Q1 2020 Earnings Call
Okay and welcome to the health care first quarter 2020 earnings conference call the webcast.
All participants will be in listen only mode.
She didn't need assistance, please no cost specialist.
Stork, you felt by zero.
After todays presentation will be an opportunity to ask questions.
Yes. Good question of Human Touch Star then one other question so.
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Please note this event is more courted.
Our knowledge chemicals, so much as Michelle LIBOR senior director I should manager of operations because remember the floor is yours.
[music].
Thank you and good morning with me today are Omega CEO Taylor Pickett CFO, Bob Stephenson C O Danby, Chief Corporate development Officer, Steve and install and making cool senior Vice president of operation.
Comments made during this conference call that are not historical facts, maybe forward looking statements such as statements regarding our financial projection dividend policy portfolio restructuring rent payments.
Antrel condition or prospects to her operators contemplated acquisitions dispositions or transitions and our business I'm portfolio outlook generally.
These forward looking statements involve risks and uncertainties, which may cause actual results could differ materially.
You see our press releases that our filings with the Securities Exchange Commission, including without limitation. Our most recent report on form 10-K, which identifies specific factors that may cause actual results or events to differ materially from those described in forward looking statements.
During the call today, we will focus a non-GAAP financial measures such as they read Epicel adjusted SFL Bad an EBITDA.
Reconciliations of these non-GAAP measures to the most comparable measure under generally accepted accounting principles.
Well, it's an explanation of usefulness of a non-GAAP measures are available under the financial information section of our website at Www Dot Omega health care Dot com and in the case of Navy I thought, though and adjusted EPS that though in our recently issued press release.
In addition, certain operator public and financial information that we discussed is based on data provided by our operators that have not been independently verified by Omega.
I will now turn the call over Taylor.
Thanks Michelle.
Good morning, Thank you for joining our first quarter 2020 earnings conference call.
We're very pleased with our first quarter results that allowed us to comfortably declare a 67 cents per share dividend that will be distributed on may 15th.
Payout ratio improved as expected to 84% of adjusted FFO and 90% of funds available for distribution.
Okay, I'm going to focus my comments on the impact of Cobot 19 on our operating partners and the potential impact on our company that's the cobot pandemic evolves.
Following our things that we know.
We know the operator reported number of a mega facilities residents and employees.
Tested positive for covert 19.
We know that labor and personal protective equipment costs have increased significantly and for facilities with positive cases increases can be dramatic.
CMS, the federal government and the states I provided meaningful and absolutely essential regulatory and financial support for the skilled nursing facility industry.
That's if in facilities has declined at least in part due to the elimination of elective hospital procedures.
Well, we do not know.
We do not know how long census, disruption and elevated covert 19 costs will last and if the funding support from the federal government and the states will be sufficient to cover all of these incremental costs.
We do not know the ultimate number of Omega facilities that will have widespread high cost outbreaks of covered 90.
Some longer term observations.
The demographics that drive our bullish perspective, increasing demand for needs based skilled nursing care have not changed.
There will be increased clinical protocols for infection control within facilities.
The monitoring employees gas and others entering facility.
We do not know if future reimbursement rates will be sufficient to cover the increased cost of enhanced infection control and monitor.
We had good financial results in the first quarter.
Additionally in April we have collected virtually all of our reps.
Nevertheless, we have withdrawn our 2020 guidance in recognition of the significant covert 19, driven on certainty that we face for the remainder of 2020.
Lastly, and most importantly.
I cannot overstate the tremendous efforts that are operating partners and their staff have undertaken to care for residents with our facilities.
The dedication of the direct caregivers his heart warming and humbling dramatically outweigh some of the negative press over the last month.
We cannot thank them enough.
I'll now turn the call over to Bob.
Thanks, Taylor and good morning.
And they read that that though when a diluted basis, it was $181 million or 77 cents per share for the quarter as compared to $144 million were 67 cents per diluted share for the first quarter 2019.
Our adjusted FFO was $186 million or 79 cents per share for the quarter and excludes several items as outlined in our adjusted EPS reconciliation to that income found in our earnings release in our supplemental and also on our website.
Revenue for the quarter was approximately $253 million versus $224 million for the first quarter of 2019 with the increased primarily resulting from incremental revenue from a combination of over $1.7 billion of new investments completed a capital renovations made to our facilities since the first quarter of 2000.
19, as well with lease amendments made it during that same time period and onetime revenue collected in the first quarter of 2020 related to security deposits held by LP unit holders due to a mega upon the sale or termination of certain facilities.
The increase in revenue was partially offset by reduced revenue related to asset sales transitions and loan repayments that have occurred throughout 2019, and the timing of the cash receipts related to operators on a cash basis.
The $253 million of revenue for the quarter includes approximately $11 million a noncash revenue.
For the month of April we collect at 98% Upfronts mortgage interest and notes.
Our DNA expense was $10.9 million for the first quarter of 2020, which is typically our highest quarter within the year.
We project quarterly GNS expand self between nine and a half attended a half million dollar for the remainder of 2020.
Interest expense for the quarter, when excluding noncash deferred financing cost was $52.7 million with the 4.6 million dollar increase over the first quarter of 2019, resulting from higher outstanding borrowings in September 2019, we issued $500 million of three and five eight senior notes due.
On October 2029.
And the December 2019, we assumed $389 million in HUD debt related to a 735 million dollar acquisition.
Our balance sheet remains strong and we continue to take steps to improve our liquidity based on the uncertainty in the credit markets that existed in March resulting from cobot 19 under an abundance of caution we borrowed approximately $300 million under our revolving credit facility to provide additional balance sheet liquidity at April Thirtyth 2020, we had.
$618 million outstanding borrowings on our 1.25 billion dollar credit facility.
And we had approximately $490 million in cash cash equivalents.
We have no significant bond maturities until August 2023.
In March we entered into $400 million up 10 year interest rate swaps at an average swap rate of <unk>, 0.8675%.
The swaps expire in 2024 and provide us with significant cost certainty upon refinancing of our 2023 bond maturity.
Well, we believe our actions to date provide us with significant liquidity and flexibility the whether a potential pronounced and prolonged impact to our business. We will continue to evaluate any additional steps that may be needed to maintain adequate liquidity.
At March 31st approximately 82% over $5.6 billion in debt was fixed we had $348 million in cash and our net funded debt to adjusted annualized EBITDA was 5.38 times or fixed charge coverage ratio was 4.1 times, it's important to note.
Don These calculations does not include any revenue related to construction and process associated with five newbuilds scheduled to become operational within the next 12 months.
When adjusting to include a full quarter of contractual revenue for acquisitions completed during the quarter and the five Newbuilds and then eliminating revenue relate to assets sold during the quarter or pro forma leverage will be roughly 5.2 times I'll now turn to call over to Steven.
Thanks, Bob and thanks to everyone on the line for joining today in conjunction with Maplewood Senior living we continue work on our Ayliffe memory care High rise It second Avenue and 90 Threerd Street in Manhattan.
The covert 19 outbreak in New York City has pose challenges to the schedule in cost of the project.
Well the project is deemed a critical resource due to its licensed nature. In construction has been allowed to proceed by the city of New York the capacity. The construction crew has been meaningfully limited in order to provide a safe working environment.
The slowdown of construction when combined with certain supply chain challenges in the need for innovative enhanced infection control protocols will delay the opening to Q3 at the earliest and correspondingly increased the project cost well the project will cost approximately $310 million, an exact estimate of the final cost will be difficult to determine.
Until we have better clarity on the opening date.
The covert 19 pandemic pose a certain challenges you need to senior housing operators, including increased costs the challenges of managing covert positive patients and meaningful practical limitations on admissions well census was strong in our senior housing portfolio through most of the first quarter.
We are seeing a 1% to 3% per month occupancy reduction once buildings in posts touring and visitation dance.
Additionally, senior housing operators to the extent their private pay in large employers.
Offered little help from the various fiscal stimulus programs.
Including the land and see IP of our New York City project at the end of the first quarter Omega Senior housing portfolio totaled $1.6 billion of investment on our balance sheet.
All of our senior housing assets are in triple net leases.
Approximately 50% of our investment isn't maplewood assets, which are in one master lease and 25% of our assets are in the UK with two master leases one for the gold care assets and one for health care homes, respectively.
The remaining 25% or intermixed with SNF assets in various master leases.
Our overall senior housing investment comprises 130 assisted living independent living and memory care assets in the U.S. and UK.
This portfolio on a standalone basis, or a slight uptick in lease coverage in the fourth quarter of 2019th However, recent events will highly likely put downward pressure on that number.
Well, we remain constructive about the prospects of senior housing the covert 19 outbreak warrants and ongoing evaluation of our development pipeline.
This analysis may take several fiscal quarters as we have an opportunity you see how market demand in facility cost structures adjust.
Well, we further underrate, our pipeline development opportunities and make progress on our existing developments. We continue to work with all of our operators on strategic reinvestment in our existing assets, we invested $39.5 million in the first quarter and new construction and strategic reinvestment $24.1 million. If this investment is predominantly.
Related to our active construction projects. The remaining 15.4 million of this investment was related to our ongoing portfolio Capex reinvestment program.
I will now turn the call over to Megan.
Thanks, Steven and good morning, everyone as you'll hear more about today. This is a high touch industry and therefore controlling inspite of the virus once it gets in a building it's difficult to safely.
Our operators are faced with numerous challenges not the least of which is adapting to the covidien 18 specific infectious disease control guidelines set forth by seeing that NCTC [noise].
Oh, you admissions actually hit its pretty pumped at positive encouraging for 14 days vendors in most areas are not limited entry into building unless they food and other deliveries outside so I'm pleased to Brian.
Our operators are having to find ways to reconfigure they're building so that they have dedicated wings for positive course <unk> president.
They're also looking at their portfolios to determine whether they're building that can be solely dedicated to cobiz 19 locations.
We have several instances of that in our portfolio and while the younger. These dedicated buildings is likely to crowd, we do not believe it up a substantially.
The challenge of following these best practice protocols exacerbated by the scarcity of personal protective equipment or pp, which also confident increased costs.
Well now are now become easier to source the availability of gallons for me, it's an issue.
Additionally, the lack of availability of testing has only recently started to eat.
Department of health and each day previously determine who got tested.
Much of this pandemic she did a lack of test gets even when there was a positive Keystone to building oftentimes only those are sometimes in some states only those with multiple symptoms would get tested.
You can imagine how tough it its control the spread of this virus, especially as it can be spread is symptomatically when the ability to touch it severely limited.
Lately, whether just your department of health, where operators working with private companies. We are hearing that whole buildings are getting tested which will obviously adds to the number of positive cases will also make it easier for operators to take all necessary steps to control the spot.
In an industry that was already hampered by stopping shortage in operators are now in addition strain on stopping as any employees with symptoms. That's cornerstone for two weeks at home and others have needed to stay home to care for young children in school being closed.
While we expect agency expense to increase the belief a larger expense increase will be a form of has or pay bonuses and overtime to permanent staff.
That's operators are trying to limit the use of agency as their permanent staff that their culture and protocols ingrained in them.
Additionally, operators are striving to keep up the morale their employees, who in turn work to maintain the Morales residents were not able to feel lot one.
This includes such things as video black after their hero employees or hero banner stressing entrance into the facility.
All of these challenging they're coming at the same time occupancy is impacted.
But the added expense and strains associated with providing currently studying.
Key to our operator success federal and state support.
The quarter direct aid relief and economic Security Act with Cures Act. This past March 27 2020.
Jim Young package and created a variety of programs available for the nursing home industry.
Payouts under 100 billion dollar health care fund it with increased by 75 billion on April 24th.
Sorry, the week of April 10th with an additional troche playing out starting April 24th.
Oh charges up into Medicare providers.
First tranche was equal to 6.2% about 2019, Medicare billing, but was ultimately netted against the second tranche.
The second tranche B. The 2018 net patient revenue divided by 2.5 trillion, which at the total health care span.
The resulting percentage multiplied by 50 billion again, but the first tranche mindset and against the result.
He asked me the impact of both tranches combined is an average of approximately 150000 to $175000 per facility that provides Medicare surfaces was obvious variances amongst buildings, depending on overall revenue.
To date assisted living facilities and not received any payouts under this fund and as of now we believe only those with some level of Medicaid revenues will get a town in the future.
Operators were able to participate in the accelerated and advance payment program through Medicare, which provided up to three months of advance Medicare billing or some lesser amount that their option.
Hey back is there recoupment 120 days out over a three month period.
Program has now been sustained it.
Well some of our operators participated in this program many others did not keeping the short payback window in a lack of visibility into where occupancy would be at the time the payback.
Many of our operators of off and taking advantage of the section 23 out you employer payroll tax deferral, which permits to deferrals in a player FICA taxes on March 27, 2020 through December 31st 2020.
Prepayment, it's 50% by year end, 2021, and 50% by year end 2022.
The 2% Medicare sequester suspended from me first through December 31st of this year with a possible one year extension.
It's one of the effect of increasing Medicare rates by 2%.
Total estimated impact to our portfolio is 25 million to the nature of December period.
The 6.2% map is which provides federal funding to state Medicaid programs is FX for January 1st 2020. He ended the month in which the national emergency lifted.
A decision on it and how much to allocate to long term care facilities is left it especially on the individual state and to date only a handful of states and it's such an allocation.
Our thoughts and prayers are with our operators and our resident and employees that are affected by cobot 19.
We continue to try to find ways to support our operators during these troubling times.
As part of that effort.
Instituted regular email blast to share pertinent information as loves to ensure that everyone feel connected to one another.
It was email blast include a variety of topics such as information on the carriers act, including eligibility interpretation and best practices reimbursing information such as the ability to scale in place.
For me shown on T.V. suppliers to current availability this all service providers.
That's practice sharing from our operators with respect to various coded 19 clinical protocols.
And data analytics.
Additionally, we have provided some of our operators. So short term was purchased P. P.
Our goal is to continue to be a source of support kinda information to our operators as they deal with frontline issue.
Prior to the development of the vaccine and widespread testing our operators are faced with figuring out how to navigate what will be the new normal for the industry.
At stay home Warner start to left and the rest of us start to get back to some semblance of normalcy our operators their employees and residents will be dealing with that's for a long time to come.
The nursing home industry. Its resilient, there's no overnight fix to this pandemic as it relates to long term care.
We are hopeful that the federal and state governments recognize the ongoing struggle that the nursing home industry will face and we'll continue to provide the necessary support to ensure that the most vulnerable in the population or cared for appropriately.
I'll now turn the call over to dance.
Thanks, Megan and good morning, everyone.
Today, our midstream materially from my usual script and talk about what's on the forefront of everyone's mind because of a 19 virus and its impact on our operators there residents and their frontline employees.
As you can imagine the virus has taken an unprecedented toll owner operators in the residents.
As of March 15th 2020, we had zero known cases.
What we posted on our website. This past Friday, we're aware that time of 4136 confirmed cases, including residents and employees within 250 facilities with at least 350 does.
Suffice it to say these numbers are only going to climb as inspires continues to spread and more test kits become available within our facilities.
Based on discussions with other operators overall occupancy has declined on average between three and 6%.
Well quality mix is down due to the discontinuation of elective surgeries offset slightly by the scaling up of residents that have tested positive for code 90 or potential cases amongst operators patient populations.
Rather than talk about our coverages, which have stayed virtually study through the fourth quarter of 2019 or new deals or dispositions, which are relatively immaterial in first quarter.
I'd like to talk about what it was meal poignant and timely in today's environment.
I'd like to give everyone a sample of a day in the life at our 966 facilities both sniff sonos.
In the aggregate on any given day there are an average of approximately 75000 patients in residents across the facilities as well as approximately 100000 full and part time staff, providing care on the front lines.
In extrapolating a handful of water now need daily routines across Omega is vast numbers of our operators residents and frontline caregivers, resulting numbers are staggering.
Here are several examples.
Every patient as monitored for code, 19th signs and symptoms, including temp and oxygen levels up to six times, a day or approximately 450000 times everyday across all Omega facilities.
Virtually all of our operator staff of approximately 100000, a record before starting their shift to have their temperature and oxygen levels taken and in many instances depth to complete a screening questionnaire.
With communal dining no more possibility every patient has served meals and their room and many have to be physically fed their meal by hand. That's 225000 meals served every day one at a time.
Medications are administered three to five times, a day and most residents have to be assistant and taking medications.
On average that's 300000 times a day our operators are administering medications.
Every resident whether coven positive or not has to have their teeth brushed get bait and get dressed most with the assistance other operators caregivers.
Donnie and doffing the proper P. P. E is required for every staff member entering or exiting in isolation unit to care for cobot positive resin.
Normal daily activities, including like enrichment and social well be is conducted in every patient room on a daily basis did restrictions on community settings.
Family visits with patients and their loved ones are conducted through windows were on ipads are laptops, if the I pad or laptop is provided by the solely the equipment must be clean and disinfect. After every virtual visit.
All levels of therapy are performing every patient room did restrictions on having patients in a therapy Jim.
Our operators direct care staff has asked to bring a separate change of close change out of their uniformed before leaving work and Warner uniform everyday in order to protect their families. When they go home.
They are asked to quarantine themselves from their family and others. So that when they return for their next shift that up potentially infect residents.
This is but a small sample what goes on during the day in the life of our operators caregivers can you imagine.
There is no social distancing in a nursing home or assisted living facility. These are high touch face to face activities that occur multiple times per day throughout or nearly 1000 facilities.
These efforts place or operators front line care givers and serious risk of not just corn team, becoming seriously ill or even dying.
Unfortunately, these risks carry over their loved ones as well.
These efforts are nothing short of ROIC.
Ultimately be both premature and irresponsible to attempt to project the impact of this virus on any given facilities residents were staff their occupancy financial performance or otherwise.
Until that time comes when the virus has subsided and some new form of normalcy has returned.
Mega as we've shown in the past well continue to stand behind her operators provide support and assistance that frontline caregivers.
And continued to tap the day after day heroic efforts.
In addition to hundreds of our operators residents, losing their lives suddenly they are also losing their caregivers.
As you can imagine this as a terrible impact on staffers door unerringly quite scared for not only their own lives, but that up their families.
Good day after day these dedicated employees keep coming back to work.
Allow me to relay just one of many heroic stories right.
Recently, one of our operators lost an employee to cover 19, a lifetime nurse, who had been with the facility for just over one year.
Upon her passing the decision was made to cease admissions.
The COO and form that the Saudi to redirect six pending admissions the administrator in Tears said, please do not stop sending new residents until they speak to the staff.
Within 20 minutes, she Texas, the COO and said the team still wants to admit.
It's what we do we need to do this.
This is just one of 100 stories I have heard personally and last few weeks.
Lastly, as many of you might have noticed and all of our operators have heard or seen the public media has repeatedly maligned skilled nursing industry as opposed to betraying the frontline caregivers as compassionate courageous heroic human beings or risking their lives trying to make a difference by saving the lives of our most vulnerable population.
Yeah.
Omega along with OCA and our operators intends to try and rectify this negative messaging with real stories of what it was occurring on a daily basis on the front lines.
We just hope they will start to listen.
I will now open the call up for questions.
Thank you Sir.
We will now begin the question answer session.
We're asking the question you May proceed Star then one on the test some foam.
Using the speakerphone, please pick but I've said before pressing the keys.
Next time, a question husband adjusted I'd like to drive the question. Please press Star then too good a star then one to asking question at this time it will just pause momentarily to a somar roster.
And the first question, we have come from partner servers ski overbearing Berg. Please go ahead.
Good morning, everybody and thank you very much for having me hope you all are well Oh, we appreciate very much your efforts to support the operators want to be in current environment.
First question on PDP and don't want to lose sight of the impact I missed the ongoing pandemic has there been any commentary from your operators in regard to functioning under the new framework in this extraordinary situation.
Well I mean, obviously [laughter] framework has changed.
A lot of what PDP ended was.
Changes the dynamics of therapy right. So.
No.
Individual therapy protocols to group and current therapies.
[laughter] with the discontinuation of use of therapy, Jim So small gone away.
As I indicated we're talking points all therapy is take that take place and and the patient room. So I, it's dramatically changed what they had put in place six months ago.
[noise] from from a daily living basis, So yes, it's.
We're not losing sight of it but what they put in place is totally different today.
Okay. Thank you appreciate the color there and then on rent coverage. It it seems like a few operators have moved into lower buckets. I mean can you provide any color as to the extent to these moves if the characteristics of these operators had changed meaningfully through the fourth quarter of 29 team.
No really not this is what we've seen over and over again these.
A lot of folks are kind of right on the finish line on these buckets.
And they tend to move back and forth from the first to second quarter, we had.
Moving downward second to third quarter, we pretty much moved back up and then.
Once again in the fourth quarter, we had a little bit back down there not always the same operators, but they do tend to shift around.
A lot of them okay.
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Okay. Thanks for that and then on further iterations of the carriers X. I mean is there any expectation that there would be a provision from Medicaid at some point.
We are hopeful.
There's no clarity on that at this point, but we are certainly helpful. Okay.
The largest components of the population so.
Well they get their fair share.
Right right and then last one from me just quickly on external activity noticed you were able to sell several assets year to date, I mean, what kind of what kind of buyers are still out there in the markets and then what would it take four away China, maybe to come more comfortable in acquisitions here.
I think acquisition and disposition activity is gone from choppy does very very choppy, it's difficult to do due diligence on excited again and our third party.
You know insults come into your building so it's gotten quite choppy the number of deals that were Seattle market has gone down considerably.
There are still deal being marketed at this point, whether they ultimately trade I can't tell you but.
There are still some deals.
Well, it's very few and far between I think we need to see a block.
More clarity on where this.
This ends up before we start to seriously look and talk about investing dollars.
In the coming quarters.
Okay. That's all for me for now thank you very much.
Next we'll tell you okusanya of Mizuho.
Yes, good morning, everyone hope, everyone, it's safe and healthy.
Just first of all to follow up on calling as question about PDP I get together, we've gotten a full quarter of PDP I'm in the fourth quarter or rent coverage statistics.
But you're right Kobe statistics were still fairly flat.
Even though PDP them I think most people expected that it would bring those numbers up because they're just talk a little bit about what happened in the fourth quarter.
And why covered we shouldn't go up more.
So the coverage in the fourth quarter actually was up.
The third quarter and the second quarter, but you know.
Happens often on December you have a lot of accrual adjustments some years. It goes up some years it goes down in this.
Particular here a lot of the accrual adjustments went the wrong way and so to sum up.
<unk> was down and thus the quarter was down but otherwise it was a good core.
Okay. That's helpful. On the second question color you gave a route occupancy trends for senior housing and skilled nursing and the middle of the pandemic are you talked about declines of 1% to 3% on the senior housing side through the 6% on the skilled side, although decline kind of.
He pro over March is that you progresses.
I'm just trying to understand how quickly those declines happened and what the implications could be going forward for rent coverage.
Okay. So thats a good question because I wasn't specific Tim.
The reason is that it's not specific it's not in a specific point in time.
The last reported period for occupancy of December 31st.
The decline I was talking about really was based upon.
You know our conversation that we have other operator polling if you will have some of our larger operators were on average day, we're seeing a decline between somewhere in 3% to 6%, obviously, we've seen facilities in certain markets with.
Very little not no occupancy decline in that.
[laughter] Center.
Oh is widespread where the occupancy has gone down considerably more so the 3% to 6% is not based on specific point in time spent on.
Oh no operators throughout a basically about two week period within the month of April.
And that's just what that share with us so that's what we.
I wanted to talk about its also kind of what we heard from the industry as a whole so it's not.
No appeared and just what they have seen in the as this code virus started to take have impact that's what theyve seen the drop off be somewhere in the neighborhood of 3% to 6%.
Got a a habit kinda talk about the biggest piece of the drop offs to <unk>.
We need a lack of and listen to that just no nothing coming in from the elective surgery and I'm just kind of curious what the biggest drivers of the declines or if this or that in commission.
So they do [laughter], that's not specific it's kind of a combination of all the above its the discharges from hospitals have gone down a lot of do elective surgeries being.
Being cut off completely.
Unfortunately, you've got a higher number of deaths in the facilities and then you've got a number of more higher number of rehospitalizations because.
As the.
As patients become sicker and sector. The Covance did a lot of times they need to be sent back to the hospital because once they hit.
Acute care or even intensive care levels that they have to be treated in the hospital so that back to the hospitals.
Okay, I, probably have a combination of those three things that are driving the occupancy down on a still side.
Okay. That's helpful last one for me from a financial aid perspective I just at this point what else would you know omega or the industry at large like <unk> from the federal government all from state agencies in regards to help for the overall industries that are huge [laughter].
With that allocation from that says that the under penetrated with all the industry thinking about what else they need.
Yeah, Hi, I think it it is the carriers Act.
Theres a substantial amount of money that has not been allocated out to cares that.
And as Dan briefly mentioned.
I wanted to care Zack money has addressed the Medicaid population in skilled nursing facility. So the thought is that we'll see some additional allocations.
Dollars.
They correlate to Medicaid activity in facilities, and then likely some allocation of dollars that correlate to positive coded outbreaks in facilities, where you see.
Dramatic cost increases.
I think those are the two prongs that have been discussed that hopefully we see HHS moved up.
Great. Thank you that best of luck.
Next we have Jonathan Hughes of Raymond James.
Hey, good morning, I appreciate all the prepared remarks and efforts from your your partners and caregivers during this difficult huh.
Can you talk about the tenants that that maybe asked for rent deferrals that they need April and may what percentage of monthly rents. They comprise how much you my plan to grant and the Nexus sniffs versus seniors housing.
You know it's early in May right, but as of today with the Banff, We've got no request for rental growth.
Jonathan just.
Just to clarify the April the 2% of rent that we haven't collected yet for this month April.
It's not they're not deferred rents.
It's that are still doing we're in discussions with our tenants about.
The status of those reps, but we have not.
We don't have any formal deferrals of any rent at this point.
It any tenants asked for deferrals in April and they said may there hasn't been any yet, but it's only five days.
Not more than a couple of three.
Does that fills an immaterial.
And now that we were able Nick.
Okay, and the mix of those those handful that than me, where they sniffs, where there are some seniors housing in the just trying to understand who might be a.
Yes, SNF operators.
Okay and about apart.
All right on the second Avenue project.
No that's being delayed now until third quarter. This year at the earliest maplewood.
Hey, Greg until that delivery date or has that been renegotiated to match up with when that project is operational.
Oh Maplewood continues to pay rent.
I have a line of credit has adequate collateral.
Frankly, we're in conversations with people would now because the plan was to open earlier.
But we haven't concluded any of those discussions at this point.
Okay.
And then last one for me on the on on the guidance withdrawal of a higher level question.
Why did you decide to to pull this versus adjusted I mean, the end today you are triple net leased free.
No external growth guidance is collected most of I mean, 90% of your rent from last month and.
It seems like you can at least maybe maintain runrate figure and I understand guidance is being withdrawn everywhere across the read space and corporate America, and there's no shortage of uncertainty, but there was another triple net and South Jersey that maintain their the run rate guidance last week. So I'm just trying to better understand.
You know what you see that caused you to pull if you can share you know your thought process there about the outlook.
Yeah, I think it really comes to duration in depth of the pandemic Jonathan It's just.
No one is going to be able to give you data around that.
And we know the government support to date has been critical to this industry and we don't know what the next round. The government support is going to look like so you combine that.
Just I know timeframe.
Yeah, I think the important thing from our perspective.
As we look at the end of this pandemic whenever that comps.
Oh.
Demographics, all the drivers of our business I mean, we don't see any reason that our business doesn't return.
Substantially to where it is today, but in the interim.
Just a big question Mark.
And that's what we're reflecting employing the guidance, we would just be guessing I'd, rather not do that.
Yeah.
Okay, but nothing so that's all they have.
Next with Nick you look go Oh Scotiabank.
Thanks, I didn't I just wanted to go back to the the occupancy drop that you talked about Oh from surveying operators.
What would the operators telling you in terms of you know thoughts about whether it could get worse.
From here and also if you're hearing any sort of early expectations about how you know states opening opening up elective procedures again for hospitals any anecdotes on how that is already I know, it's very early but maybe helping the occupancy number for skilled nursing.
Yeah. So I mean, none of my operators were out going out all the I'm trying to predict what this virus has got to do in the future. So.
No idea with what's going on how that's going to affect occupancy obviously.
Disease rabbits their facilities and becomes more widespread I can you just go to David.
If it starts to lighten up occupancy should theoretically improve.
Yeah, we've heard rumors of certain states might start to open up I haven't heard of any specific space. It is actually set that.
They're gonna start to allow elective surgeries, but.
Might have missed at this point I know not.
Specifically stated a date for when they would start to.
Moving up the doors for elective surgeries.
Okay, I guess, yeah, I mean, obviously, that's a key key component for getting the US you know skilled nursing industry back to normal.
When you look at the yeah, the amount of federal aid that's been given so far to the industry and you run some math about you know occupancy pressures that operators, you're facing short term expense pressures yeah. What is your sense here about when when you need to see.
The yeah. The hospital system, returning back to normal set skilled nursing can return back to normal just you know do your operators have a lifeline until June July.
How should we think about that.
Yep.
Fair question, Nick I don't we don't.
We don't know we know that there's still a fair amount of cares act money that hasn't been distributed that's distributed.
Reasonably consistently with what we've seen.
And the pin debit clears out by some point summer I think.
You put all that together you go the impact isn't going to be that dramatic, but if things stretch out into the fall, it's going to be difficult without.
Other roundup government support, which obviously we can always.
So I think this is what we know today you look at it you go Okay, you start to see.
Texas and other states open up elective surgery.
That's going be helpful. I think the other thing we don't know is human behavior in terms of.
Individuals willing to go to the hospital for that'll went to surgery and how fast that ramps up.
It's a TBD, but yeah, I guess, you're saying I think that's yet another reason.
The only the comment I'd make is every Friday, we posted up on our website, what we've heard from our operators in terms of.
Facilities with cases.
The one thing that a little bit positive is at least.
Right.
We.
Hi.
So that's another indicator.
From an overall.
We have places where you have had positive cases.
Occupancy is have remained relatively stable.
So.
All that goes into the equation hopefully that's enough color I mean, ultimately I don't have yes.
Yeah I understand it's it's it's a little tough to gauge I guess I'm. Just last question Taylor. How are you thinking about you know rent deferral requests if they come in you know I get that there hasn't been many yet but.
As you are saying you know it feels like the industry in the short run is facing more pressure you get through this period and then you get back to normal in there are a lot of benefits that are in place to be a PD P.M. The removal of sequestration cuts. So if you're getting a rent deferral requests you know this month next month.
What is your approach going to be are you going to make sure that the operator is fully exhausted every sort of federal program out. There are you going Oh, you're more likely to give a deferral versus some sort of you know permanent level of around cut how how should we think about.
You know what what could still play out here for your portfolio.
Do you described it so the first step is.
I have have our operators exhausted all the opportunities that might be out there in terms of liquidity.
And do we have a good sense, Oh that liquidity picture on a forward basis, and then step too if if we need to support that liquidity.
Likely be in the form a deferral that would hang up in the balance sheet.
Hopefully be recouped when all of this normalizes.
I think red Hot.
Yes, Rick cuts are only going to come in an environment, where you think.
I'm not going to return.
[music].
Where we where we left.
Or somewhere in that just code and I I, just don't see that today as we look at the landscape in front of house.
Okay. Thank you.
Thank you.
Next we have Nick Joseph of Citi.
Thanks.
Maybe in terms of May recollections I recognize we're very early in the month and that Frank it's due maybe throughout the market not necessarily on the first I was wondering if there's any trends you've seen at least but the first few days by relative to where you were on collections for the first few days of April.
Yeah, no trend I mean, it's just too early we've had.
The normal payers that we would expect really the month, but our rents are not all the first of them off they go throughout the month its contract by contract. So.
Really nothing to glean from any pattern.
For the first couple of days.
So our given the right quest comments earlier, there's no indications that may collections would be different from April at least that's all.
Well again, it's just too early to now.
Based on a couple of days, we've seen in the dialogue that Dan and his team at that with our operators.
I'd say, it's it's similar to April at this point in time.
Thanks, and then maybe just following up on the coverage and P. D. P. M discussion from earlier, it's fair to assume that coverage. When you report next quarter, given that it's a quarter or delayed and 12 months trailing.
Coverage level should actually be higher quarter from now and that will start to see the impact because of it.
Subsequent reports from there.
Well, you're gonna see some impact because of it in March and so I.
Very hesitant to talk about Q1 coverage given the fact that we had overhead related activity occurring in our facilities in March.
Okay.
Too early to predict but we'll provide color around the first quarter in terms of what we saw a pre code expenses hitting facilities.
Thanks.
The next question will have will come from Daniel Bernstein of capital one.
Hey, good good morning, and again thanks for.
For all the color and we wish all your tenants and residence well.
Wanted to touch on expenses, which you know it seems to me that expenses are one of the larger issues can you can you talk a little bit about where the expenses. It seniors housing and skilled nursing, we're kinda equitable in terms of their increases or are you seeing differences and expense needs between the seniors housing and skilled nursing facilities.
And then maybe.
Following up on that what do you think of the permanence of those increases in expenses or decrease in margins because it's too early to to predict at or where is that something that we need to think about for the long term is kind of a permit margin decrease.
For those asset classes.
Well I mean listen labor was tight before we got into those pandemic labors become increasingly tight and the costs have gone up.
Pretty much across the board.
In both sniffs now.
You know P.P. any.
Obviously, a something that's gone up considerably you know a lot of PV wasn't used in house before this pandemic in was only use sparingly snaps.
You know on them.
Back started as pandemic I'm pretty sure that you're going to still have a fair amount of any being utilized.
For some time in the future I'm.
So I think part of that cost will remain in place.
Labor, it's a it's easy to increased labor costs, it's hard to walk them back I'm, So I think and parts some of those labor costs.
We'll stay higher than they were before we got into the situation.
But in order to try to quantify that wouldn't be impossible display.
In terms of the extra costs it you're seeing on the development side, especially for second Avenue <unk> can you talk a little bit more detail on what what those costs are what changes are being made to.
The facility and there are those.
Kind of changes, so maybe Tom architectural changes or design changes yeah.
You know that I assume that's something that's going to be more permanent within the industry both seniors unskilled.
And then if you could just just give a little bit more clarity.
On the architectural design issues that you'd be it you're seeing it second happened and how that applies going for.
Stephen do you want to take that.
Sure the cost increases that were estimating it second avenue, because because the 19 and then I have more to do it just cost of delays and then there are some increases in the ordinary course that you might expect as time goes on.
As far as architectural changes that building was is effectively beyond that the state. It would you would.
Create additional architectural changes to building, we're just putting finishes at this point, there's some discussion around negative pressure rooms going forward.
In some of the development activity, but beyond that none of that affect second area.
Okay.
[laughter] you know there's been some talk as well that you know, whether tele health or Tele medicine tell a rehab might be.
A threat to seniors housing are skilled nursing do you guys have any views on that.
I think it ends up as a benefit and.
Very big percentage of our skilled nursing facility operators.
We're using tell how well before this pandemic arose.
It it stretches the ability from a caregiver perspective.
It allows you to take care of.
Residence in place for longer versus hospitalizations cheaply useful world settings. So I think its apart.
From a skilled nursing facility setting a frankly from a scene from a higher acuity senior housing setting I think at the same same answer.
That's all have I'll hop off thank you.
Next we have Lukas Hartwich of Green Street advisors.
Thanks.
Hey, guys can you provide more context for the 150000 per property or government assistance that was received a I'm just curious how hopeful that is maybe if you could provide you know what's the average opex per facility in your portfolio.
Well, obviously, the 150 to 175000 that were.
Which has an average by before that they received was extremely helpful. I mean is obviously <unk>.
Offset a lot of increased cost there we're seeing so it was.
Hugely important.
Ah average op ex cost purpose, Saudi I don't even want to try to go there.
I don't know is there's some context for the the 150 like does that cover two months of all bought back there's some sort of number on that you can estimate.
Yeah, I think that's a fair.
Without that.
Dan and his team to circle back up and get your exact number but a couple of months that sounds about right in terms of.
Cove it.
Backs up.
Oh that related opex or seen dramatic cost increases.
Okay, and then I was hoping you could provide a little more context on just market level performance or their pockets of strength weakness you know.
Thing there would be helpful.
Well I mean code as effect is obviously targeting some markets. If that's what you mean I mean, obviously the most heavily targeted it's been.
New York, New Jersey, where you know make it doesn't really have presence other than the second Avenue building, which is still under construction.
You've seen some other hot spots in.
Was one in Washington, we've seen in the Detroit Metropolitan area.
South Florida Norland.
Some of those those some of those still remain hot areas.
The sale large portion of kind of the upper mid west has been.
Largely long terms of the numbers that were Sam so yeah. There are different markets that are and much more heavily affected another.
Well I guess in that more specifically for a mega as a portfolio you know maybe EBITDARM, what's happening to EBITDARM or anything like that.
Because the you know we can be the case count by by market and you guys provide some some kids counts by by portfolio, but.
Really it's hard to draw a conclusion and what that does the revenue and EBITDARM and <unk> and all that occupancy all those metrics.
And as it relates to EBIT dollar.
We just we don't have that data is.
Premature to even start to think about EBITDAR well have to factor in.
The government payments, we don't know the exact expenses.
We just need a lot more data there.
The one other piece of color I guess I can give you is when you look at our facility count It at 250 positive.
Ladies April Thirtyth.
Yes, 27, 28% of our overall portfolio.
Our understanding is that.
Reasonably consistent with what we're hearing from a national perspective in terms of facilities with positive cases, so for what it's worth.
You know that that's about the percentage and to the extent that we're starting to see.
Seemingly facility count growth decline.
Oh, that's good news.
Great. Thanks, a lot.
As a reminder, if you'd like to participate in today's Tonight. Please press Star then one on that Touchtone phone again that is star then one to asking question next web Joshua Dennerlein.
Of Bank of America.
Hey, good morning, everyone I'm just a quick question for me for the 2% of tenants that Didnt pay was there any common theme across these operators on why they didn't pay did or were they harder hit with Kobe 19 to that lower coverage just just any insight there would be helpful. [noise].
No actually there there was not.
I would have to say people wanting to kinda Horton liquidity at this point, but other than that I, there's no real rhyme or reason.
Okay. All right. That's it for me all my other questions are answered thanks, guys.
Thank you.
Well. This time there appears to be no further questions. We'll garden conclude today's question answer session on I like to turn the conference call back over to the management team for closing remarks.
Thanks, Mike.
Thank you everyone for joining our call today and please stay safe.
And we thank you Sir also to the rest of management team for Tom also today and they give you also please stay safe at this time the conference call I thought I missed.
Tom you may disconnect [noise].
Thank you.
[music].
Yeah.