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NHI Announces Lease Amendment with Holiday Retirement

November 7, 2018

MURFREESBORO, TN–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.

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.

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