National Health Investors, Inc.

Greetings and welcome to the National Health Investors Third Quarter 2023 Earnings Call. At the start of the presentation, all lines 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. If at any time during the conference you need to reach an operator, please press star 0. As a reminder to We are recording the call today, Wednesday, November 8, 2023. I would now extend the conference over to Dana Handley. Please go ahead.

Thank you, and welcome to the National Health Investors Conference call to review the results for the third quarter of 2023. On the call today are Eric Mendelson, 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, were released after the market closed yesterday in a press release that's been covered by the financial media. 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 September 30th, 2023. 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 furnished 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.

Hello, and thanks for joining us today. We're pleased to report a very strong quarter, with our funds available for distribution, or FAD, exceeding our expectations by increasing 2% year over year and 8% sequentially. These quarterly results were driven by a number of factors, including a stable cash collection rate, record deferral repayments of $2.3 million, discrete catch-up payments of $1 million from two cash basis tenants for past due rent, and no unexpected rent concessions. Operating metrics in the real estate investment and shop segments continue to trend higher, which bolsters our confidence in the organic growth opportunities. Given the outperformance in the third quarter and current visibility into the fourth quarter, we are increasing our FAD guidance for the year John will provide more details in a few minutes. The foundation for the higher results this quarter is the hard work of our operating partners who continue to make steady improvement in operating fundamentals. EPIDARM coverage increased sequentially across all asset classes and largest tenants. Bickford, for instance, has pushed trailing 12-month rent coverage to 1.45 times, and we're happy to see that their sales focus continued to drive average occupancy gains through the third quarter, including 85.2% in September, the highest it's been since the start of the pandemic. Bickford repaid over $750,000 in deferrals during the quarter, and we expect a similar or higher amount in the fourth quarter. The portfolio's optimization, particularly within our needs-driven senior housing portfolio, excluding Bickford, continues to bear fruit, with coverage improving for the seventh straight quarter to 1.09 times on a trailing 12 basis. While this coverage is below our comfort level, we're generally encouraged by the trends. These operators repaid deferrals of approximately $1.4 million in the third quarter, which we believe is a good indication that operations continue to improve. The entrance fee and skilled nursing portfolios, which contribute approximately 60% of our NOI, continue to generate great results, and this is our expectation for the foreseeable future. Our senior housing portfolio, or SHOP, has certainly had its fair share of challenges and is not generating the performance we would have expected up to this point. That said, we're starting to see more consistency with three straight quarters of operating and financial gains. We're very happy with the momentum in occupancy, which has now grown for seven straight months to 81.2% in September. That is an increase of over 600 basis points from the February low and the highest reported month since November of 2021. The preliminary October results show that occupancy continued to move higher as well. SHOP is an important vehicle for organic growth and serves as a platform for external opportunities, so we're committed to dedicating the resources necessary to make these communities best in class. We announced last night that we are amending Discovery Senior Living's leases on eight properties, and we continue to work closely with other tenants, particularly our cash basis tenants, to optimize their cash flows. To that end, we completed the sale of three properties last week and have just one remaining property currently held for sale. I want to remind investors that two years ago, I said we would be selling up to $400 million of underperforming real estate assets. We're substantially complete with that process, and I point to our improved coverage as the positive results of these efforts. The balance sheet continues to position NHI for growth. With leverage at just 4.4 times and over $500 million in available liquidity, we have ample capacity to deploy without the immediate need for equity. Not surprisingly, the interest rate environment has had a clear impact on the financial markets. The dearth of capital and looming debt maturities should favor well-capitalized REITs like NHI. We will be patient and stay focused on our organic opportunities, including the monetization of our $34 million in outstanding deferral balances and the significant upside in the shop portfolio. We note that many of our pipeline discussions over the last year has sellers perpetually about 100 basis points behind the changes everyone is seeing in the cost of capital. That was the case this last quarter as the 10-year Treasury hit 5%. We think there is an ungrounded optimism that the cost of capital increases are temporary, and we are regularly advising customers to make sure they live to fight another day. They should be realistic about the higher for longer cost of capital and the growing illiquidity in senior housing and carefully choose a partner that will work with them towards their success in the long run. In sum, we've made great strides to enhance the quality of our portfolio while maintaining our strong financial discipline. As industry fundamentals continue to become more favorable, NHI is in a great position to participate in what we expect to be many years of exceptional future growth. I'll now turn the call over to Kevin to provide more details on our operations. Kevin.