Q4 2019 Earnings Call

4 minutes, right?

yield higher cash rents in 2020 / 2019 transitioning this portfolio is just one example of how we've used our solid and robust network of regional operating relationships too quickly transition properties and portfolios when needed

additionally during the year. We maneuvered through Senior Care Centers bankruptcy after the courts allowed senior care to assume their LTC lease over our objectives received all monies out to us, including all past due rent and legal fees Senior Care continues to get short extensions to emerge as they work to finalize their exit financing. Currently. We expect their emergence from bankruptcy to be sometime in March. We continue to have a plan to transition the portfolio should the need arise and we are ready to implement that plan. Should they not emerge from bankruptcy or failed to comply with terms of the master of these post-emergence? We are carefully monitoring senior care of progress and our office is prepared for likely contingencies.

In 2019.

Successfully executed on our annual Capital recycling program by selling $16 worth of properties in line with our annual average of 18 million dollars off sales will be higher than this historical average based on our progress in divesting the Preferred Care portfolio, which Clint will discuss later and as we continue to pursue additional Capital recycling opportunities of the eighty 1 million dollars of Investments. We completed in 2019 all that seven point five million dollars off operators new to LTC ignite Medical Resort Randall residence and English Meadows our new additions to our portfolio subsequent year end. We completed a transaction with HMG Healthcare adding another strong Regional operator.

These new operators span both skilled nursing and senior living on the skills side ignite and HMG are progressive and Innovative Regional operators who are models and depth of talent should allow them to successfully managed through evolving reimbursement models like PD p.m. On the private-pay side branch residents is a strong Regional operator who's excellent operating and development capabilities provide us and their residence with significant value.

R20

20 growth strategy will focus on continuing to Source traditional triple net leases and New Opportunities requiring Creative Financial Solutions. But Bears repeating that the market has not changed meaningfully since our last call and early indications show that we will have to dig deep to find the kinds of transactions that that's been wage. Our shareholders pricing remains fairly tight older properties have unattractive cap rates and newer properties are priced. Well above replacement costs.

We have never been a fan of growing for growth's sake and have no plans to abandon our stringent underwriting criteria. We will however continue to build relationships with national operators who are interested in growing their businesses and have the resources to do so, we will also continue to use our asset management expertise and strong balance sheet to our advantage by offering flexible and creative structures through which to deploy capital and meet the growing and changing needs of regional operators.

I'm finished.

With our guidance for 2020 assuming no additional investment activity financing or Equity issuance has and assuming the sale of the Preferred Care portfolio FM so is expected to be between $3.01 and $3.03 for the year.

Now, I'll turn the line over to Pam. Thank you. Wendy. Total revenues increased 2.9 Million for the 2019 fourth quarter from the same period last year rental revenues increased five point four million, three point nine million of which is related to property tax revenue recorded in accordance with the new lease accounting guidance that requires us to record the property tax escrow collect from our tenants as Revenue with a corresponding extent there for revenue and the 2019. Includes property tax income while 2018 does not the remainder of the increase resulted from Acquisitions and completed development projects anthems rent increase and leaves escalations offset by 869000 related to these transitions wage. Additionally, please note that we received two point five million more rent from senior care of this quarter than we did in the fourth quarter of 2018 and December 2018 Senior Care failed to pay rent. Yep.

bankruptcy protection

In December 2018. They paid all past due 2018 rent in addition to December 2019 rent. However, a 2.5 million dollar rent shortfall from Preferred Care Package and the fourth quarter of 2019 compared with the fourth quarter of 2018 offset the senior care increased.

Interest income increased $393,000 in the 2019 fourth quarter due to the funding of additional loan proceeds and expansion and renovation projects while other income decreased 2.9 Million related to the 2018 fourth-quarter right off of burnouts to Senior Lifestyle that were no longer projected to be paid income from unconsolidated joint ventures wage increased $346,000 due primarily to mezzanine loan payoff and reduced income from our preferred Equity investment. We seen your lifestyle Navy ffo was $0.81 per month would share for the 2019 and 2018 Ford quarters, excluding non-recurring items, which include insurance proceeds are $0.05 and the 2019 fourth-quarter that I'll discuss a minute and the urn out right off of eight cents and the 2018 fourth-quarter ffo per share was Seventy-Six cents in the 2019. Compared to 73 cents left.

last year

Tim available to Common shareholders decreased 18.2 million from the prior year due to the decrease in other income. I just described and impairment charge related to a preferred Equity investment which Clinton talk about shortly and a loss on sale and the 2019. Compared with a gain on sale and last year's fourth-quarter partially offset by the increase in rental revenues during a 2019 fourth-quarter. We recognized a two point 1 million dollar gain from insurance proceeds related to a property that had sustained hurricane damage and rather than rebuild it we sold it in the fourth quarter. We also sold two additional properties in the fourth quarter one in Texas and the other in Arizona for net proceeds of 5.9 million these sales resulted in accumulating a loss of four point, six million or two point five million when meted with the insurance proceeds game interest expense increased by $363,000 from last year's fourth quarter.

Due to the sale of $100.

A senior unsecured notes and a 2019 Ford Escort.

Gina expense decreased by $260,000 from the 2018 fourth-quarter due to the reimbursement of legal fees from senior care for 2020. We expect quarterly GM to be in the four point eight to four point nine million dollar range during the 2019 fourth-quarter. We invested $19 million in the acquisition of to place your living communities in Michigan subsequent to the end of the year. We invested thirteen point five million in the acquisition of a skilled nursing center in Texas The Operators associated with these three properties are new to LTC Clint will discuss these transactions further.

During the fourth quarter. We also funded 6.2 million in development and capital Improvement projects on properties. We own and one point four million under mortgage loans as well as $0.15 per share monthly dividend dividend payments during the 2019 fourth quarter totaled twenty two point seven million at December 31st. We owned two properties of development which remaining commitment to totaling $18 million. We also have remaining Mortgage Firm commitments of 3.3 million related to expansions and Renovations on for properties in Michigan. That's when you mentioned during the fourth quarter of 2019. We turned out a hundred million of our line of credit with senior unsecured notes bearing interest at 3.85% maturing and thirty Thirty-One. Additionally. We borrowed a net of 28.5 million under our line of credit for Acquisitions and to fund capital projects and made 19 million of scheduled principal birth.

It's under our senior unsecured.

Subsequent to the end of the year. We borrowed eighteen million under our line of credit for Acquisitions and to fund development commitments are so soft focus on maintaining a strong balance sheet gives us the flexibility and capacity. We need to fund current and long-term growth initiatives. We currently have approximately 488 million available under our line of credit and two hundred million under ratm providing LTC with total liquidity of almost $690 million.

Our long-term debt to maturity profile remains well-matched to our projected free cash flow helping moderate future refinancing risk, and we have no significant long-term debt maturities over the next five years at the end of the fourth quarter. Our credit metrics favorably compared to the Health Care industry average with debt to annualized adjusted ebitda for Real Estate of four point, six times and annual eyes adjusted fixed charge coverage ratio of 4.9 times, and they get to Enterprise value of 28% now, I'll turn the call over to Claim Jumper at several items to cover including the status of preferred Karen in our Senior Lifestyle preferred Equity investment. Also provide an update on Brookdale which rental properties under development. Recent acquisitions portfolio numbers and the pipeline.

as we discussed last quarter

After a thorough evaluation of the sale and releasing initiative are still nursing portfolio with Preferred Care. We decided to stay out with the best option for LTC and our shareholders Thursday 23 properties least two Preferred Care one was sold in 2019 and twenty are currently under contract and expected to close before the end of the 2020 first quarter net price for the properties currently under contract is expected to be approximately $59 and they anticipate the sales of the remaining two buildings be completed in the 20 22nd. We will provide additional details on the transactions during the next quarterly earnings call.

Last quarter, I also said that two properties owned by an affiliate of Senior Lifestyle in which we hold a preferred Equity investment on non-accrual basis. We're in the process of being sold off at that time. A purchase agreement has been executed and due diligence has been completed. We expect the sale to close in April based on the sales price under the purchase agreement LTC has record the payment on its preferred Equity investment of approximately 5.5 million dollars, which represents a difference between our investment and the estimated net sales proceeds. The name is higher than the range we provided last quarter primarily due to the buyers capex requirements and a $500,000 hold back related to an Indemnity provision in the purchase agreement.

today we have

Substantially all of the $600,000 in additional income we expected from Senior Lifestyle based on their forecasts of net operating income through 2019.

Presently the only significant lease renewals. We have three twenty twenty two leases with Brookdale Senior Living which are expiring at the end of this year the Brookdale portfolio consists of leases covering a total of 35 properties in eight states currently prevails in the renewal notice window to exercise first renewal option which remains open to approximately June 30th was an old term is for ten years, which would commence on January one 2021 during the renewal term the annual rent escalations will continue as during the initial thoughts which is based on a formula averaging approximately 2% per year.

Coverage in the portfolio by Master Lease is healthy, which leads us to believe Brookdale is likely to exercise its renewal option besides the Brookdale leases. We have six properties in for Reserve that expire in the next 24 months and which represent less than 3% of our expected 2020 Revenue.

The Acquisitions shortly after the close of the quarter. We announced a $33 investment in three properties in Michigan and Texas with officers new 2LT. See the to Michigan for these are located in Auburn Hills in Sterling Heights include a total of 156 assisted living and Memory Care units and close right at the end of 2019. We acquired them phone $19 with an additional Capital Improvement investment of approximately 2 million dollars to be deployed in the first year of release.

Believe the 10-year triple net lease with 2% annual rent escalations starting in year 2 with four or five-year renewal option. The initial cash yield is 7.4 + communities are being operated by Randall residence a michigan-based family business established in 1975 Randall currently operates thirteen independent living assisted living and memory care communities in Michigan, Ohio and, Illinois.

probably

In Texas a skilled nursing center with a hundred and forty licensed beds is located in Longview enclosed in the beginning of January the investor thirteen point five million in the acquisition Service Agency Health Care is often the center under a ten year old that Master Lease with 2% annual rent escalation starting in the year two with two five year renewal options. We Dodge Jeep cash the oldest 8.5% agency Health Care is established in 2012 and currently owns and operates 2018 housing and Care properties in Texas and, Kansas.

In conjunction with the acquisition agency Healthcare took over operations. Are they still Nursing Center in Nacogdoches, Texas in which the lease we had with another operator of matured month concurrently H&G Health are also assumed operation of a Preferred Care property. We own in the same city and commence closure of it consolidating operations of these 2 a.m. Close nursing center is now being marketed for sale.

Result of these transactions we have posted resolution of our Preferred Care portfolio helps strengthen HMG Healthcare position in the Texas Market, which also benefits and invested in a newer building in a review this strong Regional operator new to LTC in both cases. We were able to consummate these deals after building relationships over time and working together to find the best opportunities for them and for LTC in the case of HMG. We have a more than 10-year relationship with two of their principles dating back to their prior company affiliations am excited to reunite with the principles of HMG and they're very capable management team and believe we have the possibilities for additional growth with all of our new operators maintaining strong operative relationship in a Hallmark of our culture and strategy. Are you looking to you to Foster current and new relationships to Source new opportunities?

Why discuss our portfolio numbers would like to update you are one of our recent development projects under a real estate joint venture?

Fields in your living. We are developing a 7-year unit assisted living and Memory Care community in Medford, Oregon the communities expected to begin welcoming residents in the first part of March at which time we'll have four buildings in partnership with Fields moving to our portfolio numbers Q3 trailing-twelve-month even Andy Bedard coverage using a 5% management fee is 1.43 * + 1.21 * respectively for our system living portfolio and 1.75 * + 1.31 * respective life for still nursing portfolio. Remember that given the sale of the Preferred Care portfolio. We have been excluded from these numbers.

I'll finish up with some comments on our pipeline which continues to be robust and active you're excited to see and are evaluating a wide swath of financing opportunities from construction to bring deals to turn around and stabilize properties across the Continuum if we mentioned the market remains flopping, but of course the deal must need our stringent underwriting criteria and have the opportunity to create or enhance growth or to the operating Partnerships now, I'll turn the call back to Indy for closing remarks Thank you, Pam and Clint.

And the last half of 2017.

It became painfully obvious that anthem's early success in leasing up new properties was not going to be the new Norm sizes are attributable to their operational challenges over development and other market conditions, then comes the challenges of the bankruptcies and Preferred Care and Senior Care and the need to reposition for mirth. Right Assets in the last two years. LTC has been involved in very active portfolio management, which has strengthened our capabilities to manage our portfolio.

Through these challenges. We have maintained our strong balance sheet and safe monthly dividend payout with our $690 million dollars of liquidity. I can truly say we are now hiring a focus on growth and our biggest challenge is finding that growth to add value to LTC. We remain committed to broadening portfolio diversification by operator geography and property type. We have we done our transition to a much more positive twenty-twenty and I am optimistic about our progress and opportunity as we strive to become a recall done differently by remaining creative flexible and open to interesting opportunities that others may not appreciate it. We look forward to updating you again next quarter.

operator

We are now ready for questions. We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are you off speaker phone, please pick up your handset before pressing the keys. If at anytime your question has been addressed and you would like to withdraw your question, please press * then two at this time or pause momentarily to assemble our roster. Our first question comes from Jordan Sadler with keybanc capital markets, please. Go ahead.

Thank you and good morning. I wanted to start with a preferred care. If you could just Bridge us from sort of last quarter sort of estimated total proceeds to where we are. Now. I wasn't I didn't follow exactly given sort of, you know, the transaction that took place this quarter Plus. What's the anticipated that I want to thank you, and if you could just do that for us to be helpful.

Jordan

This is Clint didn't give a number last quarter as far as the total proceeds because the contracts there were still due diligence. Open. So right now for the 20 buildings that are currently under contract. That way I could be closed in first quarter is $59 million with the sale that occurred in the fourth quarter. The net proceeds were projects six million after the whole back. So with those Twenty-One properties, it's approximately $65 million dollars of net proceeds.

Under there an additional two properties left us sure know there's there's additional two properties. So one property is the one I discussed in my prepared remarks wage that was closed in the academic just Texas it's currently being marketed for sale and there's one remaining property in Arizona that operates as a it's a skilled nursing home operator to the specialized behavioral program in because of that behavioral program differed from the other building we had in Arizona. We were initially marketing the big things together. Um, we found out during the process is probably a different buyer for that other building that remains in Arizona. So we're remarketing that uh in targeting. Um, operators would be interested specifically in a behavioral program.

And What's the total rent from the remaining?

Two properties to behave behavioral and the other one.

Right. Now we are negotiating that with Preferred Care but it should be somewhere similar to what we're receiving right now on a monthly basis, which is approximately fifty-thousand low-wage production $50,000 a month. Okay, and we're not going to get anything off of Nacogdoches because that's the net proceeds. So there's only one final preferred building. I guess. I feel like the the gross proceeds. I feel like the gross proceeds from the ones that are under contract and they were sold in the fourth quarter, you know fell a bit short of I guess where we were triangulating and I'm just curious if off the market moved or we were where we just overly optimistic because what what's the

Wide Gap rate or the cap rate essentially relative to the rent that you're receiving but on the 16th, I think he's really hard to look out on the cap rate basis me. These people are body and suck. At least at least rate basis. I'd be I know I understand but I'm just ultimately I have to put this in my model, so I'm just

Trying to understand how we we can I don't have a readily we can calculate that for you and get that number to you. Okay?

and then

Maybe on the pipeline Clint you said robust and active which seems like an interesting choice of characterization. Um, I guess also in context of I guess Wendy's opening remarks where you guys all continue to be, you know, pretty stringent about your underwriting and that the market is is still kind of tight. You have got to be creative. So, can you maybe sort of dig in there a little bit on on what the real fast. We're seeing. I mean there's still a lot. There's a lot of deal flow a lot of transactions that we see through the broker Community through relationships. So we were very active engage in evaluating and reviewing deals that package deal volume is pretty high. Obviously. We've got through that to qualify the ones we think make sense for us. We are very selective. So we have to look at a lot of transactions to be able to find the ones that we think are appropriate.

For us but there's still there's still a lot of activity in the market is fairly strong.

At we're looking at, you know skilled private pay, like I said, there's turnaround deals and development deals. We're talking about, you know, mezzanine Investments to build relationships with operating companies sell a very actively engaged, you know in the acquisition process and and we are looking at a lot of opportunities.

And on the skilled side, I guess kind of curious sort of post, you know, the very recent pdpm implementation by these operators. Are you seeing you a lot of money because people are you know excited about you know, the four Q performance and and you're underwriting off of that or or you know, kind of loose. I'm sure you know, we haven't seen as much opportunity on the skilled nursing site. Cuz a lot of what we've seen in the market or older properties and it was affecting the Preferred Care portfolio. That's really not that we've not been as focused on Thursday. We haven't seen as many skilled opportunities that fit our criteria, but we're very supportive of the skilled industry and continue to look at a lot of opportunities and want to continue to invest in skilled nursing. It's just finding the right opportunity that I think right now to see deals on the market from PD p.m. That was just implemented. So I I think during the course of twenty-twenty will be in a better position to see whether the volume of deals on the scale.

Nursing side that we are interested in come to Market.

Okay. Thanks for the call.

Our next question comes from Chad vinegar with Steve, please. Go ahead. Hi. Good morning. This is Tasha. I'm for Chad. Good morning. Chris on the ERG receipt of the catch-up payment from Senior Care Centers this quarter. I think that was the positive surprise. Could you remind us if you guys have any other pending or potential payment as for release that you could possibly see 4:20 a.m.

Pertaining to Senior Care know just anything you care about broadly to know the operator that you guys transition recently any other prior. No restructuring that you did.

No, nothing that hasn't already been disclosed in. It's probably in your model.

Okay. All right, unless it doesn't happen. I think in the Thrive transition, press release we gave a detailed three years projection of the rent. We were expecting to receive and currently all that is on track so know there's there's nothing that leads us to believe that we won't collect that.

You have seems to mention drive. So it looks like you're going to see some structural cash from release the on the anniversary which the various operators that took over. Could you guys quantify the impact in Life or the second half?

Yeah for this year. It's about 600,000 increase over the prior-year.

Thank you for sure.

Okay, that's helpful. And yeah, my other question is about the no Michigan asset you buy, you know, it looks like you were busy working through the end of the year. Could you what has to do with the rationale for buying these which I believe a 25-23 assets and I think you guys bought it for $19 and you're committing additional 2 million dollar Capital Improvement near one. What is the current occupancy level in the rain coverage in this transaction? And how should we think about the return on the two-million-dollar capex Google our interest in this is we really bad as I mentioned my prepared remarks a rebuilt been building a relationship with Randall residence for a number of years now and looking for opportunities to work on a project always that organization wage. And this is a opportunity we found in a Marketplace that ran a residence has a as a present. So that made a lot of sense to partner with them on this. Although it is I mean a little bit.

older in regard to the

Original construction date the buildings were in a fairly good condition. We've committed additional Capital into the buildings. The the coverage on these buildings on underwriting was about one point two five or so. We felt very comfortable on the trailing twelve basis for the the entry point for this investment and we think we've got a lot of growth opportunity with Randall residence. So it made a lot of sense for us to move forward this transaction.

Okay, great. If I may ask just one more I think yeah.

So Jordan is about the pipeline General, but I wanted to follow up on taxes specifically you made another Steve acquisition in taxes, which was HMG Healthcare. I mean given the recent wage and the initial positive reading on p d pm has anything changed regarding your underwriting standard in that state. Are you seeing no more opportunities particularly in Texas?

We've seen we've been selective in Texas. I mean again this goes back to a relationship similar to rain to Residence as I mentioned in my comment. We've had a long-standing relationship with the principles of HMG. And we you know like Randall since we've been working on finding transactions with HMG over a number of years and they found the right opportunity and and why I discussed in my comments that the tie end of the building in our portfolio that we leased home. Hm G this just involved in in a conversation with them and it made a lot of sense for us, you know geographically Nacogdoches in Longview or probably about an hour hour and half apart so long, it's really it's just developed as an off-market transaction and it was a great entry point for us in HMG to partner together.

our next question comes

From Michael Carroll with RBC Capital markets, please. Go ahead. This is Jason on for Mike. I know you mentioned that a lot of the relationships forged in 2019 were newer relationships to the portfolio. So another underwriting question that could you just touch on how you underwrite new relationship versus existing as you turned growth.

Sure, a lot of the underwriting of of new relationships is spending time with those organizations and develop worship with the organization understanding their business models touring buildings that they operate in various markets. So it's really an evolution of getting exposure to these companies. And as I've said just you know previously in the case of Randall and hmd it's been over a long period of time understanding their models, um how they staff other buildings there are corporate office or philosophies. So it's really an Engaged process of working with these organizations over time.

got it, and then just

A quick one on that Preferred Care. So what does remarketing that is a behavioral asset do for the evaluation Prospect?

I don't know if necessary changes the valuation of the asset and the cash flow is the cash flow. I think you just targets a different operator profile than just straight off of a skilled basis that's looking more from a, you know, transitional model and not caring for a behavioral population. So you just got a different operator base. I think that would focus on this building as opposed to the other asset that we sold. Thank you.

Thank you. Our next question comes from John Kim with BMO Capital markets, please. Go ahead. Good morning on your guidance for the year. What do you assuming as far as used to proceeds from the Preferred Care dispositions?

We assume paying down the line.

Okay. When do you you mentioned older assets or trading and unattractive cap rates? That was wondering if you could elaborate what that means as far as ranges of cap rates and whether or not that's before or after capex.

The ranges of cap rates are if we're if we're looking at assets that we would buy in the seven and half and down to the six and half depending on the type of the cap rates that that we're looking at, you know are are much higher than that, and it could be in the tens or twelves. So we're just we just can't even spend money at that rate.

Tend to this for a l or Smith Personnel that are the ones that we are finding are the older ones for the probably around eight thousand nine and because of the recent development in the private-pay sector, if you have an older asset unless you can I put money in as we're doing in Michigan to improve the property and that there's not a lot of new product in the marketplace. That's just you know, you just can't underwrite that successfully and we have done a lot of looking at properties that we just couldn't get to that the the price the broker or the seller was was trying to get so there's a lot of older private-pay or we saw a lot of older private pay in 2019. I haven't been

looking at

Older private paying twenty twenty yet, but and they were you know one or two properties that were being sold at that level.

Okay, I think Len mentioned that the you believe the likely outcome of the Brookdale lease expiration. This year would be that it would were new but I was wondering how they been in contact with you and or have you been negotiating with them at all as far as changing any of the terms as far as the annual escalators or capex requirements wage negotiation with them but we've been actively engaged with Brookdale. We've had conversations with them in regard to you know, their interest in looking at us Finance Capital Improvement Capital Improvements into the buildings off Brazil's been active in in that in their own riding spending their own Capital into the buildings, but we've let them know that as we typically that we have been very proactive with our office is looking at reinvesting in our buildings and making Capital available to them and and we have approached Brookdale about that and it's something they're evaluating whether they want to look at us financing any improvements or they would fund it on their own.

But we've had a very active and and open discussion in communication with Brooke's birthday Island, really appreciate the relationship with them.

And well what's with our coverage of that portfolio?

The coverage specific on that portfolio as I mentioned in my prepared remarks. It's it's a very healthy coverage by Master Lease which leads us to believe that they probably are likely to renew the the properties off. Okay. Thank you. Thank you. All right. Next question comes from Rich Anderson with please. Go ahead. Thanks. Good morning. Everyone a good morning Rich. So on on just a couple of questions here from a modeling perspective you mentioned with senior sure you got all your past, you know do rents. So, is there a adjustment I soon as a to recreate the run-rate starting in the first quarter. Do I take sort of two million bucks out and start fresh that is that the right way to handle it.

Office revenue take one point two million cuz that was the rent. The rest was reimbursement of okay, I'm back to off cuz I don't think we're going to get 13 months early twenties. Okay fair enough. Now one of the things you talked about is seeing if there's going to be processed and you're hopeful for you know, and obviously a good outcome for LTC and you're prepared should something sort of run a Miss with them one way or another with another page. So I'm extrapolating that game plan to Brookdale, which you said you expect them to renew but what if they don't I mean, do you have a a contingency plan in place and not have you thought about what you might do with those assets if they if they choose not to just just curious if you're equally prepared.

Yeah, we haven't given the

Absolutely. We've definitely

Go through that and and the coverage is strong enough where I think if if they elected not to renew the portfolio, that would be most likely a financial pick up for us. Okay good enough. And then last month me, you know, a lot of your peers talk about pretty thin coverage on their net lease assets and the senior senior housing space. It's dead higher mind a lot of investors you get your aggregate coverage numbers and you guys generally, you know have a have a good story to tell there but I am wondering if you have any sort of meaningfully sized situations where you are approaching one or lower that you know might be in need of some sort of reset or is that pretty much now that you've been through all these you know these operators situations. Are you pretty much Clear of that now curious what where you are where you stand on that issue?

Sure, I guess which I would characterize it such as the sale on the the skilled side. We have only two properties which are often slightly under one times even dharm coverage on the skilled side. And when you look at our total revenue, it's probably right at new 1% of total revenue wage for those two buildings that's on the skilled side. And then on the private-pay side, they don't have anything below one times on eBay. I'm coverage. So I guess that's how I found your question. Okay? Perfect. Thanks very much. All right. Thank you.

our next

Question comes from Daniel Bernstein with Capital One, please. Go ahead.

Good morning. Good morning, Dan. So what time so acquisition side are you finding maybe this supposed to understand that there's significant deferred capex with some of these assets that are you know a hindrance to you, but actually, you know buying the assets and and just try understand, you know, the kind of like the preponderance of that out there. Sure absolutely in the market there definitely are situations where we're seeing all the properties that you need Capital but the challenging looking at how much Capital needs to be deployed. And what's the asking price for the asset they got to be able to we have to buy them at the right price point to be able to deploy the capital and then to make them competitive and viable. So we are seeing situations where there is this Capital need but that affects what our underwriting is and what we what are going in price can be to make that investment in a profitable where we can have a coverage.

well operator to successfully operate the property and be correct to say that this

Many sellers are not pricing in that deferred capex in their asking price.

Absolutely, okay, and then in terms of development, I mean obviously a significant amount of development Anthem Drive took a look at the the landscape out there starts are coming down pretty significantly looks like absorption is starting to exceed Supply growth. Would you consider ramping up developing again and see ma'am?

At this point, I don't think so. I mean we've we've we've brought down that development and housing call it ramping up but we look selectively I don't know a couple a couple of projects a year at three or four projects. Absolutely. But but I mean a great example of this being those, you know, not necessarily the product play side, but looking at opportunities where we can develop look at the opportunity we had with ignitor Resorts coming in and and being able to buy in partner with them on a new skill nursing investment and in conjunction with that a development of new property in in building that relationship with the night on with the private on the skilled side gives us opportunity to look at development if they grow out their their platform and and we hope to be able to partner with them on on future development. So you may see development on the skilled side off with organizations like ignite and but on the private page side, it's going to be select and opportunistic. You know, like I mentioned the project we have this filled Senior Living that's coming online and off.

In Medford, Oregon, you know, we we did that development in conjunction with independent living community. We bought and developed this adjacent to that project. So I think it'd be very selective and opportunistic how we look at development.

A senior senior apartment it's you know in the senior housing news Rags. It's well Towers obviously doing something there and and and other so have you looked at senior apartments and maybe kind of any initial thoughts on on that product type. Would you be interested in?

We haven't spent a lot of time looking at that or we actually do have one project in Wichita Kansas that we Finance construction on with an operating partner of ours offered senior living and so we do have that on a campus with an assisted living Memory Care community that we financed with them in the same Market, but on on a broad basis, we haven't spent a lot of time but something we would not. And as far as the underwriting and and maybe there is opportunity for us to look in that that space.

It's all I have. Thank you.

Again, if you'd like to ask a question, please press * then 1 our next question comes from Connor sabarsky with berenberg, please go ahead.

Good morning. Everyone just a little more on a question as to earlier in terms of rent coverage and your tenant roster you seeing any Divergence among your tenants on rent coverage. And is that wage? Is there any Rhyme or Reason to any specific markets where that's happening or or just any color there?

I would say we haven't seen a lot of Divergence with any specific operative. We're seeing some increases in certain markets with a couple of officers. We have properties within the state of New Mexico. We've seen some uh change in coverage with an eight per-cent increase in the Medicaid rate in that state plus the implementation of a provider tax. So we've seen you know, some some large changes their life being phased in on not reflecting not yet reflect fully reflected in to our coverage metrics. That's one example where we're seeing, you know improvements specific to a given stage.

And then one last question, you know, it seems to be the flavor of the day.

And then it was mentioned before some of the some of these assets you recently acquired are are a couple of decades old. I mean do you think the age of these assets really affects occupancy Trends or or is it more about the song about the operator in that sense? It's more about the operator and I look at that and you coming in and buying it at the right price and then investing the appropriate Capital to make the buildings competitive exam being in the Michigan properties in the price point of our we originally started that discussion on the acquisition price and through our due diligence process. I mean that that price did come down a number of times is we did underwriting look at the needs and there was a little bit of decline in cash flows were going through the acquisition process. So we feel that through diligence, you know, the price reduction that we were able to achieve in that transaction were attractive for us in Iraq with our that really afforded a coverage that we think provides a stabilized operation dead.

for the operator and and the additional

Capital deployed, I think we'll continue to make those buildings competitive for operator. Okay. So I mean and just one last one for me. So looking forward in terms of Acquisitions. I mean do you think some of these older assets might make make for a track opportunities in the next couple of years or would you still rather Target maybe newer? Okay. No. No, absolutely. It goes back to the operator the market the entry point on the pricing and what capital you can put into the building. So I thought we would absolutely look at the older assets that either additional Capital but it's got to be the right overall investment from the initial investment through capex that makes the buildings sustainable and doesn't overburden the property with too much rent. Okay. That's all for me. Thank you very much. It goes back goes back to basis. Thank you very much.

This concludes our question-and-answer session. I would like to turn the conference back over to Wendy Simpson for any closing remarks.

Thank you. I appreciate her. I just like to say we totally understand your focus on proceeds that will we will be getting or have gotten from Preferred Care will give you more detail in the next conference call we have but to note when we give you proceeds we're giving you net proceeds which includes some whole bats. You got off understand that the buyers are buying this without preferred giving them any indemnification. So we we have implemented in certain instances a whole back amount that stage in escrow, which we fully expect quite a bit of it will be returned to us. But our our proceeds that we talked about our net of that whole back. Hold back them out. So there's a couple of million dollars of additional possible net proceeds and I just wanted to be clear about that and there's also the net proceeds from the joint venture off.

Correct. Yes.

They're not the added together. Yeah the whole back, but in any case, I appreciate all the time you've spent with us, and certainly appreciate all your questions. We look forward to talking to you again after the first quarter. Thank you and have a great weekend.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.