National Health Investors (NHI) Enters into Joint Venture with Bickford Affiliate

October 4, 2016 4:14 PM EDT

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National Health Investors, Inc. (NYSE: NHI) announced it has signed a definitive agreement with its joint venture partner, an affiliate of Bickford Senior Living (“Bickford”), headquartered in Olathe, Kansas, to convert NHI’s RIDEA portfolio of 32 assisted living and memory care assets to a triple-net lease structure. Key terms in the new agreement between NHI and Bickford are as follows:

  • NHI purchased Bickford’s 15% interest in the real estate for $25.1 million;
  • Bickford purchased NHI’s 85% interest in the facilities’ operations for $8.1 million;
  • 2016 base cash rent of $25.3 million on the 32 stabilized facilities is unchanged based on NHI’s investment-to-date of approximately $298 million, of which NHI will now receive 100%;
  • There are 5 additional facilities under development owned by NHI; one opened in July, two are planned to open by the end of 2016, and two are planned to open in 2017. Funded amounts will be added to the lease basis during construction and up to the first six months after opening; thereafter, base rent will be charged to Bickford at a 9% annual rate. Once the facilities are stabilized, rent will be reset to fair market value;
  • Base rent on all leases will continue to escalate by 3% annually on the anniversary date of the lease;
  • Future development projects between the parties will be funded through a construction loan at 9% annual interest and NHI will receive a favorable purchase option at stabilization and rent will be set at fair market value with a floor of 9.55% on NHI’s total investment; and
  • On current and future development projects, Bickford as the operator will be entitled to incentive payments based on the achievement of predetermined operational milestones, the funding of which will increase the investment on which the lease payment to NHI is calculated.

The new agreement does not change the terms previously disclosed of the 15-year triple-net lease entered into between the parties for 5 assisted living and memory care facilities not placed into the joint venture and acquired by NHI pursuant to a purchase option with Bickford in May 2016.

On October 4, 2016, NHI filed a Form 8-K with the Securities and Exchange Commission with exhibits containing pro forma financial statements and disclosures to assist investors.

NHI’s President and CEO, Eric Mendelsohn, stated, “The relationship with our valued operator, Bickford, has been very successful, beginning with our purchase of 5 facilities in 2009 to a current total of 37 stabilized facilities with more projects in the development pipeline. In financial terms, this transaction is very accretive to NHI and locks in a stream of predictable cash flows for our shareholders. Bickford emerges as a stronger company with better credit by paying off certain of its legacy debt to third parties and has the strong incentive to continue to drive operating cash flow at each of the facilities in our lease.”

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