Q1 2020 Earnings Call
Good day and welcome to the LTC properties first quarter, 2020 analyst and Investor Conference call and webcast.
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Before management begins its presentation. Please know that today's comments, including the question and answer session may include forward looking statements subject to risks and uncertainties that may cause actual results and events to differ materially. These risks and uncertainties are detailed in LTC properties filings with the Securities and Exchange Commission.
From time to time, including the company's most recent 10-K dated December 31st 2019.
LTC undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances. After the date of this presentation.
Please note. This event is being recorded and I would now like to turn the conference over to one deep Wendy Simpson Chief Executive Officer. Please go ahead.
Thank you operator, and good morning, everyone welcome to Ltcs Twentytwenty first quarter conference call. Joining me today, our Pam Kessler, our Chief Financial Officer, and Clint Malin, our Chief investment Officer.
First LTC blocks to recognize knowledge, everyone, who is fighting a cold night team around the clock.
In there.
Sometimes that there otherwise see family the care previously did and that's correct.
As much as you can listen to and read about what is going on in the battlefield level.
No I believe that you can truly comprehend what it's like Oh actually being in the field.
Oh, the progress that has been made and there has been much done well bring some normality again to society, but this experience will not be forgotten about any of us.
The World is currently operating in a unique environment, especially for those of us in the seniors housing and care sector. LTC has built a strong operator network and we couldn't be more proud of the work. They are doing sacrifices they are making the care. They are getting other lives they are fading.
News reports hospitals and the government for the president local officials.
Possibly your neighborhood website via next door or providing their best information regarding the number of diagnosed cobot 19 cases.
These numbers could include people, who were diagnosed and later died or recover or those that still have the virus.
Recent reporting shows that testing is finding many more people with cobot 19, who are asymptomatic.
So people can be carriers and caused active construction and other people.
One huge problem in fighting the disease is having another testing equipment and laughs available to evaluate the tests in a very short time, so that appropriate action maybe take.
Yes, I have said before this is a huge and very nation made up of the state's wouldn't get somewhere laws and regulations and we hold investments in 27 state.
At present time, we have operators, who have attempted 100% testing all get arrested interest there and others, who are testing only symptomatic people.
In each case the protocol is that any resident testing positive for covert night team is isolated and cared for by only covert 19 negative caregivers. However, if the caregiver is asymptomatic and where do you do not do 100% testing one cannot be sure that the caregiver.
Actually covert 19 negative.
We are in close contact with our operators and asked them to alert out of any wide spread contagion in our property.
It is difficult to compile steps that are comparable with some tests, 100% and somebody not.
Some numbers include all cases, including residents who passed away have recovered or who tested positive bar, but ER asymptomatic. Some report active cases in the property only as of today They report to us.
We completely understand your desire to get some data it shouldn't extrapolate work compared with other free who will report soon.
We requested information from all of our operators and 93% we're able to support updated information spanning the dates from April 18th to the 29.
This time the best data we can provide is that during this 11 day reporting period 35 of our 180 properties have reported positive covert 19 cases again. These are positive covert 19 cases, possibly asymptomatic and active.
You have all heard of the white bread problem in acquiring sufficient P.P.E.M. sanitizing supply.
The lack of peace protection likely contributed to the initial high incidence of additional contagion.
Yes, this crisis percent.
These supplies are becoming less scarce, but shortages remain on the costs have increased the anyone's estimation.
Employee costs also increased almost unbelievable level, but what do you pay someone to try to fight and then physical ever be the industry is recognizing these heroes would here, okay, another incentive to reward and acknowledge their value.
Well working with and support our operators and health care industry were continuing to manage and operate LTC.
Against this challenging backdrop, LTC remains highly liquid and conservatively capitalized, which will allow us to respond to future new business opportunities when the pricing of assets in our investment classes can be reasonably calculated.
We'll talk about recent transactions shortly and Pam will talk about our strong balance sheet and liquidity.
Although the market has become more uncertain with with respect to our Twentytwenty growth. We continue to lay a foundation that will allow us to X with we won the time is right and take advantage of opportunities as they arise.
Some banks in private equity are now pulling back from seniors housing and senior care investments.
Especially in our target market, which includes smaller regional operators and smaller transactions, we are well positioned to fill the void as committed long term investors.
I'm confident that LTC will continue to play a leadership role I would caution however that it's unlikely that LTC will close any major transactions in the near term given underwriting and diligence process. It is currently broken and restrained.
Given the current situation it comes as no surprise that a handful of our partners have requested deferrals.
We are actively assessing and exploring each request at our collaborating with our operating partners to make sure we're helping as needed well being mindful of the broader implications for our company and shareholders.
It is important for us to understand the impact Cobot 19 has had on our partners entire operation and not just the properties they lease for LTC.
What will provide additional details about about Brett deferrals later.
We believe Twentytwenty Q2 will be even more challenging for our operators. Then was Q1 due to the larger impact of costs related to P. P cleaning <unk> sanitizing and payroll coupled with the financial impact related to reduced admissions and reduced revenue.
We are closely watching several financial release programs that could possibly provide assistance to some or all of our partners, but at this point, we're waiting to see how it plays out.
Quint will talk more about some of these programs.
At the end of Q1, Twentytwenty LTC had a balance of approximately 47 million in straight line rents receivable.
GAAP requires this accounting despite a maximum I learned as an account which was anticipate no profit provide for all possible losses.
In my opinion straight line accounting for many multiple year leases does not follow this theory at least I believe it does not in today's uncertain environment.
As we do every quarter, we will continue to evaluate the collectability are straight line rent receivables.
As a result of this historic economic environment and the effects of Cobot 19 on our operators financial strength.
In the future we could determined that there is not sufficient probability that we will collect some or all of our straight line rent receivables should that determination be made we would write off straight line rent receivables in accordance with the current lease accounting guidance, writing off straight line receivables would not impact 20 20-F 18.
But it would impact as Oh in shareholders equity.
Due to the uncertainties, we currently face.
And limited visibility into the remainder of Twentytwenty related to how the effects of cope at 19 will play out we're spending twentytwenty guidance.
Now I'll turn the call over to pay down.
Thank you Wendy.
Revenues increased to 954000 from last year's first quarter rental revenues increased 411000, due to acquisitions and completed development projects higher rents and 2020 from at them leases that were transition last year and the 2019 first quarter write off or straight line rent.
These increases were partially offset by decreased rent from preferred care and every seat of deferred rent from drive in the 2019 first quarter.
Interest income increased 466000, and the 2021st quarter due to the funding of additional loan proceeds primarily used for expansion and renovation projects.
Income from unconsolidated joint ventures decreased 854000, due to mezzanine loan pay offs and reduced income from our preferred equity investments on nonaccrual status any real estate joint venture with an affiliate of senior lifestyle.
Interest expense increased 243000 due to the sale of 100 million senior unsecured notes in the fourth quarter last year, partially offset by lower outstanding balances and lower interest rates under our line of credit in the 2021st quarter.
<unk> expense increased 529000 due to the timing of certain expenditures in the first quarter 2020, as compared to the same quarter last year.
Including the variance is just detailed net income available to common shareholders increased 43.1 million from the prior year period due primarily to a net gain on sale a 43.9 million related to 21 properties in our preferred care portfolio, which Chris will discuss.
Maybe I saw was 74 cents per diluted share for the first quarter at 2020, and 75 cents per share for the same period last year.
Excluding nonrecurring items in the prior year AFFO per share with 77 cents into first quarter of 2019 compared to 75 cents and 2020.
Nonrecurring items last year included the write off that straight line rent related to a lease transition and the receipt of deferred rent from thrive.
The three cents decrease and Oh, excluding nonrecurring items was due to lower income from unconsolidated joint ventures, and higher gionee, partially offset by higher revenues.
During the 2021st quarter, we received 71.9 million net proceeds from the sale of the preferred care portfolio.
Repaid 4 million under our line of credit and invested 13, and a half million any acquisition of a skilled nursing center in Texas witchcraft detailed on our last quarter's call.
We also find it six nine and development capital improvement projects on properties, we own and 400000 under mortgage loans as well as Ltcs 19 cents per share monthly dividend.
First quarter 2020 dividend payments totaled 23.2 million.
In April 1st we declared our monthly dividend 19 cents per share for the mindset April may and June 2020.
At March 31st we own one property under development would they remaining commitment at 10.8 million.
We also have remaining works from commitment.
2.9 million related to expansion and renovations on four properties in Michigan.
During the quarter, we purchased 615827 shares at LTC stock under I've been authorized stock repurchase program at an average price or $29.25 per share, including commissions for a total investment of approximately 18 million.
Shortly after our board authorized buyback program. They made a strategic decision to terminate the plan given significant changes in the market and the ongoing uncertainty surrounding cobot 19.
One of our primary goals right now is to further increase liquidity, while focusing on maintaining a strong and flexible balance sheet.
We believe this increased financial flexibility and liquidity will allow LTC to better compete for and complete accretive transaction for the time is right.
At March 31st we had 30.9 million in cash and cash equivalents.
After the receipt of proceeds in it broke on the sale of properties any unconsolidated real estate joint venture with an affiliate of senior lifestyle, which Chris will discuss.
Approximately 48 million of cash on hand.
We currently have over 510 million available under our line of credit and 200 million under our ATM program, providing LTC, but total liquidity of approximately 758 million.
This is an increase in liquidity of approximately 68 million from our last earnings call in February.
Thus far we have not been get necessary to draw down on our line of credit to further increase our cash balance.
Our long term debt to maturity profile remains well matched to our projected free cash flow.
Hoping moderate feature refinancing risk and we have no significant long term debt maturities over the next five years.
At the end of the 2021st quarter, our credit metrics favorably compared to the health care beat industry average with net debt to annualized adjusted EBITDA for real estate, a 4.4 times in annualized adjusted fixed charge coverage ratio of 4.7 times.
And they get to enterprise value of 37%.
The effect of the economic fallout from Koeppen 19 on the capital markets has resulted in our debt to enterprise leverage metrics being higher than our long term target 30%.
However, at 4.4 times, we're still comfortably below our net debt to annualized adjusted EBITDA for real estate target a below five times.
Now I'll turn things over to claim.
Thanks, Ben I.
I will cover several items today, starting with dispositions in the first quarter, we completed the divestiture of our preferred care portfolio ahead of schedule.
We sold 21 properties in multiple transactions in the first quarter 2020 spanning five states.
Pam said net proceeds were 71.9 million and the gain on sale was 43.9 million.
Properties had a combined net book value of 29.1.
Our sales the entire preferred care portfolio, including one property that was sold last year generating net proceeds of 77.9 million in a gain on sale with 44 million.
The full portfolio had a combined net book value of 35.6 months.
The final building in the portfolio with a skilled nursing center, they're not condensers, Texas, which was folded into a master lease with an affiliate of Hmg help.
Hey, Jim do you made a strategic decision to consolidate those operations into another facility they lease from LTC in the same market into close down the property.
The shuttered property is currently being marketed for sale as of March 31, 2020 had a net book value of $793000.
Last quarter, we also discuss the sale of four properties owned by an affiliate of senior lifestyle, and which we held a preferred equity investment on a non accrual basis.
Hi, closing, which occurred in April we receive cash proceeds of 17.2 million.
And winding down the joint venture we believe it is likely we will recover another 1.3 million, resulting from a true up of working capital and the potential release of the $500000 hold back securing an antibody provision and the purchase agreement.
We anticipate recording an additional loss of approximately $600000.
In Twoq you 2020.
Based on the sales price and the cost and peroration estimates in Fourq. You 2019, we recorded an impairment on our preferred equity investment of approximately 5.5 million.
Now I'd like to provide an update on senior care centers, who emerged from bankruptcy in late March.
As part of senior care as emergence he was disclosed doing a court hearing, but the new majority equity owners of senior care and the other co. Let's see we're in discussions to potentially sell such ownership interest in our lessees.
Because ltcs master lease with senior care restricts what changes have control except in permitted circumstances.
We requested confirmation from them, but any potential sale would meet and comply with all applicable terms and conditions of the change of control provision in our master lease.
When senior care failed to respond to aspire deadline, we filed a lawsuit seeking a declaratory judgment and injunctive relief relating to any potential equity sale transaction, but does not comply with the provision in our master lease.
Well, we maintain a good working relationship senior care as management team. We believe it is important to enforce our rights under the master lease and we are prepared to transition that facilities to another operator if required.
As a reminder, senior care as current all monies owed to us through April.
Next I'll update you on our developed projects construction is complete on our assisted living memory care real estate joint venture project with field senior living in Medford, Oregon.
This week fields expects to receive its license to operate and is currently hiring staff with the community.
Additionally, field has been approved for assistance and the Paycheck protection program, but has made a strategic decision for now to delay opening the community until the stay at home order is lifted in Oregon.
Fields with LTC support will continue to evaluate the appropriate time, which to begin admitting residents to the community you will update you again next quarter.
Last summer, we acquired a parcel of land and committed to develop a 90, Ben post acute skill nursing center independence, Missouri with ignite medical resorts construction is on schedule well they fall 2020 completion date.
Moving onto mezzanine in the fourth quarter of 2018, you originated alone for the development of the independent living assisted living and memory care community in Atlanta to be owned and operated by village Park Senior living the nine acre campus is on track to be completed in the second quarter of 2021.
Katrina lease renewals for a moment, our brookdale leases, which cover 35 properties in eight states are the only significant renewals we had through 2022.
Bill is still within the window to exercise its first renewal option.
We remain in close contact with them and believe any renewal notices given will likely be delivered toward the end of the window in June.
As Wendy mentioned, we are currently assessing the need for rent deferrals. Among our partners. We collected a majority of April rent. However, we granted a total of approximately 772000 and rent deferrals to six operators, the majority of whom for seniors housing operators.
Total deferrals represent approximately 7% of april's contractual rent.
How do we chosen to apply security deposits in lieu of deferring rent the deferrals would have amounted to 276000 or approximately 2.5% of april's contractual rent.
Oh, the 772000 of deferred rent we provided an April 137000 has already been repaid to us effectively reducing the percentages I just mentioned from 7% to 5.7%.
And from 2.5% to 1.4% respectively.
We may deliver additional rent assistance in may on it as needed basis.
We're not anticipating an across the board rent for all program. Instead, we're working closely with our partners to help them, where we are needed most.
As Wendy mentioned, we have a lot of confidence in our operator's ability to manage through this handling.
Moving onto our portfolio numbers Q4, trailing 12 month, EBITDARM and EBITDAR coverage using a 5% management fee was 1.44 times and 1.22 times, respectively for our assisted living portfolio.
And 1.79 times, and 1.34 times, respectively for our skilled nursing portfolio.
As a reminder of the preferred care portfolio has been excluded from these metrics.
I'd now like to provide some occupancy trends in our portfolio in light of Cobot night team.
To give you visibility into current occupancy, we're providing information as of April 20 Threerd.
For our private pay portfolio occupancy is as of that date.
Well, our skilled portfolio occupancy is the average for the month to date.
Because our partners have provided April data to us on a voluntary an expedited basis for the month has closed.
Permission, we are providing encompasses approximately 68% of our total private pay units and approximately 88% of our skilled nursing beds.
For additional context, we're also sharing comparative information about occupancy as of December 31st 2019 at March 31st 2020. So the same population used in April data.
With that preamble private pay occupancy at December 31 March 31, and April 23rd respectively.
86%, 83% and 80%.
We are skilled nursing average monthly occupancy for December 2019 March 2020 in April two days, respectively was 79%, 78% and 75%.
The decline in both private pay in skilled nursing occupancy is not surprising given current industry trends.
As Wendy mentioned there are separately programs that are providing a will provide financial assistance to some or all of our operating partners. The biggest by far is the two plus trillion cares Act, which has provided some financial assistance to skilled nursing.
The package earmarked to 175 billion for the health care industry of which 75 billion has already been or will shortly be deployed.
At this time the government continues to assess distribution the remaining hundred billion be portion of which May also benefits skilled nursing and private pay senior housing.
Yes, the Athree hundred 50 billion Paycheck Protection program has also provided a systems to a number of our partners.
I don't have already received funding while others are waiting for distribution be additional 310 billion.
On that have that allocated.
I will finish with a few comments on our pipeline.
Obviously, we are operating in a transactional market that is constrained by operators appropriately focused on protecting and caring for seniors in stock affected by cobot 19, rather than focusing on deals.
The same time due diligence has been challenged has access to properties is being well that's it.
We don't yet know how or when one we'll see we'll return to the transactional market. So we are exploring strategic ways to best deploy capital in the current environment.
Right now, we're seeing more demand for structured finance products and are putting more emphasis on creating financing options that work best for operating partners.
These vehicles could include preferred equity investments mezzanine loans bridge loans construction loans and Unitranche loans.
Which we believe provided better risk adjusted return in a shorter investment horizon in today's environment.
These solutions can assist operators by providing them with liquidity through releasing trapped equity in their properties bridging maturing loans, while waiting for the market to return to normal funding construction for shovel ready projects.
Funding existing projects or other investors have backed away from their commitments and providing an exit plan for equity investors, who may have their own liquidity needs.
Over the longer term, you're continuing to build a pipeline that spans the only these type of instruments, but also more standard acquisition and development investments.
Our business development team is active and staying close to the market to ensure we understand the needs of regional operators overtime.
Our goal is to find investments, but not only meet our rigorous underwriting criteria, but that can create or enhance growth orange and partnerships with regional operating companies.
Now I'll turn the call back to Wendy for her closing comments.
Thank you Pam and Clint.
Before we open the call to your questions I want to again express my gratitude to our operating partners and their employees and families. We know the work you are doing right now is beyond any challenge you have ever faced but we have every faith that you will continue to care for your patience and residents.
Safety and health with Grace and 42.
I also want to convey my sincere appreciation to the entire LTC family for quickly adapting to working from home without interruption.
We are working to support our partners, while continuing to build a solid foundation for LTC future growth opportunity will present itself well limited visibility at this time does not allow us to provide a clear timeline to recovery I'm confident that LTC has a solid foundation and is it.
Good position to air quickly on those opportunities as we strive to be a read done differently.
Please stay safe and if you are able do something to help and or recognize those who are in need right now.
Operator.
We're now ready to take questions.
[noise], we will now begin the question answer session to ask a question you May Press Star then one on your Touchtone phone.
If you are using these speakerphone, please pick up your handset before pressing the keys.
It's at any time. Your question has been a trust and you would like to withdraw your question. Please press Star then too.
At this time, we will pause momentarily to assemble our roster.
And our first question will come from Tayo Okusanya of Mizuho. Please go ahead.
Hi, Yes, good morning, everyone. I Hope you all are they still healthy as well. Thank you for all the comments during the call a couple of questions from my end the first one or your top tenants.
You talked about collecting 90% of the rents in April could you give us a sense of whether some of those tenants have subsequently paid in me I'll just give us a general sense of again, the guys who are struggling to pay a little bit well.
Well, what maybe going on with though.
Sure. So this is clint.
For the April rents on average are probably 25% for the specific operators that we provided deferrals for.
And going into May right now, we only have one rent deferral that we have Oh, we gave one operator in conjunction with the April deferral, which is less than 1% of our may revenues, we've not received any additional.
Request for me deferrals at this point for this month going for May run.
Obviously Friday being the first second certain being over the weekend.
We've collected 55% of our rents on interest.
On Friday.
And we expect the rents for us typically come due anytime between the first in the 15th so [laughter] rents Phase then every month.
So that's where we sit right now without May run.
Okay. That's helpful. And then the second question I had was up some of the occupancy statistics you give me the most recent occupancy statistics.
I guess, what I'd say those two numbers was a senior housing you know up 8% under skilled nursing number around 75, and you kind of overly those numbers on so we got a cyclical.
Deals nothing's, operator, or typical senior housing operator, when it does suggest that we the rent coverages come down pretty significantly. It goes occupancy you got kind of sustainable wall. So how do you come to think about side and we've got to you know you can have some really big drops in occupancy that becomes the.
Eight of the world for a quarter or too.
Oh, it definitely be especially as Wendy mentioned with the increased cost that operators have for staffing MPB. Those are some challenges we have seen on our skilled portfolio that [laughter] providers have been able to participate and the cares that as far as those funds being deployed into <unk>.
It's overoptimism, yes, let's be a loans have received funds are all funds to come in so that's been helpful operators.
As well, but as occupancy yeah does decline it does become a little more challenge but.
We need to see where it's going to go on this is why we pulled guidance suspend the guidance going forward because we're not exactly sure where this will go as far as any additional assistance that can be provided through the different programs that are out there there's still $100 billion of funds in the cares that that is waiting distribution. So it'll be sort of a wait and see we do think that.
It's likely skilled occupancy probably pick up I'm at a faster pace [noise].
Following as the time period normalizes, some and some state cats.
Implemented rate increases PDP is just beginning to hit and the government CMS.
Has a rate increase coming up over.
Suspended as a question to superstation cod of 2% in as well. So there's some some benefits and rates are both on the Austin state Medicaid side as well as I'm, just a Medicare rate.
Great all right I'll yield the thought I'd just go back into queue. Thank you.
Thank you.
Our next question comes from Rich Anderson of SMBC. Please go ahead.
Hey, excuse me good morning.
So a great call not easy to say a lot of stuff I imagined. So I appreciate all the detail when you the 772000 of rent deferred.
When I figured I think you just said 25 first that on average is 25% of a have a attendance rent is that what else is that what you said.
Correct, Okay, and how many you said six operators, how many actually requested that you denied.
We request that we denied right now we haven't denied anybody people would be general inquiries.
About or other reads, making programs available and then maybe some crossover in tenant relationships.
The business in general inquiries about that we've not specifically denied anyone that's supposed to be I'm going into April Oh, we had a number of calls in the end of March that facilitated the deferrals.
Actually we only have one deferral that we have for me that we agreed to in April.
Being less than 1% of our total may contractual rent.
Okay. So maybe only put it this way perhaps of the six operators did they want a full rent deferral and then you negotiated a 25%. It is kind of go like that was sort of a negotiation at that level or just trying to understand the cadence of the of the conversations.
No. It was just a general conversation they typically do not asked for full rent relief. It was only up a portion I think they could not see what they needed.
Yeah, no. It was not full deferrals and it was there not requests for full deferrals other than in one case.
But it was it might minor amount.
Okay.
Overall pull them.
Okay, how does bad debt enter into this conversation with you in terms of.
Collectible, obviously collectability issues down the road.
Do you have a.
Are you working on a a sort of a an outlook on on how bad debt might play a role when you start to bring guidance back into the conversation just curious.
Sort of the watch list in the portfolio as it relates to Collectability.
Well I think that bad debt maturities Tam that you would be referring to in other straight line rent balances that when do you referred to.
As we typically don't have a our balances outstanding for our current rents.
And as Wendy alluded to that something that we evaluate every quarter and we weren't going forward it really depends on.
Congrats on a GAAP the company 19.
Ah crisis, Okay, alright, Thanks, Pam said before at the 47 million.
She is that could be all perhaps.
You know at risk at some point you'd be almost willing to say.
To just go to a full cash basis and the whole portfolio at some point is that it in the realm of possibility.
It it hits the circumstances want you require any accounting rules require that you.
Analyze the credit each credit individually. So we have to look at each operator, and the lease individually and make that determination.
Yeah, it's possible that any anything is possible. These days I suppose yeah. There are then last question how is memory care holding up in this environment.
So, Florida, because it's been hasn't really seen a much different from the l. side, but one of the general comments routes that we receive from operators is obviously social distancing.
In communities, a little more challenging in a memory care environment.
Then a al or aisle. So that's the one general comment that we've had from a memory care operators.
Okay, great. Thanks very much.
Thank you.
Thank you.
Our next question comes from John Kim of BMO. Please go ahead.
[noise] I'm. Good morning, Thanks for all the color on the call I was wondering for the 35 properties that you have determined has a positive cases covered 19.
Protocols that operators are taking place and does it.
Different materially between operators.
Oh, I wouldn't say that differs materially obviously when somebody has symptoms.
Diagnosed me, though there are isolated as Wendy mentioned in her comments.
Comments.
And they and staffing, but they tried to segregate staffing as far as whose were whose caring for those individuals that are presumed to be covered positive or or our positive.
More symptomatic.
Well said, they've all illuminated <unk>.
We're all being very careful about people coming in delivering thing, even though a post office, we had one operator, who enough smaller facility absolutely made a buffalo does the facility and the staff was living there along with the residence for a period, although I.
Assess the entire <unk> building so.
It's been handled differently [noise].
The same as I said some are testing, 100% summer just testing symptomatic people.
But as soon as they find out that there's.
Coal that in the facility Theres, a lot of or to segregate those off those up residence Inn segregate the staff.
So it's all it's all being taking care of primarily on on those.
Type of activities.
So in effect the property goes under quarantine you limit visitations and.
Can you just elaborate on what happens with the stuff just to.
Limits to spread.
They're getting beginning stopped at work specifically only without population so you're not intermixing with other portions of the building, which typically requires and then there's higher levels of TV as far as downs shields, that's between well those items honest scarce as they once were which also entails increased pay typically for.
Staff that are working on those isolation units.
Kinda staffing.
He test positive.
It's not allow back into the facility for for two weeks or whatever the state requirement as but generally it's a two week and then they have to test a negative again before they they can come back.
[laughter].
Okay on the Brookdale or lease at an option window I think in the last call you.
Pete I think we're more confident they will renew that reason I'm wondering if you still feel that way today or could there be anything that you do.
With that option window.
You know our last call us was precaution and the coverages as we mentioned last time is pretty healthy not portfolio.
But obviously want to covert environment, and we don't know what would come of that so I think that obviously complicates it but are they indicated in my comments.
I think it's prudent and Brookdale, probably would not send a notice until if they're going to renew toward the end of that that window, but nothing has transpired happens between us and ill make us believe they haven't indicating anything no negative.
[laughter] I mean, just following up on Rick Rich's question.
If you anticipate a tenants will not be able to pay the rents in future periods and then you might doesn't that receivable well you then in those cases go to cash rents accounting.
Yes, we would.
Okay.
Thank you.
Thank you.
Our next question comes from Michael Carroll of RBC capital markets. Please go ahead.
Thanks, Good morning, So I'm not sure if you answered just yet or not I know I think I'm kind of touched on it but can you provide some color on the tenants that have actually requested rent deferrals in April and what does those deferral requests mainly due to their liquidity being shifted to TP any in labor investments.
Our has operational deterioration on the occupancy side already being felt that made it a little bit more difficult for them to cover that rent in April.
I will turn for the most part it has been just the uncertainty of cost as far as securing P.P. It was the initial hot reasons for all for calls coming in.
No. This was towards the end of March when this you know just started and there were concerns about the scarcity of P. and I think there was just uncertainty on money or the amount of funds that people were expanding on that stock up on certain supplies and equipment.
Okay, and then and close the tenants that paid back the deferral already I mean, I guess that was outstanding for media sounds like only a few weeks I guess, how did they pay that back. So quickly was that a seniors housing or a snippet I'm not sure. If we're able to say that I mean did they get some reimbursement from the government or was it that the peaking.
PTSD costs, just weren't as as big as expected.
So what one was the skilled provider and one was a private pay operator in our deferrals, we set forth a a repayment date [laughter] or the soon sooner receipt of government funds or assistance from the various programs that are out there. So one of the operators received.
Funds, which triggered the repayment back to us and on the private pay operator, I think when they went into April just with the uncertainty on on cost they sort of proactively.
Asked for assistance.
Just have flexibility, but then once they got through the middle of the monthly.
They had the funds so they decided to pay that back to us proactively without request.
Okay and then when did the April deferral rent discussions start was that's in the beginning of April I know it sounds like the may discussions. So it's been pretty modest to date I mean would you expect aims to tick back up as the me right gets do or would you have already had those by this time.
No using using April as a proxy those call started coming in the last week of March.
And that was really when we that's when the majority of those Oh six operators contacted us so.
We do not have any other than the one deferral. We granted there now for May along with April to one operator, we've not received any other request. This point for made referrals. It is possible obviously between now and the middle the month wouldn't rent different due dates come that we will probably have a couple of other office.
I would be my guess.
But at this point, we've had less calls only dead going into April.
Okay, Great and then just last question on the the memory care side on how exposed does that property type I mean, I think it's obvious that they have shorter length of stays so they would have a higher move outreach, but are you seeing a higher move in rates just because it's more need base compared to $8 right now is that a stair asked.
Im interested just too early to tell right now.
I think it's too early to tell right now is some some communities have been able to move people and others have they been covered diagnosis they've stopped admission so really just depends on real property by property basis.
Okay, great. Thank you.
Thank you.
Our next question comes from Jordan Sadler of Keybanc. Please go ahead.
Thank you good morning.
The again, thanks for all your color.
You've provided it's a enlightening.
In a difficult environment so a.
A little bit more clarity if I if I could here on on May I know, it's a very very new.
Information to seasonally the fourth we just had a weekend.
If we compare the 55% collected so far year over year.
Would we be about where we're supposed to be.
And I recognize you don't have a lot of days here, but is it looked like you're running pretty much in line with where you would normally be or maybe even month over month versus April this many days into the quarter the 55.
George it's kind of hard to say that 'cause it really depends on one day of the week Oh, you know the first falls in the space having to fall in the first so tragic. It averaged you will have to look at you know what when that first falls during the course of a week. So I think that what we received on Friday.
I felt appropriate and could have been lines, what we've received before we expect additional payments.
And then this week. So we have some rents are not due until you know the 15th of the month, but on average I think that that sort of felt like it was.
Generally what we would collect at that point in time.
Okay and then.
Another follow up on.
With covance facilities the number.
And just 35.
How is that changed over the last few weeks has it stabilized recently.
Any sort of sort of cadence in terms of the number of facilities with co that.
I would say that it's increased but its increase because an in anticipation for the call. We probably proactively reached out to our operators to get occupancy information and cobot information, which was a specific specific requests we made for this call.
Typically we have asked operators do is when do you indicated in her script is too.
Let us to any widespread outbreaks at the can you just who haven't wanted to overburden or operators. They know they fell about lot of responsibility in a lot of efforts being put forth on the front lines of this.
And to report to us buildings or if there's just no small incidence of that.
Just asked that they notified us many widespread outbreaks. So of course during this process, we expected that number to go up.
Because we asked for reporting Honda civic to to this call.
It's a little hard to tell I guess, because it's not like you had a result every Friday in terms of or report every Friday in terms of number of facilities.
And as Wendy mentioned to the reporting metrics are different for how people report to us so to make it comparables very challenging.
That makes sense have you been able to notice to this most recent update with the occupancy data.
The impact in terms of facility occupancy for a cobot facility versus a nine non covert facility.
We haven't been able to do that specific analysis, because we just got this information and so it's too new to really tie and.
That information.
Okay understandable.
And.
What's what's your sense you know vis-a-vis.
You know the cares active paycheck protection program Health care Enhancement Act, you know or the.
You know the public health search social services Emergency fund.
And do what are the Medicare accelerated advance payment program.
Do you have a sense of skilled nursing operators that have received any proceeds under these programs so away from sort of.
Just the more traditional paycheck protection program, but really under sort of the health care side of these programs.
Well on the Cures Act absolutely people perceive the first 30 billion dollar tranche of the time, they've got approximately 6.2% of their 2019 Medicare payments and then the second tranche, which is being well funded now some people have received that a middle continue to be funded I think during the course of this week. So still providers have definitely benefited from that.
Under the S.P.A. program are there has been funds that had been received by some of our operators skilled.
All of private pay side.
No that's evolved a little bit overtime to because initially when you had to 500 employee requirement that seem to disqualify a number of parties, but there was the alternative sizing standard that others have looked into that have helped smaller operators qualify for those SPJ funds. So no not second try.
Thank you still Pete still to be deployed and more people that we now have been able to they'll get approval, but are waiting for funds.
Under the FDA programs, let has been helpful to both sides.
As it relates to the accelerated advanced Medicare payment program that probably is not been is helpful. Because no. Some operators have taken up but they've chosen to reserve those dollars if the lenders even make the money available because you know 90 days from no you won't have revenues flowing so I think that has been fenders.
That's helpful as the other as the ASP program or the cares Act.
And.
Putting funds out for the skilled providers.
Okay, and then and then lastly, I guess.
The the initial sort occupancy data was helpful. But I was a little bit surprised I don't know if I heard the strong or maybe just sort of help me parse this a little bit.
So the private pay.
Occupancy appeared to slip about 300 basis points from 331 to 430 from 83 to 80.
But also.
The sniffs portfolio.
Which I believe was the average for the month of March versus the average for the month for April also slip by 300 basis points.
It was is that correct from 78 dispose the average because the average for the month in December the month of margin than year to date through April.
Oh <unk> year to date, Susan much debate.
Today, So we get we gave three point so for the private private pay on there was as other specific date December 31 marks or do you want on April 23rd again that was 86 Athree hundred 80 for private pay.
For skilled it was the average for the month of December.
March and April to date, and that was 70 978, and 75, respectively and that was was that through the 23rd as well.
Yes people to date, okay. So so okay. So I think this lines up so.
My question here is I guess I would've expected left.
That maybe the occupancy fall off from for private pay <unk> would have been a little bit sharper than for sniffs, but they seem to be somewhat in line and I guess, what I, what I think a lot of people are trying to understand in terms of how this plays out.
As you sort of natural churn for your private pay operators on a monthly basis for versus the churn.
In your skilled portfolio on a monthly basis.
And these are non discretionary move outs, obviously are what what have you.
So I guess any reason for that you could sort of.
Some color you can give is it the cessation of the elective procedures that caused sniffs to fall really at the same rate right away as as private pay 'cause it almost seems like sniff saw a sharper fall off.
Right because you're looking at an average number for the month that sell the same amount is that is as a as private pay.
Sure I think do the decline and sent US what was expected on the on the on the skilled side with elective procedures being deferred so that was expected again.
You've got the 400 basis point drop from December to.
No problem on the average, which intuitively it made sense to us when we expected that type of decline.
One interesting point is that the the skilled mix has remained constant pretty much concentra that timeframe declined minimally, but the mix on the insurance a Medicare to stay for a portion of the same during those time frames on the skilled side.
Okay.
Oh yield the floor.
Thank you. Thank you.
Our next question comes from Conor suffer ski of Berenberg. Please go ahead.
Good morning, everyone and thank you for out of me on the call appreciate very much the efforts of the LTC team your operators at this time.
First question pretty high level, I mean, I apologies if I missed this before have you seen any improvement in the sourcing and procurement of detection equipment for your operators and then.
Can you provide any color as to the timeline of maybe wendy's the associated cost would be mitigated going forward.
Oh, we definitely have seen that the scarcity has its not as severe as it was back in March to April, which Wendy mentioned, but yeah, I think that no. Other people enabled us to buy sort of in bulk if you well and then stock supplies.
But there is not this rush of uncertainty about supply is not being although the cost maybe not as high as it once was in the March 1st of April.
But the costs are still still in the higher side I think as we move forward and next few months, depending on whether its environment goes we don't know exactly now whether it goes but at this point it seems like there's more availability. Although the cost is higher than has been in the past, it's not at a peak price what it.
Let's say a month ago.
One of one of the things that.
Happened.
During this period as.
We noticed and we we facilitated.
Our operators talking to each other and and indicating where they found supply somewhat supplies were available and how they could get them. So we set up a structure within our LTAC operators. So that they could share information of worried to get supplies as fast as they can and the types of supplies they need.
Right now if you talk to an operator their biggest challenge is testing.
I think gallons are still at a premium in terms of getting enough balance, but masks and gloves seem to be in in good supply every place that they need them. So right now if you talk to an operator about their biggest challenge, it's getting tests and getting the results of the test.
But yeah I mean, when this started people just.
We're not prepared for.
This to happen. This this quickly and to have a need for this level of supply so they have.
Okay. Appreciate the color there and then in terms of external opportunities you mentioned that some potential investors, maybe pulling away from senior housing and skilled nursing.
But it does sound like you guys are in a bit of holding pattern right now maybe into the timing becomes more prudent if that's the case I mean, what kind of factors would you need to fall into place them big before becoming more comfortable with these real estate markets.
I mean, we knew these need to see more normalize period Morse more.
Stability of what occupancy is gonna be as far as some recovery on both skilled nursing and so living just get a sense guy what is a need and what do we get back to normal level. A then what is that what does that level. You know one thing we all seem to see as you know what is pricing you know we taught we've talked in previous calls about okay.
Rates being.
Pretty low levels than pricing being at a premium.
You know really need to see going for what does that look like and also what is our cost of capital going forward once the equity market starts to normalize.
It was a better sense of where we can accretive we deploy capital.
Right.
Right and then a final one from me, we're seeing reintroduction of elective procedures several states and I'm kind of wondering what portion of your skilled nursing occupancy would be attributable to elective rehab and then as we see this reintroduction occurred you think you could see an uptick of occupancy under Snic portfolio.
We do think we've talked about this as far as we think skilled recovers faster.
Because sort of about pent up demand on the elective.
Surgeries. So we do think it's going to happen.
Occupancy will increase more skilled initially and it really depends on what were your I think in the country. You know some some parts of the country, though hospitals have stop those procedures really focus on caring for co that if there's been.
No declined an instance of cogan nothing sort of normalize as being able to have people going back into the hospitals.
Mhm.
Okay I appreciate the color that's all for me.
Thank you very much.
Our next question comes from Daniel Bernstein of capital One. Please go ahead.
Hi, good morning.
[noise] like everybody else. We appreciate all the color that you're giving given the circumstances I wanted to touch on the wages.
Yeah, you're beginning comments when do you see wages were up an unbelievable amount. So I want to see if we could get a little bit more color on whether you're referring to both skilled nursing seniors housing.
And then relative to that do you see those as for.
Permanent kind of increases.
Or semi permanent or something that's going to stick around for quite a while obviously occupancy can can fluctuate a great deal and the next couple of months or come back or are not come back, but I'm a little bit more worried about the long term impact from expenses.
On seniors housing and skills more skilled nursing margins.
Yeah, It's early days and we've talked about it with our operators and it's very hard to take back money. After it's been given for awhile. So I would expect that just the average salary cost at any facility at any level, it's probably going to tick up it's too early.
Tell how much this pace.
Hey, check protection program has helped differ or some of that increase.
Over the overtime.
Perversely enough our operators last month, we're saying that the employment base is much better for them because people who can't get jobs. Other places are applying for jobs at nursing homes and assisted living properties.
So in order to get new staff and and in fact that a lot of hospitals have furloughed people. So there are more nurses and clinicians available.
So on the on the plus side, there's there's sufficient labor.
The negative side, it's costing it's costing more I would just predict that going forward labor costs are going to be higher I don't think it's gonna be like 10% or anything like that but it will just be higher.
It was it more of an issuance in seniors housing can then skilled nursing just because.
Skilled nursing has generally higher.
Labor to two patient ratios. So maybe they were already you already had high staffing were seniors housing you have to go head to cope with Covidien each increased staffing levels.
Just trying to understand if is it maybe one sector versus another had.
More but im more of an impact from wages or expense generally.
Yeah, Dan from our visibility it seems like it's been both assisted living and and skilled I mean, you've had situations. When you know if there is and outbreak of covet or more diagnosed every building or a competitor. So there can be concerned of stuff in getting good motivated.
No to come into work yeah. Those are so we've seen that across both this is the end.
And skill.
Okay.
And then.
In terms of anthem, and I guess, the extra five properties you expected certain level of increases in those rents for 2020.
Jim We hopefully 2021 can you talk a little bit belt weren't the trends in those properties in terms of occupancy and great margin, where the impacts there similar I'm just trying to gauge whether.
How confident you are that the rent increases for anthem or going to stick or not.
Well, obviously with anthem is that they're in the same vote as everybody else is as far as you know going through this no this challenge and occupancy.
You know we have not maximized the rents on anthem as we have stepped up rents as they've been increased occupancy. So there was some cushion that we had provided into the anthem step ups, where that goes beyond this I'd love to wait and see where the environment is but we we did not trying to take every single dollar.
Stepping up the anthem rate increases and on the of the thrive properties and we've reset Rencen Enphase, though then.
Couple of properties have performed better than expected. We've had one one property that step back on the occupancy side. So it's been a little bit a mixed bag.
On but it takes time as I mentioned before with these transitions and operations that people need to come in and implement their protocols are staffing level. They had some turnover on staffing. So we expected that take a little bit of time to put in place on the thrive properties.
Okay, and I guess, just one last question for me.
Our investments under ridable little disappointed if somebody came your way.
Did you feel very challenged right.
It's very challenging it you know something that could possibly be done then you know we mentioned structured finance products you know if somebody was looking at selling.
You know a mezz loan for instance, they had put in place because somebody hadn't liquidity means that we could see that.
In the capital stack as far as what we would buy was well covered and in that type of investment you don't have to go into property specific village and so that's an example of where we could potentially see opportunity those are going to be bite size investments. Yeah. We're staying close to ground talking to a lot of people see more opportunity is but it's.
When do you mentioned you know any large investments I don't see any major transactions. During this timeframe, but we're going to look at being opportunistic and stay connected to see where opportunities.
I'm going to us.
Okay I.
Again, I appreciate you, taking recalls and giving us all color that you can't okay. Great. Thank you.
Our next question is a follow up from Tayo Okusanya of Mizuho. Please go ahead.
Oh Your line is open on the Sun this isn't muted on yours.
Hi, Yes, hi, how are you I just wanted to follow up on Jordan's question about the care that I'm, specifically, what would be going on in regards to allocations to skilled nursing as well as to senior housing.
Is there any data or are you kind of a we at this point of the how much exactly boot particular sector have received another yet.
And then ultimately that could be a specific allocation either to skilled nursing or senior housing at some point.
Well right now of of what has been deployed so far there was different methodologies.
To the skilled industry out of the first $30 billion deployed and that was a 6.2% of the 2019.
Medicare payment so there wasn't methodology.
On average you know we've heard that that's the other 30 billion approximately 1.5 billion was deployed two skilled nursing thats an average couldn't be.
Could be a little higher but that's what we've received from industry.
Information.
The next 20 billion that was allocated was based on basically a facilities share of net patient revenues for 2018 relative to all net revenues for our Medicare cost reports. So there's different methodology about how that was deployed for the different to.
Yes.
Ooh getting using industry information as far as averages, we've heard and somewhere in the hundred $75000.
Per.
For property, that's obviously depends on the size of the building and how much Medicare.
Payments you pad.
I'm now there's a remaining hundred billion that has not yet been allocated on that so we don't know what that methodology is.
I know that the trade organizations on the private pay side between argenta them and Asha have been no lobbying to participate in that and it's possible there couldn't be participation the remaining funds.
To be deployed under the cares Act.
For both private pay as well as skilled nursing that have not yet been determined to our knowledge as of this morning.
Gotcha, Okay. That's helpful.
And then just one other follow up.
Just within the quarter. So in some of the occupancy changes that they'd happened within the portfolios I guess, they get and when you kind of have occupancy down kind of 300 basis points in Q1.
Was that all kind of in March when the whole who that patent that make started though where there's something that's kind of going on throughout the quarter as well just trying to understand.
The occupancy drops within the core within the outlook you want.
Nothing specific other than Covance as far as there is no nothing else that specifically stood out to us.
Okay. So those are really big shop pull back in March sounds like what may have happened.
That seems to be what our data shows.
Okay, but thank you very much it up.
Right. Thank you.
Our next question is a follow up from Jordan Sadler of Keybanc. Please go ahead.
Thanks, I just wanted to try and follow up on that occupancy question, one more time and.
One of the other questions I think helped.
Flesh it out a little bit and I thought it might reask on another way surrounding sort of a Medicare census.
Do you have for no. They the Medicare census of your SNF portfolio.
I know that we have 21.7% reported in the fourth quarter as a payer sources that it is that.
I assume that's.
Probably.
Higher than the occupancy.
Correct that's reported for in our supplemental we do.
All revenue I guess.
Yes.
That's that's all revenue. So so just trying to get a sense of of sort of what might happen to this occupancy.
But really profitability.
Of sniffs in the short term is as you were just essentially given the nature of Medicare overlay.
30 day period of Lockdowns and or <unk>.
Delaying elective procedures et cetera.
You could expect a significant portion of this occupancy.
And payer source to essentially go ahead go away until it.
Returns right until these elective procedures.
Come back.
Is that fair.
You would have a lesser number of Medicare.
Managed care admissions correct I mean, you still have they couldn't be the same percentage relevant to your total but as you have.
People convert over to Medicaid and you haven't Medicaid discharges.
You're probably not filling those with is not as high a number of Medicare.
In managed care admissions not to say the percentage of the occupancy that a mistake because right now through December March and April.
A percentage.
Those time frames for us as far as for skilled patients managed care and Medicare.
Dip just slightly it was based on the average occupancy a pretty constant number pleasure occupancy went down your skilled was still the same percentage of of your occupancy.
Okay.
Do you have a sense of recent census from these most recent updates from your operators do you have a sense of recent census at least qualitatively.
From SNF operators.
I mean qualitatively, it's just that definitely seen a slow in admissions from hospitals and that's just is pretty pretty constant across operators in different parts of the country.
Okay, but they also tend bar figured all the data sleep qualitatively. They also thinking but as it has decreased they do think that it would no one's.
Business things become a little bit norm normal there's gonna be they expect an uptick on the on hospital admissions and hopefully census into the into skilled.
Okay and has there been any discussion with operators surrounding what could potentially happen.
At least on the Medicare side in terms of rehab I see.
Potential risks to some of the Medicare census.
As some of these folks look to maybe rehab at home or rehab in alternate alternative location.
You know to avoid shorted, the the risk potentially being a in a facility where it where you may have covert 19 or just being exposed to.
Another vulnerable population or with Avon and.
Well population any thoughts surrounding how that me.
I saw I saw an article this morning that there was going to be a waiver for tele health four O T. P T.
And speech because right now those waivers I think have been more on the on the physician side, but that's something I think is being put in place temporarily from a tele health medicine standpoint to allow for those type of.
Therapies to be available.
And to be able to be literacy <unk>. So you could have approach. So this could be maybe a little bit prolonged in terms of the decline in Medicare census in other words, you may see a slight snapped back but it may be sort of a flat are you.
Rather than.
Hard to say I, I think what you're probably going to see Jordan is it probably depends what geography or at in the country summaries of the hit harder or the ones that haven't been hit as hard as you're probably going to see that disproportionate in different parts of the country as my guess as far as timing, but at this point its.
I would say, obviously I unprecedent at a time and you know it's hard to say exactly what we just don't have a crystal ball know what will happen I'm, probably will differ by by state and and geography, So I guess.
Well I certainly appreciate all your candor and all of your efforts. Thank you guys.
Alright. Thank you appreciate it.
This concludes our question and answer session I would like to turn the conference back over to Wendy Simpson for any closing remarks.
[noise] again, thank you all for joining us and we look forward to updates that we can provide up into this coming quarter and everybody stay safe and stay well. Thank you.
The conference has now concluded. Thank you for attending today's presentation and you may now disconnect.