National Healthcare Properties, Inc. Q2 FY2021 earnings call

• Stabilized occupancy in the Shop portfolio with a small quarter-over-quarter increase post-COVID, which hadn't happened in over a year.
• Grew net operating income in the MOB portfolio year-over-year and substantially decreased net leverage to 38.5% from 41.2%.
• Closed on the sale of a significant development property in Florida.
• Combined closed and forward acquisitions pipeline over $167 million with a 7.7% weighted average cap rate.
• Forward leasing pipeline for over 15,000 square feet, expecting MOB and Triple-Net portfolio occupancy to increase to 91.8% and add nearly $360,000 of annualized straight-line rent over the remainder of 2021.
• Rent collection in MOB and Triple-Net segments was approximately 100% for the second quarter and the last four quarters, and nearly 100% for full year 2020.
• Owns 195 properties in 33 states totaling approximately 9.1 million rentable square feet. Deployed over $5.4 million in capital expenditures year-to-date to enhance Shop assets.
• MOB portfolio 90.9% occupied, Shop portfolio 73.2% occupied (up 0.5% QoQ). Triple-Net leased post-acute and skilled nursing facilities in hospitals 100% occupied, six hospitals 90.7% leased.
• Focus on MOB and Shop segments due to demographic tailwinds; MOBs benefit from growing demand as healthcare system evolves, Shops from long-term demographic tailwinds for seniors housing.
• Strong tenant relationships: MOB tenants include UPMC, DaVita, etc.; Shop operators include Frontier Management, etc.
• Closed seven MOB acquisitions in the second quarter for $36.9 million, with a forward pipeline of over $124.3 million in MOB acquisitions.

Medical Office Buildings (MOB): At quarter end, 90.9% occupied with a weighted average remaining lease term of 4.7 years. Contributes a significant portion to net operating income. Shop portfolio: 73.2% occupied, up 0.5% from last quarter. Triple-Net leased healthcare facilities: 100% occupied with a weighted average remaining lease term of 6.3 years. At the end of the quarter, MOB and Shop segments together represented 91% of HTI’s net operating income, with Triple-Net leased healthcare facilities making up the remaining 9%.

• Net leverage decreased to 38.5% from 41.2% this quarter, a step towards resumption of cash distributions (Board's decision).
• Continues to focus on active portfolio management, accretive acquisitions, robust leasing activity, and capital structure improvements.
• Forward leasing pipeline expected to increase MOB and Triple-Net occupancy to 91.8%, adding nearly $360,000 annualized straight-line rent in 2021.
• Expect rent collection trend in MOB and Triple-Net segments to continue through the remainder of 2021.

• Uncertainty from temporary disruptions caused by COVID-19 pandemic affecting Shop occupancy recovery.
• Dependence on successful execution of acquisitions, leasing, and portfolio management strategies.
• Market conditions and economic factors impacting real estate values and tenant performance.