NHI Announces Lease Amendment with Holiday Retirement
November 06 2018 - 6:10AM
Business Wire
National Health Investors (NHI) has entered into a lease
amendment and guaranty release the (“Agreement”) with our tenant,
an affiliate of Holiday Retirement (“Holiday”). The Agreement
extends the term of the lease, increases required minimum capital
expenditure per unit and provides NHI with stronger proforma 2019
lease coverage ratio. NHI leases 25 independent living facilities
to Holiday at an original cost to NHI of $493 million.
Under the Agreement:
- NHI will receive consideration of
approximately $65.8 million in cash (or property in lieu of cash at
NHI’s option), which includes the forfeiture to NHI of half of the
current $21.275 million security deposit.
- NHI shall have sole discretion to
acquire a Holiday property in lieu of cash that will be leased back
to NHI at a rent acceptable to NHI and subject to the same terms
and conditions of the amended master lease. NHI is under no
obligation to accept a property in lieu of cash due to us under the
Agreement.
- The lease maturity is extended by five
years to December 31, 2035 and will be secured by the remaining
half of the NHI-held security deposit. Additionally, NHI is
requiring $5 million of equity to be contributed into the Holiday
tenant entity (the “Credit Enhancement”). The use of the Credit
Enhancement will be limited to payment of NHI rent and NHI-approved
capital expenditures. Future return of the Credit Enhancement will
further be limited to performance measures, including liquidity and
lease service coverage ratio covenants.
- NHI requires that $6.5 million of
equity be contributed to the Holiday management company.
- Effective January 1, 2019, Holiday rent
will be $31.5 million for the existing 25 assets, as opposed to the
$39 million previously obligated, with escalators commencing
annually November 1, 2020, equal to the greater of 2.0% or 45% of
trailing 12 months year‐over‐year revenue growth of the NHI/
Holiday portfolio, not to exceed 3.0%.
- NHI has committed to invest up to $5
million into the communities in ROI‐producing capital expenditures
at a 7.0% lease rate on funds drawn. In addition, Holiday has
dedicated a minimum of $1,500 per unit in annual capital
expenditures.
- NHI and Holiday are contemplating the
sale of up to five properties within the existing Holiday lease. A
subsequent sale of properties, if any, would reduce the rent owed
NHI 7% times the net proceeds received by NHI. No reduction in the
security deposit, or tenant Credit Enhancement will occur as a
result of any future sale.
About NHI
Incorporated in 1991, National Health Investors, Inc. (NYSE:
NHI) is a real estate investment trust specializing in
sale-leaseback, joint-venture, mortgage and mezzanine financing of
need-driven and discretionary senior housing and medical
investments. NHI’s portfolio consists of independent, assisted and
memory care communities, entrance-fee retirement communities,
skilled nursing facilities, medical office buildings and specialty
hospitals. For more information, visit www.nhireit.com.
This press release includes forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. All statements regarding the Company's, tenants',
operators', borrowers’ or managers' expected future financial
position, results of operations, cash flows, funds from operations,
dividend and dividend plans, financing opportunities and plans,
capital market transactions, business strategy, budgets, projected
costs, operating metrics, capital expenditures, competitive
positions, acquisitions, investment opportunities, dispositions,
acquisition integration, growth opportunities, expected lease
income, continued qualification as a real estate investment trust
(“REIT”), plans and objectives of management for future operations,
continued performance improvements, ability to service and
refinance our debt obligations, ability to finance growth
opportunities, and similar statements including, without
limitation, those containing words such as “may”, “will”,
“believes”, “anticipates”, “expects”, “intends”, “estimates”,
“plans”, and other similar expressions are forward-looking
statements. Forward-looking statements involve known and unknown
risks and uncertainties that may cause our actual results in future
periods to differ materially from those projected or contemplated
in the forward-looking statements. Such risks and uncertainties
include, among other things; the operating success of our tenants
and borrowers for collection of our lease and interest income; the
success of property development and construction activities, which
may fail to achieve the operating results we expect; the risk that
our tenants and borrowers may become subject to bankruptcy or
insolvency proceedings; risks related to governmental regulations
and payors, principally Medicare and Medicaid, and the effect that
lower reimbursement rates would have on our tenants’ and borrowers’
business; the risk that the cash flows of our tenants and borrowers
would be adversely affected by increased liability claims and
liability insurance costs; risks related to environmental laws and
the costs associated with liabilities related to hazardous
substances; the risk that we may not be fully indemnified by our
lessees and borrowers against future litigation; the success of our
future acquisitions and investments; our ability to reinvest cash
in real estate investments in a timely manner and on acceptable
terms; the potential need to incur more debt in the future, which
may not be available on terms acceptable to us; our ability to meet
covenants related to our indebtedness which impose certain
operational; the risk that the illiquidity of real estate
investments could impede our ability to respond to adverse changes
in the performance of our properties; risks associated with our
investments in unconsolidated entities, including our lack of sole
decision-making authority and our reliance on the financial
condition of other interests; our dependence on revenues derived
mainly from fixed rate investments in real estate assets, while a
portion of our debt bears interest at variable rates; the risk that
our assets may be subject to impairment charges; and our dependence
on the ability to continue to qualify for taxation as a real estate
investment trust. Many of these factors are beyond the control of
the Company and its management. The Company assumes no obligation
to update any of the foregoing or any other forward looking
statements, except as required by law, and these statements speak
only as of the date on which they are made. Investors are urged to
carefully review and consider the various disclosures made by NHI
in its periodic reports filed with the Securities and Exchange
Commission, including the risk factors and other information
disclosed in NHI’s Annual Report on Form 10-K for the most recently
ended fiscal year. Copies of these filings are available at no cost
on the SEC’s web site at http://www.sec.gov or on NHI’s web site at
http://www.nhireit.com.
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National Health Investors, Inc.John Spaid, 615-890-9100Executive
Vice President, Finance
National Health Investors (NYSE:NHI)
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