National Health Investors, Inc.

Greetings and welcome to the National Health Investors Second Quarter 2021 Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will 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. And if at any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Tuesday, August 10, 2021. It is now my pleasure to turn the conference over to Dana Hambly. Please go ahead.

Thank you, Jennifer, and welcome to the National Health Investors Conference call to review the company's results for the second quarter of 2021. On the call today are Eric Mendelsohn, 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 risks 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's Form 10-Q for the quarter ended June 30, 2021. Copies of these filings are available on the SEC's website at sec.gov or on NHI's website at nhireet.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.

Thank you, Dana. Hello, and thanks for joining us today. It's been a busy 2021, and the breakneck pace won't be slowing anytime soon. We announced last night that we have a non-binding letter of intent to sell nine holiday properties to an institutional buyer for $129.8 million, and we are in negotiations on the remaining 17 properties, which could result in a lease restructuring, retenanting, RIDEA structure, or further asset sales. We also continue to work on optimizing the Bickford relationship, which could also result in a range of outcomes that would improve Bickford's cash flow, reduce our rent concentration, and improve our EBITDARM coverage. We have said that we are motivated by this crisis to transform into a stronger company, and we are making steady progress on that front. We have completed or announced nearly $220 million in dispositions year-to-date and we have concrete plans for additional sales that will get us to the higher end of our $250 to $400 million range. We expect that this will be substantially complete by the end of this year. As a result, we'll have plenty of capital to redeploy as we start to build back our NOI. Considering that lease coverage for many of the senior housing asset sales we are contemplating is significantly below one times, We are seeing a nice arbitrage opportunity in selling assets with an effective yield in the low single digits and replacing them with investments at yields in the mid to high single digits. We expect to have near full capacity available on our revolver and limited need to issue equity, which should return NHI to its more historic NOI growth profile. We also believe that we can participate in the recovery of the senior housing industry through the repayment of rent deferrals, which also enhances this growth story. Turning to our results, our collection rate was approximately 87% for the second quarter, compared to 94% in the first quarter. The second quarter was negatively impacted by higher deferrals, which increased to $9.9 million compared to 4.2 million in the first quarter. The general theme continues to be that the entrance fee, skilled nursing, and hospital segments representing close to 60% of our annualized cash revenue net of deferrals are performing well while the freestanding assisted living, memory care, and independent living segments have experienced more significant occupancy and margin pressure driven primarily by industry-wide staffing shortages that is pushing hourly rates and agency costs to unprecedented levels. We made the hard decision to reduce our quarterly dividend by 18%, but we believe this is proving to be the right decision as our operators continue to recover. We expect that we will continue to provide some level of support as occupancy and margins continue their rebound By right-sizing the dividend, we have sufficient capacity to assist our partners through the recovery while maintaining our balance sheet strength. As we rebuild NOI, we expect a return to dividend growth. Despite the near-term industry challenges, we remain encouraged by the steady occupancy growth experienced across the senior housing portfolio since the March lows. SLC is near pre-pandemic levels and we're very pleased with the progress that Bickford is making as they have improved occupancy by 500 basis points since March. The recent surge in COVID cases obviously has the potential to become a headwind, but we have not experienced any meaningful disruption so far. The resident vaccination rates are high and appear to be effective. We will continue to provide a high level of transparency as our transition progresses. There are still many moving parts, so we're reluctant to provide guidance at this time. Our visibility is improving, though, and we remain optimistic on the longer-term fundamentals that drive our growth for years to come. I'll now turn the call over to John.