Q1 2020 Earnings Call
Ladies and gentlemen, this is the operator today's conference is scheduled to begin shortly please continue to stand by and thank you for your patience.
Okay.
[music].
[laughter], ladies and gentlemen, thank you for standing by and welcome to the Q1 Twentytwenty Ventas earnings Conference call. At this time all participant lines are in they listen only mode. Please be advised that today's conference is being recorded if you require any further its just.
Please press Star Zero I would now like to turn the conference over to your speaker today.
Mr Juan Sanabria.
Thanks, Andy Good morning, and welcome to the Ventas Conference call to review the company's announcement today regarding its results for the first quarter ended March 31 2020.
As we start let me express it all projections and predictions and certain other statements to be made during this conference call maybe considered forward looking statements within the meeting at the Federal Securities Law.
The company cautions that these forward looking statements are subject to many risks uncertainties and contingencies and stockholders you know they should recognize an actual results may differ materially from the company's expectations, whether expressed or implied.
That tough expressly disclaims any obligation to release publicly any updates or revisions to any forward looking statements to reflect any changes in expectations.
Additional information about the factors that may affect the company's operations and results is included in the Companys annual report on form 10-K for the year ended December 31, 2019, and the company's other FCC filings.
Please note the quantitative reconciliations between each non-GAAP financial measure referenced on this conference call and its most directly comparable GAAP measure as well as a company supplemental disclosure schedule are available in the Investor Relations section of our website at Www Dot Ben <unk> Dot com.
Before I hand, the call off to Deborah acre Farr, Chairman and CEO of the company I'd like to note that we posted an investor presentation. This morning on our website, which includes a cobot 19 business update that was helpful information that the team will reference in our prepared remarks with those formalities out of the way I'll hand, it over to Debbie.
Thank you wine.
And good morning, Oliver shareholders, another participant and welcome to the van <unk> first quarter 2020 earnings call.
I sincerely hope you and yours are safe and healthy.
Today, the Ventas team is working remotely, but we acted gathering spirit as we outline our outstanding first quarter results.
That's great the challenging conditions in the market the economy and our company brought on by the terrible curve in 19 pandemic.
Scott near term business trends and evaluate the macro outlook.
At this time, we say unprecedented condition nationally and globally created by the pandemic.
There was a nice they really stay has been around a long time has managed through many severe crises over the decade, and creating the 911 terrorist attack and the great financial crisis and that deep recession that followed that.
Yet today's conference next of public health remote working economic operational and market conditions make this pandemic a uniquely challenging adversary.
Let me begin today by setting the stage and then outlining the swift and decisive actions, we've taken to ensure that ventass remains strong and stable.
[noise] actually rolled into March we were excited to see how our previously announced initiatives, we're gaining traction and making an impact and how well our overall enterprise and each of our business line we're performing.
You can see the power of our diversified business model and the strong normalized FFO per share results. We reported today at 97 cents per share inclusive of this financial impact of coded 19 toward the ended the quarter.
In short we were hitting on all cylinders, but terrific momentum.
As soon as we realized the potential scoping impact of the novel Corona virus in February and early in March we identified as our key priority that health and safety, a ventas employees and their families and the employees patient and senior living residents and our 1200 health.
Care site.
Although this particular crisis, reflecting unique combination of forces are our experience deep analysis based on early real time input and core principles have given us the solid framework for action.
Here are some of this strong measures we have taken to preserve and protect the company and the many stakeholders.
Who depend upon us.
We have devoted significant efforts to support our tenants and operators across our portfolio. During the Calvin 19 pandemic, we've established financial support programs for those were experiencing financial hardship weve assisted operators, who may be eligible for complex and various government program.
And we leveraged our national scale to help operators source supply, including scarce personal protective equipment or pp E.
And today, we've announced a powerful new initiative prevented senior living operators.
Then we'll be providing access to covert 19 testing kit and analysis from Mayo clinic laboratories without charge to certain of our senior housing operators to further enhance safety at Ventas communities I accelerating employee eat testing.
That's happened atria working through Atria is ongoing relationship have secured access to testing capacity in excess of 30000.
Atria, it's already nearly done testing all of its 14000 U.S. on site and regional staff.
With approximately 9000 results in less than 1% of atrium employee tests have been returned positive.
Combined with digital tracking and tracing and appropriate use SPP atria is building a new normal model to run it senior housing business safely and thoughtfully.
In a positive sign atria has moved in 300 residents since early March all under full quarantine NPP eat protocol.
[noise] Ventas plans to make available to certain of its other operators at least 10000 covert 19 test kits and analysis from Mayo Clinic lab.
So it will be the nats ventas operator to use this testing for its ventas communities in us already getting ready to test all that staff in may.
We look forward to finding more ways to work with Mayo clinic labs, and our operators to further enhance safety at our communities for residents and caregivers.
We will continue to evaluate additional action as appropriate.
[noise] second on our action hit list, we moved early to review and implement our pre existing business continuity plan. So we could maintain a high level of productivity and manage a seamless transition to remote working arrangements.
With an interdisciplinary team of Ventas leaders coordinating our efforts strong I T support and capabilities full buying and by our employees and enhanced communication the company experience no downtime and we've been highly effective during these challenging time.
I'm so proud of how ventas employees have reacted in rallied and I want to thank them for their extraordinary effort.
Third we're pleased that Weve reached a positive consensual resolution of our holiday lease.
After receiving full rents from holiday since lease inception in 2013 through the end of the first quarter 2020.
We have now received an additional hundred million dollars in cash and secured notes.
We've entered into a new management agreement with holiday for 26 independent living assets and we terminated the holiday lease all effective April one.
[noise] this management structure retains our upside in our 26 communities and provides us with operational flexibility.
We appreciate holiday managements engagement and cooperation to complete this transaction.
Fourth we were excited to augment our leadership team with Justin Hutchens and carry Roberts when they join Ventas on March the fourth.
Justin and carriers have added new energy and insight to our tight knit group at this crucial time.
They've already made many meaningful contributions to Manhattan as Weve collaborated to analyze and attack the business challenges presented by the pandemic.
Our experience has instilled in us the importance of liquidity in the crisis.
As a result, we showed the courage of our conviction in mid March by drawing on our revolver and then issuing senior note generating $3.3 billion and liquidity.
This financial flexibility will serve us well as we manage through to the other side the cobot 19 pandemic.
In addition, we further enhanced our financial flexibility by acting immediately to reduce 2020 capital expenditures by $300 million, mainly by causing certain of our previously announced ground up developments that were not yet substantially underway.
We are also carefully reviewing other areas of our company for cost savings, including general and administrative expenses.
At the same time, we probably would through our financial guidance on March 17th nearly two months ago. When our early analysis and formed by real time data led us to conclude that our financial performance could be materially affected by the pandemic.
Our foresight proved correct and we fulfilled our commitment to transparency to our stakeholders by the actions we took in a timely way.
Finally, Ventas has served and continues to work tirelessly as a proactive and evidenced based advocate for seniors with federal policy makers.
Working with industry group and in alliance with senior living Ceos, we're demonstrating the crucial role senior living care providers play in protecting our senior population that is particularly vulnerable to the novel Corona virus.
Well, we've taken plenty of action policymakers have done exponentially more the said the administration and Congress have implemented a comprehensive a ray of bold policy actions to partially mitigate the viruses severe implications for public health capital markets and the economy.
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Many businesses in household including many of our tenants and operators have already benefited from this arsenal of federal program.
With this powerful support and more financial release likely to follow it's our responsibility now to take action to safely and responsibly move our company toward a new normal.
As we do so our visibility is limited and uncertainty remains very high.
Indeed, we faced a coded 19 paradox on one side reputable models and even certain government projections show and expected increase in cobot 19 confirmed cases and mortality numbers in many jurisdictions.
These expectations, if they materialize could derail even the best laid plans for economic recovery.
And this morning, we saw a historic levels of unemployment claims in the U.S.
On the other hand, there is palpable optimism in the air as most states plants staged reopening of their economies and businesses.
Many companies, including ours are preparing for a gradual returned to office work.
Patients and physicians are scheduling appointments and elective procedures.
Families are making deposits for senior housing move in.
Universities are planning to welcome students in the fall and most importantly, our best scientific and medical mines are racing to find treatment cures and vaccines for the Corona virus.
We're proud to say that many of our key research and innovation University relationships and tenants, including do wake Forest Penn Yale an integral molecular or at the forefront of this research.
All these promising developments provide hope for expedia and sustained bounce back.
We don't have to know how these opposing trends will play out.
Our job is to preserve and protect our company and our stakeholders and be ready for a variety of scenarios and opportunity.
Before closing I want to address our dividends in the context of this coven 19 uncertainty.
As you know, we declared and paid our last quarterly dividend in April.
Because we normally pay our next dividend in July our board will consider the dividend in mid to late June.
As it always does a responsible and experienced board will make a decision using its good faith business judgment.
Taking into account all of the information available to it at that time.
In a situation like the fast moving rapidly changing global pandemic, we have the advantage of aggregating and analyzing the best and most current information available in order to make the optimal decision.
The cycle tested Ventas team and the company are well prepared to manage through current conditions and to take further action as necessary.
Guided by our experience analysis and ethics, we will safeguard our employees, our senior housing residents and caregivers our capital and our reputation so that ventas will remain a leading healthcare property owner in the businesses and geographies, where we invest a desire.
Well employer and an attractive investment vehicle.
And now for the first time I'm pleased to ask Justin Hutchens to address you about Fantasise senior housing business.
Thanks Debbie.
Let me just start out by saying I'm extremely excited to be working with the Ventas team.
Given the circumstances of certainly had the opportunity that jump right in and immediately put my operating experience to work.
I'm also happy to be working again with longstanding colleagues and industry leaders like atria Brookdale.
Yes, so holiday and Sunrise.
Cobot, notwithstanding I see great opportunities ahead for Ventas and its senior housing business.
My first vessels earnings call I'd like to.
Discuss the momentum of our shop same store portfolio showed in the first quarter.
Outline how events also worked with integrity to support our tenants and operators during a very challenging time.
Described the operational and clinical environment and shop and Triple net.
Delve into April and May trends and provide our outlook for safe and stage Reopenings in senior housing.
Our shop portfolio started the year ahead of our expectations and with good momentum.
Sequentially and NOI and our same store shop portfolio grew 2.3% in the first quarter with Covance costs embedded.
Without covenant impacts and NOI grew 6% versus the fourth quarter.
With credit due to solid sequential performance from atria through strong rate growth and expense control.
And some welcome stabilization from SL.
As expected.
The year over year same store shelf comparisons were negatively affected by 6 million in covered cost incurred in the quarter.
The reduction in occupancy as a result of covered in the back half of March as well as the previously discussed lower starpointe heading into 2020.
X corporate costs the year over year same store NOI would have declined 6.9%.
Better than our expectations given the difficult prior year comparisons.
Well, we are mostly focused on the impact of covert 19 through our operating performance. It is worth noting new construction starts in senior housing continues to decelerate with the first quarter of 2020, having the lowest number of new starts and several years at 1000 units and Ventas markets.
Moving to our support for senior housing tenants and operators.
I've been proud that Ventas has been out front and willing to work with integrity in support of our senior housing tenants.
Who are on the front lines of caring for seniors.
This support has taken many forms.
I will just focus on some creative programs, we've offered to our triple net tenants.
The company offered support to a triple net senior housing tenants affected by the covert 19 pandemic by implementing a 25% rent deferral program in April to enable them to care for seniors purchase needed supplies and pay employees.
This program ultimately reduce April cash receipts by approximately 3 million.
Adjusting for this to support program tenants paid substantially all triple net senior housing ran in April.
For the month of May the company offer qualified senior housing tenants the opportunity that pay after 25% of their rent with cash Escrows and security deposits and based on participating tenets. We expect about 2 million of our rent to be paid this way.
We are encouraged to see that some of our tenants have availed themselves of government relief programs for which they are eligible.
We will continue to engage and constructive ongoing dialogue with our triple net tenants regarding their cobot 19 challenges on the case by case basis.
We have many tools available to us to work through a near term conditions, including our backstop of corporate and personal guarantees and over $100 million of security deposits that stand behind these lease obligations.
Turning to the clinical and operational environment. These trying times underlying the importance of partnering with true industry leaders.
We have been inspired by the tireless work of our operating partners to keep senior safe.
Senior housing operators across the industry continue to aggressively implement protocols to protect against Cobot 19.
The result of these protocols is that almost all operators are only offering virtual tours and at the present time about 29% of our 400 shop communities have suspended their movements.
In terms of the clinical impact on our shop portfolio as of April 30.
It is a tale of two cities.
Having a large new York and New Jersey footprint is a strategic advantage for Ventas, but those states, where the epicenter for the cobot 19 infection and mortality rate.
On a full portfolio basis about a quarter of our shop communities experienced at least one positive covert 19 resident diagnosis since the beginning of the pandemic.
Registering accumulative percentage of resident cases at slightly over 2% of the resident population.
Excluding New York in New Jersey. These figures improved dramatically with only 1% of our residents cumulatively effective since day one.
And our Triple net senior housing portfolio benefiting from geographic diversification the percentage of resident cases is 1%.
As is best practice, the care providers to great lengths to isolate or transfer to a higher acuity setting the limited number of residents who received positive diagnosis.
Brookdale in particular has been compassionate.
But also early disciplined and rigorous and its preparation for and management of covert conditions for the benefit of residents and their families.
And shop as a result of restricted access to communities nationally.
April move ins approximated 25% of typical levels.
Well overall move outs were largely in line with historic patterns.
April average occupancy it was approximately 82.4%.
As of May one spot occupancy was estimated as 80.7%.
Representing a 330 basis points decline since the beginning of April based on interim information provided by Ventas operators.
When excluding New York New Jersey.
Occupancy would have declined 280 basis points operating expenses are trending around 10% higher, particularly for labor and suppliers, including PPD.
These revenue and expense trends, we're seeing for April are expected to continue in may.
Financial and operational trends are expected to be directionally similar for a triple net portfolio and the second quarter.
For senior housing overall, as we look beyond the second quarter.
There are three critical considerations, we are monitoring that will materially affect the outlook for senior housing.
One timing of reopening of communities to physical tourists and move ins to costs and access to labor three local demand characteristics.
Including evolving protocols required to protect against the virus.
The timing of openings will be driven by state specific guidelines CDC guidelines and local community considerations.
Ventas along with our operating partners is closely tracking state specific guidelines and cobot infection curves in each of our markets.
I am encouraged to report.
That we have roughly 300 deposits for move ins, which is a good sign of ongoing demand for our senior housing communities.
Senior housing operators will find success in many ways, including on most importantly building trust with prospective residents and their families by demonstrating a concerted effort to keep communities free of infection.
To do so we anticipate elevated levels of costs over the course of the next several months.
Trust and confidence in senior housing over the near term will be supported with best in class infection control practices availability of pp and testing residents and employees.
As Debbie described Ventas has played an important role alongside our operators and tenants in combating depend demick.
In helping operators prepare to open successfully.
Through this challenging stretch we continue to resolutely believe in the long term value that senior living offers residents and their families.
And our sharply focused on positioning Ventas is senior housing business for long term success.
With that I'll hand, the floor to Pete to discuss our office business.
Thanks, Justin we are certainly glad to have you and carry on board I'll quickly touch on the first quarter results for office segment, which represents 27% to Ventass in Hawaii, and then focus on the latest trends and our latest second quarter Cobranded framework.
For the first quarter 2020 office same store cash NOI increased.
By 5.8% year on year. This outstanding results was fueled by our and I portfolio, which grew 22% driven by strong Lisa in complemented by strong performance from the and will be portfolio.
In our anime first quarter average rent per square foot was up 9.4%.
Occupancy has a robust.
Just under 97%.
Strong performance in our University based developments affiliated with Washington University of Pennsylvania in Philadelphia, and Washington University in Saint Louis fueled our growth.
Complementing this fast growing overnight business is our MLB business and will be same store cash.
In a wide for the first quarter 2020 increased 1.9% year on year also above our expectations.
Now, let's shift to the latest koby trends, we're seeing in our office portfolio.
I'll start with medical office, our top priority has been to partner with our tenants and the associated with health systems to ensure the safety of health professionals patients in our employees.
We have source substantial amounts of PPD coordinated visitors screening.
License short term spaces set of dry through testing centers in our parking lots provided supplemental cleaning and otherwise supported our tenants during this challenging time.
We are happy to report that all of our buildings are open the none of our site based employees have tested positively for Covidien 18.
We sincerely thank all of our onsite employees and partners, who fight the slight everyday we're very proud of them.
I'll also say regarding our imovie business, the parking receipts have slowed and well safety concerns have caused an increase in cleaning costs.
Given the current uncertainty the pace of new leasing has slowed however.
We still least 573000 square feet during the first quarter.
In 381000 square feet during April with an additional 200000 square feet of leases at the letters of intent stage.
Also tenant retention has increased im proud to say that will be reported record retention of 83% for the trailing 12 months.
90% retention for the first quarter.
94% retention for March in an outstanding 98% in April.
Turning to our Anite portfolio for our Anite buildings are 100% open and are supporting critical research focused on the detection prevention in cure of Cobot 19.
We are proud to be partners with leading research institutions such as Yale.
And gene Therapy Center Wake Forest Health Sciences, Virginia Commonwealth University integral molecular lexia on and others in fighting this virus.
We look forward to expanding our portfolio with other leading research institutions, such as Arizona State University of Pittsburgh in New under construction World Class research buildings.
As previously mentioned, our Anite portfolio is 97% leased with an active leasing pipeline.
Lab space continues to be in high demand net net as of April thirtyth.
We had 91.5% occupancy in our office business, representing a 150 basis points year on year increase from two to April 2018.
From March 30, Onest through April Thirtyth, we experienced a 10 basis point increase and occupancy for MLB and a 10 basis point increase for our NIE.
So let's talk rate rent payments.
During the first quarter, our tenants paid essentially 100% to the office rent.
Our historical bad debt expense has only been 20 basis points.
We have high quality tenants that pay their rent in April our tenants paid 96% of office rents, we expect a significant proportion of the unpaid rent to be ultimately collected.
I'm encouraged that so far in May our office tenants have paid nearly 80% to the rents due to date, we are seeing a faster payment rates than what we experienced in April.
I will say the tenants experiencing the most pressure other smaller third party physician groups and MLB the smaller private companies nine in retail taken together these customer segments represent a relatively small portion of our office portfolio.
We're supporting these tenants by raising awareness in assisting them with securing federal relief on the selective basis. We're also offering to defer may run for the small tenants to be repaid no later than the fourth quarter to date only a small number attendance of utilize the rent deferral.
Opportunity.
Supporting the durability of our office portfolio or a couple of additional sex.
First our MLP portfolio is largely on campus 71%.
We also have a high level of acuity in our buildings with 88% of our physician tenants being specialists are buildings and our tenants are essential to the delivery of care during this difficult time.
Less than 10% of our attendance suites closed during the pandemic.
Second as of May seven over 80% of the MLB and Hawaii is in states that have either reopened for elective procedures or have a knows the resumption of elective procedures in locations that have reopened we're seeing materially inc. material increases in activity, although still.
Hello pre co bid levels.
As a reminder, that our nation is resilient and that normalcy returned smelling catastrophes Im happy to report that Ventas is delivery date.
Okay.
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We're.
As bill.
Yes.
Okay.
So you will be well.
But.
Yes.
Subsidy.
That was devastated hurricane Michael in 2016 that happy news I'll pass the turn to Bob to finish up our prepared remarks.
Thank you Pete.
I will start with our triple net lease portfolio overall before to close the some enterprise level commentary.
The Triple net portfolio grew same store cash NOI by a solid 3.9% year over year in the first quarter.
Growth is driven by Inplace lease Escalations in a 3 million dollar cash that you received in the quarter from capital senior living.
Trailing 12 month coverage as of the fourth quarter 19.
Or the overall triple net portfolio for Triple net senior housing remains stable at 1.5 times and 1.1 times respectively.
Post acute coverage declined sequentially by 10 basis points to 1.3 times.
Due to declining volumes at kindred driven by managed care in purposeful reduction of Noncompliant patients.
Adjusting for the 25% referral program in senior housing, we collected on close to 100% of our overall expected triple net portfolio rents in April.
We've already received almost 100% a triple that healthcare rents for May.
And we're on track with Triple net senior housing may collections.
We expect the impact of Kobin on our triple that healthcare rents from acute care providers to be muted in the second quarter.
Acute care hospitals have been impacted by the reduction of elective procedures.
But if I had significant access to government funding and support.
Additionally for ardent as of May Onest, all 10 of the Ventas owned hospitals have reopened where will reopen in may for elective procedures.
For the post acute providers and our triple net healthcare portfolio volume trends have varied.
Elteks census has been higher than budgeted the costs have increased.
We expect that the concern over respiratory disease will enhance kindred siltech business going forward.
Earth census, initially declined due to lower surgeries in acute care volumes, but census has improved since mid April.
So this are experiencing notably higher mortality rates with census down dramatically and the most profitable rehab patients also down.
Positive post acute trends include access to government funding relief from site neutral pricing.
Waiver of length of stay requirements in the 2% sequestration delay.
I'll close with some comments regarding the overall enterprise in our financial position.
I want to underscore how pleased we are with our first quarter results.
Including property performance ahead of our expectations.
Record quarterly revenues.
Strong episode delivery of 97 cents per share and has balance Usfive 0.7 times net debt to EBITDA and excellent liquidity.
And we took decisive action in the face of this endemic to bolster our financial flexibility.
In March we drew 2.75 billion under our $3 billion revolver and follow that up in early April with a 500 million senior note issuance.
As a result as of May six.
Ventas has approximately 3.2 billion in cash and cash equivalents on hand.
With no commercial paper outstanding.
We also have very limited debt maturing in 2020, or 2021, and we have the ability to extend our revolver for up to one year.
We plan to bolster financial flexibility by reducing 2020 total capital expenditures by nearly 300 million to a total of 500 million.
With the decline led by pausing ground up developments, not yet substantially underway, notably one new city in Philly and 42 10 Saint Louis.
Our ongoing development projects are on average, 81% pre leased the high quality credit tenants and the earn I business.
I would note as Ventas has a 400 million dollar committed construction line of credit to fund developments with $250 million available capacity as of the into March.
Ventas is expected unfunded investments in all ground up developments in 2020 net of committed financing is approximately 100 million.
In addition to conserving Capex. The company is reviewing its cost structure is across the enterprise.
Including its SGS and organizational costs.
As Debbie says we're on it.
Given our early understanding of the potential impact of the pandemic.
Then southwest through its previously issued financial guidance on March 17th.
We believe the adverse impact on our operating results in financial condition. It will be driven by many factors.
Most of which are outside the company's control and ability to folk forecast.
However in order to provide investors with incremental observations and transparency. We included today, the investor deck outlining our cobot response and latest business trends.
As well as expanded just disclosure as summarized on page 40 for the supplemental.
To close we are pleased with our third for the year and with the actions taken thus far.
Our committed to continuing to take the actions necessary to manage through these unprecedented times.
That concludes were prepared remarks.
Before we start with today.
We are limiting each caller to two questions given a busy calendar request from a few analyst and to be respectful to everyone on the line.
Also given the fact that we're all remote.
We will as Debbie to at this quarter back to the queuing day and to pass questions. The Ventas team as needed.
That I will turn the call back to the operator.
Okay.
We will now pause to assemble the queue. Please press star one to join the queue.
Your first question comes from Joe's Nick Joseph from Citi.
Thank you appreciate all the color and specifically on April and May read collections for net lease.
Drip holiday this morning, but do you expect additional net lease restructuring over the next few months.
Good morning, next Debbie I'm going to ask Ed destined to comment on that.
Thank you Debbie.
The first of all I.
I think it's important to note.
Our biggest priority is that our operators are looking out for the health and safety of our resident in our communities.
Thats priority number one in the near term also point to.
As I mentioned our proved in our prepared remarks that we've already started to take action.
We mentioned the rent for on April we mentioned that the the opportunity for tenants to pay down rather pay some of the rent with their cash escrows in may.
And you noted the holiday restructuring.
Well, we're committed to do is to take action, that's going to give us the best opportunity to create value in our portfolio.
And work.
With our operators to determine the best outcome, it's still early.
Some uncertainty ahead of us still.
But we'll certainly be watching everything closely.
Debit, it's Michael Bilerman.
Just as a second question okay.
Hope you're doing well.
Yes, I think.
Mentioned in his comments about looking at all forms of cost within the enterprise can you sort of address corporate.
Management sort of pay levels and whether that's on the docket and how investors should think about that and just from a governance perspective, whether there'd be any changes from the chairman and CEO role, which you continue to maintain.
Sure I'm happy to talk about that in turn it over to Bob for a little bit more detail, but.
Most of our executive compensation is very aligned with shareholders and this is the vast majority of which is in the form of performance based equity compensation.
When you think about the overall enterprise.
I'm going to turn it over to Bob to talk about some of the insights. He has about making sure that the company is efficient and cognizant of the environment that we're in.
Sure.
This is this is an analysis Michael that began pre Cove is that is the the analysis of our SGN a.
We're well underway that analysis everything I would say is on the table as we think about that.
I would expect to have some more news this quarter.
As we are well underway on that analysis, and we do see opportunity, but at the end of the day, we have a 20 year record of being efficient and effective and that continues to be our goal and we have a duty to make sure we're doing that.
And that is there anything on putting the chairman and CEO role.
I think that consistent with the idea that you.
One of the cost efficient.
Our expectation is that I would continue to hold those growth, obviously, serving as a pleasure of our shareholder of our shareholders and our board of directors.
Thank you.
Thank you.
Your next question comes from Rick Rich Anderson from S. MBC.
Thanks, Good morning, everyone and Hello to you Brad.
Right.
So.
Just on the on the holiday and maybe.
The an extrapolation from that so EBITDA below rent so it's obviously.
A dilutive transaction, but understanding kind of the thought process sort of taking sovereigns roadmap on holiday.
And so I'm curious if in the aftermath of all this do you feel like net lease is becoming an increasingly dying breed for Ventas and you want more control that goes through brookdale, the brookdale and others or is this a one off type of thing and you still think that Theres a role for triple net to play in senior housing in the aftermath.
The Boulder.
Good good to talk with you read shelf, let me take that a couple of things. One is we are pleased with the holiday transaction, we think it really thats a lot of good things and we're happy to take a paycheck, if our friend Rick matrices, but and that we preserve good upside in the asset and a lot of op.
Additional flexibility so we feel good about that and Dan.
Look forward to to optimizing that portfolio.
In terms to the Triple net lease what I would say is.
At Triple net leases are a little bit like.
Mortgages, and one cents, which is that they may magnify ups and downs for the operators and then any.
Challenging environment, they're going to be best favor AG and of course that the situation, we find ourselves and now in other environment, they could be very attractive to both land owners as well as the operators.
So I think there's many tools in the bank many.
I guess you take clubs in the Dag tools in the tool kit and the Triple net lease I think we'll continue to be one oh, there and there are many ways that you can customize leases all said to create alignment so.
We think the triple net lease will survive and we think we'll continue to be creative and collaborative and how we work with our operators be they tenants or managers and optimizing our portfolio and then being good partners.
Okay I prefer arrows in the quiver, but that's just me.
Good morning.
Ladies and then can you juxtapose the us to Canadian particularly as it relates to your recent investment.
There and how how things are you know kind of performing relatively.
Yes, I mean, our.
Our investment most we have that a significant Canadian portfolio, obviously that pandemic has affected assets there as well those operators have also receive significant government support.
And one thing we have liked about the.
To that portfolio with LTM is that they have a younger healthier population or longer length of stay there very rigorous and has been very active from early on working to protect the residents up obviously that portfolio will be affected as well, but there are some characteristics of that or Jim.
Portfolio that make yet.
Probably a better performer on a relative basis, despite being impacted by the pandemic.
Okay, great. Thanks, very much good luck, everyone. Thank you great talking to rich.
Your next question comes from Nick Yulico from Scotia Bank.
Putting everyone.
Hi, Nashville.
In terms of the holiday holiday restructuring I want to make sure understanding how this is going to work.
Yes in terms of the the money that you're seeing from them the cash.
And then the notes and we are you going to be actually booking.
Any income from those two items in the second quarter and on terms of notes.
The 9% rate is there any component of that that is that is cash interest that you're receiving yes.
Great question at the yes, the cash and notes are effectively income and I think we mentioned this in the release and.
And so those will be included a net income.
And yes, we would expect as part of our ongoing.
As.
You get a feel for you know I know you gave the you the coverage on holiday as it as a trailing number.
Is is it possible to get the quarterly you know first quarter he bit dark and for those assets. So we can understand you know exactly from an N.Y. standpoint as you now have this operating.
And a lie you know what what the Delta is going to be between the old Yeah 60 million of cash N.Y.U. down the lease versus you know kind of on a real time basis, realizing things are going to move around still but at least on the first quarter number like what that looked like from a operating either.
Our basis.
Right I mean, you <unk>.
<unk>.
<unk>.
Well I why now in any time.
Actually reporting.
And really what I would say is that just like everything else in the portfolio or if you play now it's really going to depend on how the pandemic really plays out and so I think you know, we'll just we'll just differ that as we get more real time information about the portfolio I'm happy to talk to you about investing.
Progress.
Right I guess, but I mean, you guys do have an actual number I'm assuming that you know for the first quarter and that's I was trying to see if we could always get that number. So we can use that as a base to them build off some assumptions.
Yeah, I mean, I think you should you should look at about a point you know about a 0.9 EBITDARM coverage something like that in in the first quarter.
Rough number.
Okay. Thank you.
Yeah.
Your next question comes from the Crumb, Hi Trust from Morgan Stanley.
Mm.
Hello.
Oh, sorry, I had myself on mute.
I I, just said hope everyone in the theme is okay and doing well.
You reference you reference the dividend in your prepared remarks, and I, just I want to clarify one.
Do you mean, the divisions or gosh today.
And just as we think about the dividend going to second quarter.
What are sort of the metrics what are you looking at maybe gives a sense of where you know after <unk> dividend could trend, even just percentage wise what some of your puts and takes if you think about the dividend.
Mm Hmm. Thank you yeah, I mean, I think I I really wanted just touch on the fact that you know while we're in this period of uncertainty. We we generally want to match our decision, making speed with what's required and our board is going to look at all relevant information when it addresses the dividend.
As I mentioned in mid to late June.
Okay <unk>, it's it's all cast currency.
It it has been yes the crown.
Okay.
And then just second as you.
I can do in both need the expectations for occupancy in the next few months and was about 100 basis points per month and the write their portfolio.
Can you give it the sort of a broader sense of what the ins and outs on terms of assumptions for moving versus move out as an aside if we could request more monthly or more timely more weekly updates that would be great.
I mean ask Bob to address that.
Yeah.
Sure and I'll give you some building blocks vicar amusing April as.
It was our case study here you know, we we saw a movie ends.
Approximately 25% of our historic levels were down 75% for the other way.
The.
The move out have trend did pretty consistently with historical.
The the the net of that is approximately 70 basis point impact.
On occupancy.
On a weekly basis.
One way to think about about revenue impacted a than this isn't the page seven of the investor deck.
If you haven't seen this is 100 basis points of occupancy generally.
Sequentially on average is about two to 3 million of revenue per month.
So he can you can do map there.
Then we we expect that trend as we see it right now to to carry on into.
Intimate.
Unexplained side, we mentioned about 10% topics increased driven by by Labour and and supplies, including P.P. any.
We have about 125 million of monthly abax in our portfolio and shop. So it gives you some more more facts if you like to do the math.
Okay, <unk>, we thought you'd love those real system.
[laughter] that'd be I guess I was just trying to understand the move from the 330 basis points loss.
In the month the vehicle down to 100 per month and I was just trying to understand more specific need like what are you is you mean changes from it proved to me it through June.
Oh, let me, let me clarify just to make sure. We're on the same page or 330 basis points was the spot to spot that's actually beginning to end of April.
Since you move and my my hundred basis points was simply a rule of thumb how to help you. So yeah. Okay. That's that's an important clarification you know beyond beyond what we're seeing in April in early in the May I I'm not.
Able to project, what I think it's going to be for the second quarter for example.
But those those give you some building blocks to make your own assumptions.
Yeah.
<unk>. This is just <unk> I'm going out a little color to that might be helpful.
And I'll just preface this that I'm Gonna give you April average occupancy numbers that are presented by her operators and these are fully vetted <unk> report these numbers, but I'm gonna compare March 1st So March average occupancy was 85%.
Will average is 82.4%.
There's 260 based points difference.
You take New York in New Jersey out as I did my prepared remarks, when I was using spot occupancy.
March averages 85.1 April.
82.9, so the 220 basis points change.
And that shows the difference between really that quote unquote spot and getting a month to end of mine versus the average I tend to spend the money. So let's carry on thank you.
Thank you.
Yeah.
Your next question comes from Michael Carol from our B.C. capital markets.
Yeah. Thanks.
You could add some color on the the testing capabilities that you're providing your operators I don't know if you said this rip I missed it but are you able to provide enough tests for all the rest is that the facility is or what in depth are you able to offer right now that relationship.
Great. Good morning. So we're very excited about this initiative and we are taking the first step with a tree, yeah, and it's really to accelerate employee testing <unk>.
With select operators can make our communities safer and facilitate thoughtful re opening and confidence in trust as Justin talked about and so we have this first compliment of 10000 testing kids with mail.
Labs analysis, which is very important they have a very high accuracy rate at May I wish you would imagine.
And we really think this is has great first stab that we can make available a tree is already done it E.S.L.V. neck, and we'll make it available to select operators principally for their employee testing program. Once we see how that goes again, we're early early days.
Still a lot of uncertainty new testing and tools coming out all the time will determine if we went to react or if we want to take a different step moving forward, but we think this is a great opportunity to do the right thing.
And really have a differentiated partnership with our operators and really build that trust and confidence with residents in their families that is so sorely needed.
And then what's the the turnaround time, how long does it take to get the tests and then I guess, if you're have confidence that at least your employees or not infected by by Tobin is there discussions that she could reopen those communities or is it still to really to tell.
Mhm, the the turn around just a day or two and it it will indeed build confidence as you know a component of a thoughtful reopening and admission plan.
And I'll just one other point to that this adjusting all of our operators are considering they're moving protocols at this point at about 70% or operators are operating of states that are starting to lose center stay at home policy Sosa very active conversation.
<unk>.
The advantage that testing gives you.
Obviously, it gives you a lot more certainly around the potential for spread of infection, but the other advantages. It's recognized in a C.D.C. guidelines. If if testing occurs then it can accelerate the times that someone can move in where the regular quarantines around 14 days like testing protocol testing.
Files for something closer to two or three days right.
Right and that's a good point b. and because the cats may also be available for new residents in certain cases.
Thank you Mike Okay. Thanks.
Your next question comes from Jordan Sadler from key Bank capital markets.
Yeah.
Thank you <unk> and then I hope everybody is doing well.
<unk> my for.
Right.
My first question I think is maybe for Bob.
Only the T. devotee did quarterbacks that.
Regarding the revolver draw down and I think some subsequent repayment close to senior notice choice in April.
He did mention your conversation that yeah event this past the peak.
Mortality and your shop assets, and and Triple net and so I I get some kind of curious.
I know, they're waiting for the last minute make a decision on a dividend, but what do you want to see you do the virus.
Before in order to sort of pay down those borrowings and so what is that.
You know sort of draw down <unk> is that reflecting concerned surrounding the ability to potentially borrow.
Oh.
Well I will turn it over to buy but one thing we know for sure if that.
Having been through many decades of that then having assured liquidity is the number one two and three attributes that you want to have to manage successfully through any kind of uncertainty and so we have that and that kind of a golden rule and it's served us very very wow in terms.
The past the peak you know again there are numerous models, there's a lot of uncertainty, but you know as in the point in time I'm glad that you've noticed our data that shows that a lot of r. and R.Y. in our senior housing communities on those.
Triple that in shock.
In states, where according to a single model as of a certain to date.
The peak of mortality is behind US now that could change again and that of course would affect.
Outlook.
Well, that's that's helpful. I guess mmm I guess I'm I'm trying to understand the difference between you know that assured liquidity as it relates to sort of that revolver borrowing or drawdown versus the dividend that you actually pay so yeah.
There's some uncertainty <unk>.
The potential to be able to draw or have access to cash but.
It seems like you you have.
You're not yet willing to sorta cut the dividend down to zero in order to sorta stave off you know or protect yourself from any uncertainty or maybe I'm misreading not.
Yes, I mean, I think what we've said clearly about the dividend is that the board will make that decision at the right time.
Which they are dividend isn't July dividend, historically, and so that would.
Basically differ that decision to be made by our board until mid to late June.
So do you have a question for Bob about the revolver Dre just Jason.
Oh, it's Jordan and I I was just for your children.
I'm sorry about that.
Okay.
I I think you answered it but but maybe you mentioned just and I'll I'll I wanted a welcome back to him back to read Atlanta. Unfortunately, other these Ah crazy circumstances, but I would have asked him for a view of the Pope portfolio probably not.
Fully appropriate.
Oh, it a a debbie.
Years ago, you spun off the.
Killed nursing portfolio at a time when there were some you know real distress in that sector.
Any thoughts surrounding you know.
Management and or the potential spend up the seniors housing portfolio or we just because that way too soon and I don't mean to be flipping at all in that question.
Yeah, I think that on the skilled nursing I think we I'm glad you reminded us of that that we really did that add the absolute peak time evaluations added seven cap on a rent at that time and we we really continue to believe.
That was very sound strategic decision you know, particularly as we look at infection mortality rates and skilled nursing now I think we given all the uncertainty right now we're focused on health and safety is and just instead and and really this strong effort to keep them 'cause strong.
Stable and get ready for any scenario in the opportunities that and the teacher. So we'll defer that discussion if you don't mind.
Okay.
Thank you.
Thanks Jordan.
Your next question comes from Joshua dinner learn from Bank of America.
Hey.
I'd be doing clearly have too many people with the first initial j. in my life isn't it.
I'll try to get it right.
Yeah, I'm just curious on the holidays switch to the management contract was that's something we were in discussion with <unk> or the pandemic or was it really depends dynamic with the driver that kinda.
<unk> got you going on on that discussion mhm, well, we we've talked about holidays for awhile and have been you know pretty clear about what the performance was over the past couple of years I think we've we're in a good spot because we were you know holiday remained currently paying full rent all the way.
Through the first quarter and they've been great about that and we were this whole beneficiary of the guarantor. So of course, we had even door kind of one to one coverage. So we we felt like we were in a good spot that we did feel mutually that it was the right time to take a different approach and.
We did so in a way that we think was beneficial for both been preserved upside and not on operational flexibility. So we're we're happy that we've done it we're gonna you know.
Mm mm, we're going to optimize that portfolio, especially now that are adjusted this year.
Okay and then.
Senior housing Triple net rents senior presentation, you mentioned I guess.
May rancher, allowing up to 25% of the rent to get paid from positive you expect 2 million are starting to be paid give a sense of like.
Exact into what what percent of tenants are taking advantage of that and I guess later on you would you require the attendance to kind of back all those deposits.
Right Justice Yup, it's actually very little percentage, if you think about.
Around 130 million of rent per month, and only around 2 million over the up to 2 million everything will be paid with the the cash escrows the security deposit so not a lot.
I'll mention to other things on the trip on that one is that.
As we said it's may collections are really right on track.
So what can good in May also some of our April tenets that took advantage of the deferral have already paid back.
So that was a good encouraging sign as well and in that case, there was smaller operators that taking advantage of government assistance.
But our intent was to allow some liquidity for operators during a very tough and uncertain time.
And we're happy that that some of the operators of taking advantage of that mm mm.
Thank you.
Mm.
[noise]. Your next question comes from John Kim from B.M.O. capital markets.
Very good morning, everyone and welcome trust them.
Oh My God a question on.
Oh and a question on your.
Your deposits that were mentioned we ended deposits and senior housing is there any difference regionally 'cause New York, New Jersey, more or fewer <unk> or their markets nine impacted by the virus.
Well.
Hello, and this is just let me just mentioned in the first of all we don't normally track deposits.
Because it's you know.
Your housing, particularly assisted living a member care, where we focus his knee driven so so the tracking deposits is usually a very short term indicator of a move and but given that environment. We started to track recently a lot of those deposits are in Sunrise Sunrise has have a northeast.
Footprint with us. So there is certainly you know some some new York and Massachusetts Oh.
You know or bukar sunrise footprint, a lot of those deposits are with them.
There's there's another sat on mention.
That's around leads which is something that we do try regularly and leads have stabilized over the past few weeks that about half of our typical lead volume.
Which is.
And you know encouraging in a sense because it it shows that they're still ongoing demand, even though we're not getting physical tourism or give me virtual tours in lieu of those.
They're still ongoing demand and and it's ahead of that that moving paste that we've been experiencing so far but there is.
Long answer to a short question and and that is not.
Ready to really point out specific geography, except to say that that Sunrise is a big part of those deposits.
Okay, and then keep mentioning <unk> hi retention rate you guys card in the medical office business.
Can you provide some terms on that are these you know start term or month month lease extensions and also with catastrophe <unk>.
Okay.
Yeah, So John let me just be sure that I.
I understand what's your what's your asking well we talked about was 96% [noise].
Receipt of those cash friends.
Overall in the office I I would too.
Is that what you're asking.
No I was talking about the retention rates are the the renewal rates.
Oh I see okay. So <unk>, yeah, the 90% for the corridor, 94% for.
We're margie and for April is 98%, which is a phenomenal phenomenal set numbers and you know I would say, it's a mix. So in some cases are short term, where they just uncertain about about their future and so they want to you know just.
Take a year extension in other cases, we use the opportunity to take advantage of.
Maybe some relief in exchange for a couple of years of additional term. So we've been you know fairly entrepreneurial in doing that.
And then there's also some practical reasons I'll tell you could have it interesting story so of an O.B.G.Y.N., who was 70 something years old who's going to retire.
He sat back and he thought you know what with this shelter at home, maybe there's going to be a lot of burst. The next day nine those from now so I'm gonna extend for one more year I'm going to work the cashier than this opportunity. So it's been a mixture of things.
Great. Thank you.
Thanks, John.
Your next question comes from the <unk>.
Lucas Heart, which from Green Street advisers.
Great. Thanks, whenever we do come out the other side or the the <unk> pandemic I'm just curious what you think the recovery shop looks like <unk> do you expect it to be pent up demand or do you expect something more gradual.
Well I think our focus right now is really getting getting through the the biggest part of the pandemic Lucas and then there remains really a lot of uncertainty about the depth and.
The time period, where it would be most active and then what the slope and pays to recovery well look like and knows well <unk> you know those could vary significantly affect what the recovery and senior housing looks like so I would be really happy for the day, when we can discuss that with more.
Specificity in terms of timing pace and slow.
Ah, but right now we're focused on on maximizing during the course of the the toughest period of the pandemic.
Great and then the second one for me is just can you provide a little more color on the performance trends of the Sunrise shot portfolio.
<unk>.
<unk> Yep sure. So I mentioned in my prepared remarks, you know the year over year stuff that we're down and and the reasons for that given the fact that we're starting off at a lower starting points. They also mentioned the strong sequential performance the that for for.
<unk> was driven by a tree on E.S.L.
Sunrise is not as big a contributor to that there there there's some.
Less <unk> less good performance, but from the Sunrise portfolio.
During that time so it's.
Actually contributing on a sequential basis closest to down around 9%.
Thank you.
Your next question comes from <unk>, you could sanya from Mississippi.
Yes, good morning, that'd be one just good to have your <unk>, England builds up.
[laughter], Hi, Oh, Oh, I that'd be a good uncle of plus and smell good I'm glad to hear that a couple of course and the most one is actually on the office right.
The 96% of your poor red.
But when you put up was breaking down and it was you know the rates of M.L.D. versus last finances, whether big differences there.
They child this is Pete.
Uh-huh.
How are you.
So so the 96% would agree very pleased with it in one of the items I did want to point out is that those are receipts. Those are deferrals are not included in that number and as a matter of fact for April.
Almost zero deferrals, we're talking like $150000 were the deferrals Naperville and those were for retail tenant. So this is true cash receipts and collected in a in a very positive way.
The M.L.B.M.O.B. portfolio is slightly higher.
Collection rate for April.
And the R. and I hit a slightly.
Lower number but really nothing.
No material is interesting is that many of the universities are just they still right here. They do hand checks you know they actually write checks out and it's a slow process than a normal month it at the slower process than a.
In a turbulent month. So that's that's my assessment.
Well I mean, those those those portfolios perform very well.
So.
I've done on the lifeline supplier.
Wrong.
This quarter.
Again, and you know a a positive on the overall then top story, so I guess, a little bit surprised when we looked at the development pipeline. That's the projects that were halted a all kind of life Science Wexford project.
There was one other projects also lifeline rubber completion date was differed Oh of course about yeah. So that's kind of true acquire kind of thinking about that isn't that doesn't if that's a big positive on your on your on the overall story.
I guess part of what kind of happening rather develop my <unk>.
You know called single delay in some other development project.
Well, you're absolutely right. We are happy that we have grown our office portfolio and particularly this exciting life Science University based portfolio of the past years, it's really you're seeing the benefit of that right now both in the fact that that's where all the action is on.
Virus and the vaccines and the search for a cure as well as the diversification benefits were getting from that portfolio. It within the broader dentists enterprise and so we do have it is a significant capital allocation priority. We do have a number of ongoing projects with Eric.
Found a state and pets to name a few and basically what we did as a matter of I think really good discipline and approach is that we when we really understood quickly that potential from the Corona virus, we we.
We pot aggressively pies on the two developments that really were not yet significantly under way and so the ones that are ongoing are going to be delivered and we'll have you know or 80 per cent preleased.
And the ones that are on the drawing board has been pie I think intelligently to take a look at Capitol conservation and of course as I mentioned, we'll be able to make a decision on notice at the appropriate time as to moving forward and timing and and the like it <unk>.
We are happy to have this portfolio and it will continue to be an important part of events has story.
Gotcha, Okay. One might you would indulge me you know when it's like you know so when Justin was was analysis joining the team you guys amount skill you what kind of plans around senior housing stock up a form that they today you a noun you know solid.
<unk> around holidays, just talked about performing so clearly I think the market is looking for you guys. You know to kind of you know.
Rectified you know potential issues that people seem to portfolio just kind of given that I I guess why why you guys didn't do not a little bit more aggressive.
It was lost a kind of trying to address some of these issues where I bet. It.
Some of the trip and that puts for your <unk> coverage and things of that nature. It just kind of feels like.
It's a good thing do it we're expecting you to do it but you know the minutes are it it just doesn't seem to be happening that's quickly I, let them. Some of US you know on paper.
Mhm.
Well I would say that we over a long period of time have a good track record of taking action and that we think is is going to be beneficial.
Four hours for shareholders and we've taken you know many actions two evidence bad weather and then with kindred or today with holiday.
And we will continue to do that we've made a ton of progress. We're proud of what we've done on the leadership from as you mentioned.
Along with the portfolio front, and we will we will continue to do that with.
Urgency and purpose and hopefully we'll continue to get rewarded for doing the right things that the right time.
Well that's helpful well I just feel like the runways clearly open and everyone's waiting for you guys to take off.
Well. Thank you we appreciate that support we our wings are flapping.
Huh.
<unk> I think we have wine cooler operator.
[noise] anything further.
Okay. If we don't have any further questions I Wanna sincerely. Thank you for your time your attention. Your interest invented we have a great came here that's really committed.
To protecting and preserving the company and for really delivering for all the stakeholders who depend upon us. So we look forward to seeing you on the other side. It is terrible pandemic and until then stay safe and strong we'll see if then bye bye.
Ladies and gentlemen, this does conclude today's conference. Thank you for participating.
You may know disconnect.
Operators are post conference.
No Sir there's not.
We are knew nobody can here's right.
No Sir I one moment please.
[laughter].
[laughter].
[music].