and small that the that that fee, you you I’m that Okay recognize curious And for towards stabilization? you and when had option the this regarding off loan property is

Kevin Pascoe

Sure.

them. close the contact still [indiscernible] prepared is to with through occupancy in So it’s will we something that, in continue The based, on to was before that have on a discussions option they bit XX it. those to the just it it are engage performance and But really still construction threshold layout make watching we so progress in place engage operator, which time little side of has have off closely in with progress conversations. occupancy purchase around the right they are if certain once paid the reaches make you the component, million we to

Jordan Sadler

window or needs to speak is occupancy you the for where it to Can to be open? the

Kevin Pascoe

added has us just that we phase continuing it’s the the and been time, the that’s Well phase to piece in the beautifully to whole first and around It’s for XX%, do over the building. big really investment first lease to was two this the time XXX place. performed through entire units well part the

for to little So a of to get it’s just bit going time there. take

has I said don’t any other it’s by paint a going on want like stretch, up first is units well, it those occupancy struggled, to is leasing just because picture side. phase So it’s I not the the really that extremely

and so So where opportunity lease continue to positive units, we they their that’s really are on the progress. the is very

Jordan Sadler

something early didn’t they faster. Okay. have paid off, they on they that I rate, open relative the I like technically that be were was your because you felt were accelerated thought it of an maybe at so maybe option, might got I window coming I it know some coming up in or for but it so to time thought coming portion years five that, in.

is coverage in there, allocated wasn’t maybe one for calculation the how you an previously saying the were for is Roger, last management Roger, calculated, the change show included and coverage EBITDARM noticed what Okay in the portfolio? I its fee that there

Kevin Pascoe

that. this Kevin, Sure, is I take will

have we really Communities. - it’s had those actually we have So the that Living Senior for published financials only

We way. deep questions and communities. right we to as level a did the - very that management were high that things we that a math looking we of that in portion double fee at allocated were that sure accounting so did the of had gets on found them the And effect we to make have back we of went financials, scrub those through

with back be other to consistent consistent so it’s across So the calculation board. a that we portion our EBITDARM added coverage,

Jordan Sadler

That just for was SLC?

Kevin Pascoe

correct. That’s

Jordan Sadler

there Okay. it assume or I getting whether coverage relates that mean I guess received? have question have follow-up and fees I there guess as the calculate occupancy that you SLC, on includes you to been are is, I I and how the not the

Kevin Pascoe

questions that’s and of have we the Well definitely one gotten. yes,

Jordan Sadler

Any be commentary sort why on of would included. those

I I’m of me at last is on to those, with on calculation it’s me million $XX to coverage negative some let's financings an the got why up something like But of up flow. And the made in And which basis terms seems to they financing when stabilized cash at financial, side, made of side So or on participant include operating wrong year. then the is I significantly mean helping of that a if it SLC’s credit. property? to look have be fees correct I the party operating a to it those appropriate the guess say seems line fund in least NHI for difference

Eric Mendelsohn

Eric. Jordan this is

to we're are those just clear, year that. lumpy. of based so and regular that purchases annualized you're event of on recurring So be about recurring year-in, portion million I CTRC $X purchases. talking you anywhere an from to million what a buy-in those $XX the But give is year-out basis is talking from will income that’s made

So to line, you was say paid. think credit to that and I income, operator I unfair the the credit checked is almost that time is not us to mentioned and entirely that last line

Kevin Pascoe

that Yes, on is on there and very development balance a and only the used cottages new property. of for is new that units really small

line. for use they a line, as it they that family So goes and fund example to to home single credit fee credit gets up once the would paid, payoff the build then entry

adding our we basis adding without to the base So building. asset additional are any to basis

for to source funding It’s rent. to the to a not that’s new them payout inventory add So communities. really just

Jordan Sadler

refundable. just the fees I follow-up Okay. with off-line. occupancy you I will were thought

but So that's to follow-up, me can where we I was can offline. coming form, explain you

Eric Mendelsohn

they that a isn’t is that portion refundable, portion making are still off money good is There but the Okay. refundable.

Jordan Sadler

amount The you net guys…

Eric Mendelsohn

Yes.

Jordan Sadler

Okay. Thank you.

Eric Mendelsohn

Jordan. Thanks

Operator

SunTrust. of Fleming Please comes from the Eric with proceed. The line next question

Eric Fleming

Hey.

Just a the question. pipeline follow-up on

deeper Health, you you of but I’m it you know at terms obviously of have types. still moved property are sounds I is is other are looking at can you in Senior what that the guess opportunities, terms Nursing away asking an Behavior in I what more So still opportunity? Housing, looking [indiscernible] from like core Skilled

Kevin Pascoe

looking are it we opportunity Kevin. that Yes, an still Eric is this is available. still for, see something still Yes,

kind still an is terms the is lot have is is in yield, of right in the we there as think what look right that of not before, about talked in should will I terms of you what coverage, of market, just comps a there element like. the if discovery of what

making side, business on sure quality available. have Housing we and we on So credit Skilled price are to trying similar long-term we we appropriately and what we the out figure high to work on then good are that’s focus that Senior our the coverage, based how can operators have with that

So to we is it is but are still it. bit little something there discovery component more evaluating, a that

Eric Fleming

a Alright. Thanks lot.

Operator

to go the appear there call questions. will be ahead. And back Eric over Please to further no I turn Mendelsohn.

Eric Mendelsohn

Thank all New of to you you at in June. York in more and and look NAREIT seeing will operator we forward

Operator

Ladies does for today. you disconnect that and lines. your participation for call gentlemen the conference thanks that conclude We ask please your and

National Health Investors (NHI) 8 May 182018 Q1 Earnings call transcript