National Health Investors, Inc.

Welcome to the first quarter 2023 conference call. During the presentation, our 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 by the 4 on your telephone. If at any time during the conference you need to reach an operator, you may press the star or by the zero. As a reminder, this conference is being recorded Wednesday, May 10, 2023. I would now like to turn the call for now to Dana Hamley. Please go right ahead.

Thank you, and welcome to the National Health Investors Conference call to review the company's results for the first quarter of 2023. On the call today are Eric Mendelsohn, President and CEO, Kevin Pascoe, Chief Investment Officer, John Spade, 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 March 31, 2023. Copies of those 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 our CEO, Eric Mendelsohn.

Thank you, Dana. Hello, and thanks for joining us today. We're off to a great start in 2023 with first quarter results coming in ahead of our expectations, driven by strong cash collections at over 98%, limited rent concessions, and deferral payments from four tenants. We announced new investments of $54.8 million during the quarter, and were able to utilize 2.5 million of the Bickford deferral balance in lieu of cash to create incremental value on a newly constructed community in Chesapeake, Virginia. We also benefited from 1.3 million in discrete items that, while only impacting the first quarter, demonstrate the value of triple net leases in preserving NOI and the resilience of our tenants as operating fundamentals continue to improve. Our portfolio optimization has resulted in the sale of five more buildings year-to-date with low single-digit NOI yields and coverage below one times. We continue to see the results of the optimization through significantly improved EPIDARM coverage, particularly for our need-driven senior housing tenants. Coverage improved year-over-year by 31% and sequentially by 9% to 1.11 times. This is the highest reported coverage since our first quarter of 2020, reflecting the hard work of our asset management team and our partner tenants as the pandemic effects move further away. We have more work to do, but the improving trends are encouraging. As we have talked about throughout the pandemic, the entrance fee and skilled nursing portfolios which account for 60% of our NOI, continue to anchor the portfolio with industry leaders, including NHC, SLC, Ensign, Watermark, and LCS. One area of disappointment for the quarter was the performance of SHOP, which is 3% of our NOI, but a clear strategic focus for the company. Our longer-term view on the upside potential of that portfolio has not changed. though the timeline is taking longer. We are working closely with our experienced partners, Merrill Gardens and Discovery, and expect better results. As we outlined in our press release last night, and following our strong first quarter results, we are increasing our guidance for the year. We continue to expect strong cash collections, minimal rent concessions, and deferral payments. There are still a handful of tenants on our worry list, that we are monitoring closely, and we have factored in some level of financial support, but this is a little more difficult to forecast and a potential source of variability. We expect incremental quarterly improvement in SHOP, but given the soft first quarter results, our expectation for the full year contribution has been lowered. Fortunately, The balance sheet and our financial profile continue to be pillars of strength, with leverage at just 4.6 times, over $5 million of liquidity, and an FAD payout ratio at 81.8%. We still have some capital we expect to recycle as we conclude our disposition activities and are well positioned to return to our historical investment trends when market conditions improve. We are content to be patient and believe we are in the enviable position of having significant capital to deploy at a time when capital seems increasingly scarce. I'll now turn the call over to John to discuss our financial results and guidance in more detail. John.