National Health Investors, Inc.

Greetings and welcome to the National Health Investors First Quarter 2021 Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If at any time during the conference you need to reach an operator, please press star 0. This conference is being recorded Tuesday, May 11, 2021. And now I'd like to turn the conference over to Dana Hambly. Please go ahead.

Thank you, and welcome everyone to the National Health Investors Conference Call to review the company's results for the first quarter of 2021. On the call today are Eric Mendelson, President and CEO, Kevin Pascoe, Chief Investment Officer, John Spade, Executive Vice President and Chief Financial Officer, and David Travis, Chief Accounting Officer. The results, as well as notice of the accessibility of this conference call on a listen-only basis, were released after the market closed yesterday in a press release that's been covered by the financial media. As a reminder, any statements in this conference call which are not historical facts are forward-looking statements. NHI cautions investors that any forward-looking statements may involve risk or uncertainties and are not guarantees of future performance. All forward-looking statements represent NHI's judgment as of the date of this conference call. Investors are urged to carefully review various disclosures made by NHI and its periodic reports filed with the Securities and Exchange Commission, including the risk factors and other information disclosed in NHI Form 10-Q for the quarter ended March 31, 2021. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhiread.com. In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in NHI's earnings release and related tables and schedules. which have been filed on Form 8K with the SEC. Listeners are encouraged to review those reconciliations provided in the earnings release together with all other information provided in that release. I'll now turn the call over to Eric Mendelson.

Hello, and thanks for joining us today. We hope that everyone is staying healthy. We're grateful for all the efforts of our operating partners and their teams as they have been battling on the front lines of this pandemic for well over a year. with multiple ups and downs along the way. With the successful rollout of the vaccine clinics across our communities, we are now starting to see some light at the end of the tunnel, with lead sales and move-ins picking up. That said, we expect that the path to a more normal operating environment will be uneven and is likely to be a multi-year process, which will make 2021 a difficult year for NHI as we help our tenants bridge the gap to full occupancy and margin recovery. Fortunately, our prudent balance sheet situation puts us in a position to address and resolve many of our most pressing issues this year and to emerge as a stronger company with a long runway for growth. Turning to our results, the first quarter was ahead of our internal expectations driven by lower levels of deferrals. As we've seen throughout the year, the entrance fee and skilled nursing segments, which represent more than 50% of cash revenue, are performing well, while the freestanding assisted living, memory care, and independent living segments have experienced more significant occupancy and margin declines. Despite the challenges, our monthly collections remain strong through the first quarter, as we collected over 94% of cash due. However, as COVID cases started spiking again in late 2020 and earlier this year, it became clear that our tenants would need more assistance. As previously announced, we reached an agreement for a $5 million second quarter deferral with Bickford. In addition, we've reached agreements with four other operators for concessions totaling 2.3 million in the second quarter to date. We're also in discussions with Holiday, that could result in rent concessions starting in the second quarter. We announced last night that we completed the sale of six Bickford properties for $52.9 million, which includes a $13 million second mortgage provided by NHI. This transaction is projected to improve Bickford's annual cash flow by approximately $1.8 million. We continue to be very proactive with Bickford and are pleased that their occupancy trends have improved in the last several weeks, resulting in 180 basis point increase in April versus March. But we know they're not out of the woods yet. On a more positive note, we're very excited about our recently announced $50 million mezzanine loan with Montecito Medical to invest primarily in medical office buildings. We don't view this as a change in strategy for NHI, but rather as a chance to deploy capital at favorable risk-adjusted returns with one of the premier owners and operators of MOBs in the country. It also fulfills a goal of doing more business in Nashville. We have said in the past that we were unwilling to make decisions that have a long-lasting impact on our business in the midst of the worst crisis that our industry has ever experienced. Now that the impact of the pandemic is beginning to wane, we're starting to make some of those decisions which we expect to result in a portfolio of stronger assets, less operator revenue concentration, and healthier EBITDARM coverage ratios. This can be accomplished by restructuring leases, selling underperformers, and changing out operators who are not the right fit. We believe we can achieve these outcomes while maintaining our investment grade rating as we have multiple levers at our disposal, including full capacity on our revolver, access to both debt and equity capital markets, dispositions and capital recycling, as well as possible changes to our approach to our dividend. With that, I'll turn the call over to John.