Q2 2020 LTC Properties Inc Earnings Call
Good day and welcome to the LTC properties, Inc. second quarter, 2020 analysts and Investor call.
All participants will be insulin.
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Please note. This event is being recorded I'll now like to turn the conference over to Wendy Simpson.
Please go ahead.
Thank you operator, and good morning, everyone.
Welcome to Ltcs Twentytwenty second quarter conference call joining me today, our Pam Kessler co President and CFO, and Clint Malin co President and Chief investment Officer.
I'm also thrilled that when katzman founder and CEO of Juniper communities is joining us as a special guest we are included on our call and informative session with Lynn designed to provide insights and other operators perspective on the challenges caused by the pandemic and the lessons learned to fall.
During these challenging.
I would also like to acknowledge Pam included who recently were promoted to co presidents in recognition of the many important contributions they have made to LTC over the years with me they share a strong strategic vision of Ltcs future.
Please join me in congratulating them for these well deserved promotions.
Before I begin to review our business I want to thank our operating partners for all they have done for their patients residence and employees during the pandemic.
They have aggressively dealt with unprecedented challenge over the last several months, while also solving problems creatively and compassionately.
Speaking of creativity I would like to shared this story from one of our memory care communities that recently made national news.
After being separated for more than 100 days from her husband, Steve who is suffering from early onset all fibers.
Very Daniel.
Focused on finding a way to reignite with him.
Our operator, LG senior headquartered in Hickory North Carolina.
Outside of the box and offered marry a part time job as the dish washer.
Both marrying the community are taking this job seriously. She received substantial training on assisted living care and has been tested weekly for covert 19.
Now after each shift married this is Steve and his room, where they watch TV and laying that together holding hands.
She uses her paycheck to buy gift cards for the staff in recognition of the very hard work they are doing to care for her husband and others loved ones.
There are similar stories from many of our operators around the country in fact, I hope Lynn will share some of her own.
We commend them for working tirelessly to provide care, where it is needed the most and have confidence. They will continue to meet this new normal with diligent strength and grace.
Although most states were able to successfully flatten the curve earlier on in the pandemic Cobot 19 cases have spiked around the country potentially over taxing our health care system in our industry, specifically uncertainties remain around P. P sanitizing supplies testing and staffing.
Demand for testing has increased resulting in growing like times between test in results well. Some testing results have been found to be unreliable.
The recent decision by CMS to provide point of care covert 19 test supplies to skilled nursing facilities should help but to our knowledge. There is no similar program for private pay communities.
It is quite impressive to see how our industry has come together. During this time. In addition to the work being done by operators several industry organizations have launched initiatives, including intensive lobbying of Congress for additional really funding limited liability protection and the prioritization of testing P.T.
He has access to a vaccine what available.
They have also engaged PR firms and launched a media campaigns in an effort to enhance the perception of our industry and refuse recent trends of negative press LTC is honored to be an active participant in several of these programs.
Moving more specifically to LTC second quarter results.
Most directly due to cope with costs and other covert impacts we have placed our senior lifestyle portfolio on a cash basis as of July 1st due to a shortfall in may and June rent payments.
Senior lifestyle total orderly rental obligation to LTC is approximately $4.6 million for the quarter ended June Thirtyth Twentytwenty, we received a total of approximately $1.8 million.
In July we received approximately $1.1 billion.
Recent.
Rent payments have been trending up.
At June Thirtyth senior lifestyle owed us $2.8 million for the second quarter of Twentytwenty, which is reflected in our receivable balance as of that date and is covered by an undrawn letter of credit that we hold.
In cooperation with senior lifestyle, we are evaluating our options for the portfolio, which may include seeking new operators for the 23 properties and or pursuing sales of some of the 23.
A split of the portfolio among several different regional operators someone who could be new to LTC properties provides an opportunity to reduce portfolio concentration while building relationships with operators new to LTC with whom we can grow.
We have actively managed operator concentration in our portfolio. Our current senior lifestyle is one of only two operators for income and asset concentration exceeds 10%.
Not surprisingly the quarter has been quiet with respect to new investments. However, we are continuing to court potential operating partners and evaluate structured finance opportunities, which typically have shorter investment duration and we believe offer better risk adjusted returns in today's market.
While the market still remains on certain with respect to Twentytwenty Foundation, we have built will serve us well when restrictions Lucent and we can again actively engaged with potential acquisition candidates.
Being well capitalized allows us to more quickly step into situations than some other financing sources.
Although I believe that it is unlikely we will close any major transactions and Twentytwenty I also believe that LTC will continue to play a strategic an important role in seniors housing and care financing over the long term.
Yes, we discussed last quarter, we are not giving twentytwenty AFFO guidance due to covert related uncertainties.
Now I'll turn the call over to Pam.
Thank you Wendy.
When he discussed we've placed senior lifestyle on a cash basis as of July. One. Additionally, we wrote off our straight line rent and me incentive balances related to senior lifestyle as of June 30.
Merely due to this write off total revenues decreased 17.8 million from last year second quarter.
Increased friend from preferred care was also a contributing factor. These declines were partially offset by acquisitions and completed development projects increased rent from 2019, these transition and higher rent from anthem.
Interest income increased 469000, and a 2022nd quarter due to the funding of additional non proceeds and expansion on renovation project.
Income from unconsolidated joint ventures decreased 128000, and QQ 2020, due to mezzanine loan pay offs and reduced income from our preferred equity investment in a joint venture with an affiliate of senior lifestyle.
During the fourth quarter of last year, we recognized a five and a half million dollar impairment charge related to our 25 million investment in the joint venture.
In the second quarter of 2024 properties comprising the JV were sold as discussed on last call. Accordingly, we received partial liquidation proceeds of 17, and a half million and recognized a loss on liquidation of unconsolidated joint ventures a 620000.
Hey receivable balance $7 million related to additional proceeds that we anticipate receiving throughout the second half of 2020.
Interest expense decreased 164000, due to lower outstanding balances and lower interest rates under our line of credit in Twoq 2020, partially offset by the sale of 100 million a senior unsecured notes in the fourth quarter of 2019.
<unk> expense was comparable year over year.
Net income available to common shareholders decreased 18.6 million due primarily to the write off of senior lifestyle straight line rents receivable and lease incentive balances as well as the loss on the liquidation of our unconsolidated JV.
Maybe AFFO 31 cents per diluted share for the second quarter 2020, and 75 cents per diluted share the same period last year.
Excluding the nonrecurring items already discussed in the current period.
FFO per share with 76 cents this quarter compared with 75 cents in last year's second quarter.
During the 2022nd quarter, we received 17 and a half million from the sale of the properties and JV with an affiliate of senior lifestyle as previously discussed and 2.1 million related to the partial pay down of an outstanding mezzanine loan.
Funded 2 million of additional proceeds under an existing mortgage loan with an affiliate of prestige healthcare, which is secured by fourth skilled nursing centers with a total of 501 bad.
The additional proceeds bear interest at 8.89% increasing through end of quarter percent annually. Thereafter, we also funded 7.4 million in development and capital improvement projects. Some properties, we own 200000 under mortgage loans and pay 22.4 million in common dividends.
At June 30, we own one property under development with remaining commitments of 7.4 million. We also have remaining commitments under mortgage loans of 2.7 million related to expansions and renovations on four properties in Michigan.
At June 30, we had 50.4 million in cash and cash equivalents. We currently have over 510 million available under our line of credit and 200 million under our ATM program, providing LTC. The total liquidity of approximately 760 million.
Our long term debt to maturity profile remains well matched to our projected free cash flow, helping moderate feature refinancing risk and we have no significant long term debt maturities over the next five years.
At the end of the 2022nd quarter, our credit metrics compared favorably to the health care RV industry average with net debt to annualized adjusted EBITDA for real estate, a 4.3 times and annualized adjusted fixed charge coverage ratio of 4.9 time any debt to enterprise value of 32%.
Yeah, that's got the economics fallout from cope with 19 on the real estate capital markets has resulted in our debt to enterprise leverage metric being higher than our long term target of 30%.
However, at 4.3 time, we're still comfortably below our net debt to annualized adjusted EBITDA for real estate target a below five times.
I'd like to quickly discuss rent deferral before turning the call over to claim.
For the second quarter rent deferrals were less than a million dollars or approximately 2% of second quarter Bank.
Proximately 277000 of this deferred rent has been repaid.
Accordingly at June 30, there were 653000 and rent deferrals outstanding or about 1.5% of rent.
In July we received to do for all request from operators and granted one any amount of 80000 for July and the other totaling 280000 for August in October but.
Now I'll turn the call over to claim.
Thanks, Tim.
We'll cover several items today, starting with our Brookdale renewal.
Or brookdale leases, which covered 35 properties in eight states.
The only significant lease renewals through 2020 to.
Given the uncertainties caused by Cobot 19, we agreed to extend the maturity date by one year through December 30, Onest 2021.
In consideration for the one year extension Brookfield agreed to consolidate the four leases we have with them into a single master lease whereby all properties must be renewed together.
Brookdale mill has three renewal periods.
Consisting of one for your renewal option, one five year renewal option and 110 year renewal options.
Brookfields notice period exercises first renewal option will open January 120, 21, and close on April Thirtyth 2021.
Economic terms of rent remain the same as a consolidated front in terms under the previous four separate lease agreements.
We have extended a 4 million dollar capital commitment to Brookdale, which is available through December 30, Onest 2021 at a 7% yield.
Moving to our developed projects as I mentioned last quarter.
Instruction was completed on our assisted living memory care real estate joint venture project with field senior living and Medford, Oregon.
Deals has received its a license to operate is conducting tours and plans to open in the fall.
Our development project with ignite remains on track to be completed in the fall.
Next I'll discuss our portfolio numbers Q1, trailing 12 month, EBITDARM and EBITDAR coverage using a 5% management fee was 1.39 times and 1.17 times, respectively for assisted living portfolio.
And 1.76 times, and 1.31 times, respectively for our skilled nursing portfolio.
Excluding senior lifestyle from our assisted living portfolio, EBITDARM and EBITDAR coverages increased to 1.49 times and 1.26 times.
I'd now like to provide some occupancy trends in our portfolio.
This data is as of July 17.
For our private pay portfolio.
Occupancy is as of that date specifically.
For our skilled portfolio occupancy is the average for the month to date.
And because our partners have provided July data to us on a voluntary and expedited basis before the month is closed.
Information, we're providing encompasses approximately 72% of our total private pay units and approximately 93% of our skilled nursing beds.
For additional context.
We're also sharing comparative information about occupancy as of March 31, 2020 in June 32020.
Same population used for the July data.
Private pay occupancy at March 31 was 83% and 77%.
30 in July 70.
For skilled nursing average monthly occupancy for the same dates respectively was 80%, 72% and 71 person.
I'll finish my remarks today with some brief comments on deal flow.
The market remains constrained and there are still complexities to work through we're seeing some interesting opportunities and our business development team is continuing to actively source new deals.
Analyzing where we believe the market is headed.
Our positioning LTC to be ready to strategically deploy capital as soon as practical and beneficial for us and for our shareholders.
We believe that are strong and flexible balance sheet is a competitive advantage.
Right now, we see better opportunities in structured finance products, such as preferred equity investments mezzanine loans bridge loans and unitranche loans for their shorter duration and what we believed to be better risk adjusted returns in today's market over the longer term, we are continuing to build and enhance operator really.
Recent chips, so that when the time is right you can return to more standard acquisition and development investments that meet our underwriting criteria and create or enhance growth oriented partnerships strong regional operating company.
At this time, however, we cannot accurately pinpoint when these type of transactions will resume.
Now I'll turn the call back to windy for closing remarks.
Thank you Pam and class.
As I reflect back on the quarter. It was encouraging to see some signs of progress as our operators and the seniors housing and care industry aggressively address pandemic related challenges.
LTC is continuing to provide support as needed as our operators now have to deal with the reference questions of the reese's like in coated cases.
I continue to believe that more and more opportunities will be available to LTC and that we stand prepared to act on them when the time is right.
Now, it's my pleasure to introduce Lynn Katzman, founder and CEO Juniper communities Lin started juniper and 1988 and has grown the company to one of the Premier regional senior living companies in the United States.
Good day Juniper operates 21 communities in three states, Colorado, New Jersey, and Pennsylvania of these 21 juniper leases to in Colorado and three in New Jersey from LTC.
These include all care levels from independent living to memory care to skilled rehabilitation centers.
During the first mission of nurturing the spirit of life is visible in their physical environments and experience through their signature care programs.
After Lynn's presentation, we will open the lines for questions. Please take into consideration that juniper is a private company and while Lin may provide some financial related data in her prepared remarks, please refrain from asking financial questions regarding junipers balance sheet or operations.
Welcome limbs.
Are we life now.
On your loss.
Yes Lynn please.
Begin.
Hi.
Okay.
Operator, we can't hear Lynn.
I can't.
One sorry can you hear me now.
The other thing here yeah, Okay. Thank you Randy and thank you Clinton Pam I apologize.
Today, I'm going to be talking about.
Cobot 19, the impact of Cobot 19 from an operators perspective, and as Wendy said junipers property span. The continue on however, today I'm going to be focusing primarily on the Ala and memory care experience during cope it.
To summarize my comment briefly I want to let you know that I want to share with you and understanding of cobot 19, and its impact on senior housing true chronology of but then.
I want to talk with you about junipers Cobot 19 journey, our strategy as well as a three phase approach to the pandemic and lastly, I'd like to share with you. Some of the lessons have believed we've learned.
First.
I want to talk about the cope with 19 reality.
The CDC issued its first public alert to the U.S.
On January eight.
This year.
The first death.
In the U.S. occurred at Evergreen Health Care Center.
In Kirkland, Washington.
On February 29.
On March 11, they were 1100 confirmed cases in the U.S. and it was on that day that the WH out declared.
Oh, good 19 to be a global pandemic.
On the next day on March 12.
How things human services.
Group placed their first order.
For and 95 math.
At the time they expected delivery.
Around the end of April.
By the end of March.
Were 164000.
Confirmed cases.
With over 3100 debt.
Four months later.
As you own, though we stand at 150000 Americans dead.
It's just 1200 with an additional 1200 being added.
Yesterday.
So the extent of this pandemic hi is.
Huge.
And the timeframe in which this has happened is incredibly short which has made it that much more difficult for all of us, but especially operators who care for chronically ill older adults.
To take action.
During the first Cobot 19 journey as I said has three phases, one we called the crisis Phase, which started in March late March and went through May.
Phase two is what we're calling our path forward or the beginning of recovery and phase three which we are had not yet experienced is what we're doubling the new normal.
I want to now tell you a little bit about our 30000 switch view of our strategy. Our goal has been to keep our residents and our associates healthy and safe.
And our approach has been one which we consider to be proactive.
And has involved primarily at testing.
And infection control.
Policy.
Part of our strategy.
Has.
Evolve because of our understanding of what successful countries have done other successful countries have done.
In combating cobot and looking at the infection prevention strategies, which I have let them more success.
Those are Germany, and South Korea.
[noise] our crisis management strategy included four key points.
First was testing contact tracing in isolation, where we define the problem identified our risk risk and implemented protective actions that related to what we had identified.
Our second second piece of our crisis management process related to stepped up infection control practices, which included the everything from Handwashing and social distancing.
Two cleaning and disinfecting and most importantly, the proper use and availability of personal protective equipment or P. P E.
The third part of our strategy involved associate training and support particularly to assure widespread adoption of appropriate practices.
And last but certainly not lease was a.
New system to ensure enhanced accountability and to document result.
As I said before our testing strategy was patterned after South Korea.
It's used a a test early and universal.
Strategy, regardless, if someone's symptoms.
We used that we initiated testing in late March we used to private lab and our decision was to test all residents and associates not just those with significant symptoms substantially different than what was happening at the time.
We started by testing in hot spots.
In two communities both of which were LTC properties, one in Colorado and one in New Jersey, roughly 50%. The people tested were positive, but most notably of the 70% to 94% where asymptomatic.
72% of residents to be specific at 94%.
Of our associates.
It is hugely important because it told us that this disease was transmitted.
Without someone having symptoms.
That despite or be we're being told by the CDC, we needed to do more.
Juniper use that information to put together, what we considered our battle plan, which we believe has been fairly successful.
I want to also note that the majority of our communities tested 100% negative ended those communities. What we did is essentially sheltered everyone, including our staff in place.
Fun example of this was something we call camp Wellspring, which took place in memory care and as many of you may know memory care residents are harder to isolate they naturally like to come out of their rooms, and often times wander and so I.
Delighting them individually in their suites is often more difficult.
By creating a safe environment by sheltering in place by creating small cohorts, we were able to keep people safe and healthy.
More importantly, or equally importantly, I should say is that we created a a fun environment, one which had tremendous positive impact on our residents and our team members as well as their families. We created an RV camp and out.
Or parking lot and each of the cohorts.
Cohorts are like neighborhoods and so we assigned staff to each of those neighborhood. They were not allowed to go to other parts of the building. So similarly, they had to shelter outside of the building in their time off in distinct location and we created those.
We ended the day Gil you with many of our residents felt that they were on take place. They thought it was great fun and that we've now dubbed it can't spring. So that's a a fun story about that I will also just to note as I'm, telling stories that in the communities that sheltered in place we.
Ill now has three new babies of women, who sheltered in place it gave birth shortly thereafter.
I want to let you know that in terms of testing right. Now we are doing viral testing weekly, but the key to the strategy working is rapid accurate affordable and regular testing testing a force that's the data to keep people.
Who are likely or who are likely communicable and who can transmit the disease out of the community.
That enables us to create a safer environment, which keeps everybody healthier we've been quite successful doing that as of the time, we reported to LTC Oh, we have no cases of coated anywhere in our system among resonance in staff.
[noise] moving along I want to talk little bit now about some of our other infection control practices and then briefly about staff issues infection control practices, including stopping non essential visitors who coming in screening at the door taking.
Temperatures of all people some of the other things we did a included Stratifying our residents in terms of risk understanding their chronic conditions and monitoring those who are more susceptible to the disease more often.
As I mentioned before we cohort at residents and staff, which was probably one of the more effective measures we took.
He we had an adequate supply we spent a lot of money on it one of the more important things. We learned is that we had to train people in the use of pp and as we all know wearing them ask is is new to many of US it was to our residents and to our teams and training people and how to use them how to.
Put them on how long to keep them on how not to touch them and then doing compliance audits are all extremely important and a proper infection prevention.
In terms of Disinfecting, we went green, which is something that juniper has done a repeatedly over our 30 years, we used to non toxic disinfectant, which was a EPA and FDA approved and utilized bloggers to make sure that we did.
In fact at the whole building.
The other thing we did that I think was really important which you may not consider a direct infection control practice, but reconsidered and infection prevention practice is communication, we communicated early Austin and I believe transparently.
[noise] July 17, we had.
Communicated 1980 different times with all of our residents families and their powers of attorney as appropriate so communication for US has been critical and getting the support of our teams of our residents and our families I want to talk.
Briefly about staff issues, one of the things that really impact all about senior living providers is staffing if someone sick, obviously they need to be out of the building if someone's exposed to someone who sick they to need to lead and as I as such it meant that in several cases all of us.
Within a very short period of time, the staffing you needed was or your regular staff, we're no longer available in the same numbers they were before.
If you add to that fear.
Staffing has become difficult, particularly in hot spot.
The cost of that staffing has gone up.
As we've provided appreciation pay otherwise notice here, okay and that some people call with hazard pay as well.
In addition, personal protective equipment needs to be accessible, which we were able to do and used properly now what's the solution to the staffing gross.
Issues well for us it was to train all of our available associates to be universal workers to extend pay when people were sick sick or exposed to protect them and their families to provide appreciation pay particularly in areas, where we had covert positive resident.
Okay.
To provide additional incentives for people to shelter in place to essentially create a bubble around our.
Communities and lastly, we used our salespeople.
As recruiters and found this to be extremely effective in helping us fill empty positions while people were sick.
[noise] I want to talk to now that the second phase, which we call the pathway forward for US. The goal of this phase is to restore profitability, while keeping residents and associates healthy state and engaged.
Our approach has been to jumpstart move ins and implement what we call the five pillars, which in notable juniper fashion alliterative. So they are prevention people program place and packaging.
Prevention has to do with our testing strategy and infection prevention, including cleaning disinfecting and again cohort and people have to do with the schedules for associates their assignments again relating to cohort and different pay programs.
Programming in the pathway forward is about reopening dining restoring activities and.
Perhaps most importantly, establishing safe visitation for families.
In terms of place we work had been working on making sure. There are visible signs that we are beginning to return to normal while maintaining successful infection prevention and control strategies, and lastly, under packaging, which you might consider marketing and sales we focused.
On message and the delivery of that message in terms of driving sales moving forward I want to tell you a little bit about what we've done in the results to date.
In terms of our effort, we utilize a golden triangle approach, which includes the executive director the director of Wellness I'm, the director of sales and marketing those three people come together to focus their effort on outreach and in working together to.
Those sales we've re situated our sales offices, we've changed our two or protocols that moved our model suites to areas, which they can be easily accessed without going through other parts of the building.
We've created new messaging, we've trained for that and then Weve also demonstrated competency among the appropriate people. We've added additional sales support for target communities, who had significant reductions in census over the period, we put together tool kits for rapid move ins and we've instituted.
Every board.
What does is what did we achieved well in terms of digital leads which is major source of leads at this point in time. Our July 2020 digital leads are up 33% over April of 2020.
And our July 2020 digital leads are up 48% over July 2019th.
So we are seeing substantial growth and believe we have put in place some special campaigns and they are working.
We've started doing virtual tours, they're catching on.
Our communities are now able to do backstage tours as well as virtual tours and I'm proud to say that our July 2020 results, while not a where they were pretty cove. It we are seeing that census games and we're very happy about that.
Some of her operator pandemic, a imperatives that I think you need to know about is that we continue to screen for social isolation issues. Among our residents we have expanded tele health, where mental health care as well and we've continued to increase access to the internet and smart devices.
And just so you know we have done over 12000 virtual visits with family since the start of the pandemic. We've added a variety of different ways for people to meet with their health care providers online and have done over 1400 window visits.
What are the lessons learned well in terms of leadership vision and the ability to use data to set a pro active course has been extremely important I think a second lesson learned is that technology is extremely.
Useful and really critical in generating good data.
And communicating appropriately.
In times of crisis. Some of the technology that has been increased in its uses of course tele health. We've used a variety of ways to communicate with residence and families and we do use technology to support.
Activities, both social and fitness related some of you may have seen the joint effort between LTC and juniper to develop an industry accessible.
Virtual connections program, which is a provides a whole host of opportunities for people in our communities at varying levels of care and service need as well as in the community that's accessible via F. L virtual dot com and I think a LTC.
That I will say that there in my mind be a new model Oh.
Senior living as we move forward. It may not involved massive restructuring of what exists but it does involve an emphasis on safety on dedicated staff.
Looking at buildings in terms of small neighborhoods.
And increasing social engagement through a variety of ways of integrating what we do with the community at large.
In terms of phase three our new normal it to work in progress we're not there yet it will involve a variety of different things, including continued use of data of technology that is for data communications provider access digital marketing and resident engagement.
We will continue to integrate health services with other providers outside of our communities.
Our neighborhood designs.
Our very important, particularly for cohort again, keep beating people safe and giving families and prospective residents and understanding a visible understanding of how we manage during this type of pandemic.
There will be gated entry.
Where we take temperatures and we screen very tightly over who enters the building and of course cleaning and disinfecting has changed and needs to be visible.
So all of those things will be part of our new normal and I think that concludes my comments and I want to turn it back over to Wendy. Thank you.
Thank you and then Lynn will be available during during our Q a nice session. So you can ask her questions about juniper and healthy industry in general So we'll now open it up to.
Q in Asia.
We will now be can look question answer session. Please note that today's comments, including the question answer session include forward looking statements subject to risks and uncertainties that may cause actual results and events to differ materially.
These risks and uncertainties are detailed in LTC properties filings with the Securities and Exchange Commission from time to each of.
Including the company's most recent Tyratech dated December 31, 29 to LTC undertakes no obligation to revise or update these forward looking statements to reflect events or circumstances optimistic of this presentation.
If you'd like to ask your question. It a star then one.
So withdraw your question. Please press Star then too.
This time, we'll pause momentarily to assemble a roster.
Yeah.
Well first question will come from Daniel Bernstein with capital one. Please go ahead.
Hi, good morning.
Good morning, Dan can you hear me okay.
And just thinks win for all the the color commentary on the operations have a quick question for land and maybe.
LTC is well just in terms of how are you thinking about.
The margins for the business has been a lot of talk.
Maybe more expensive in permanently impaired I know you talked about it when staffing challenges during this but how how should we think about the margins just of the seniors housing business going forward can they come back where they.
Somewhat permanently impaired.
I do believe they can come back I think that for them to fully be restored it's going to take time for two reasons number one obviously, we've been impaired both either we have new costs related to keep and things like testing and additional staffing costs.
And the on the revenue side, obviously, our occupancy in many places not in all places has been.
Has been impacted but I do believe that one of two things will help us restore.
[noise] normalcy, if you will to margins and I think one of those obviously is a vaccine which is effective and utilized widely Ah I think the other frankly is rapid testing and I know our experience with testing has created a sense of safety.
Our staff and that also among prospective precedence so while there's a cost to that I do believe that cost will eventually be offset by the government and that margins I can return to normal, albeit I do believe it will take some time.
Okay.
I don't know, Phil when the or a quick or someone on that what you should see side has some thoughts on that.
In terms of margins and maybe how you're underwriting.
Assets or is it just too soon to.
Put a normal number on a number right.
Sure Dan. Thank you I didn't we think similar to ones perspective, it's gonna take time to normalize and what we said on our last call as you're looking at acquisitions right now, it's probably a little more challenging because in the interim.
Exactly sure without margin is gonna look like a well be focused and looking right now more on structured finance products.
But we think over time and he's a private pay businesses, there will be normalization of that and and there's going to be this increase in a sense of security in the environment as far as you know protocols staffing infection control testing I think thats going to increase the value perception of the business.
And I would I would echo wetlands set about safety I'd think the operators that are able to demonstrate a safe environment for seniors will recover quickly more quickly on the.
Side.
Okay.
In terms of senior lifestyle, I, just want to come I understand.
Yeah, obviously, you were unwinding the JV that was already known but.
I guess, we're taking a little bit if I was surprised by the.
Right down a bit of lease and just want to understand what warning signs worth there I know senior lifestyle. So much larger operator, and just your 23 properties. So just trying to understand.
How much.
The non payment is performance of the assets themselves versus broader struggles are senior lifestyle.
Dan This is client one thing we obviously, we're a little surprised as well we look back into April when this depend demick was just becoming in the midst of it.
And we did offer some deferred rent as we disclosed to senior lifestyle on that but also to disclose how renters was paid in May June and the trended up in July that timeframe. There was a back in may there's a uncertainty regarding securing P.P.O. staffing costs when he will pay so those.
Outsized expenses and again in that timeframe operators were trying to secure PV I'm not only for the next three days because when it gets much they could in the per unit cost associated with up you know substantial.
So when going back and looking at the financial statements during that timeframe, there's definitely a significant increase during the May and June timeframe scores you will pay NPV cost.
And Dan Senior lifestyle is eight a company that they believed and taking their counsel from their their legal advice is that they could not apply for government support in that program. So all of their.
Sure added cost got taken out of our rent most specifically so our smaller operators, who were able to get the benefit of support from the P. P. P program, we're able to absorb those costs without support senior lifestyle just on.
Fortunately was in the position that they were unable to get that support we do have an agreement with senior lifestyle. However that should that will support the fourth coming in the future and indeed, the industry is lobbying hard.
As I said in my comments.
Any support money they get would come to us to pay for back ramped we do have a security on our books for that the rent that's on paid and their rent is going up is as we indicated they paid 1.1 million for July so they're getting closer to their rent.
They had one property that they had to close totally because they had a major.
Flooding is your blood flooding issue and they do have insurance interruption policies. So you know we hope that we'll get that money back. So there were a lot of things that happened to senior lifestyle, just as a tsunami type of situation.
Okay. Okay.
And just one quick question you have 9.9 million from anthem, that's anticipated, but you have some language in the summer. Thank you.
Just kind of suggested that that number might not quite be there. So I just want to understand.
Kind of what the expected ramp might be.
In the second half to pay the full 9.9 in 2020, if that's the case, maybe what they paid in one Q2 Q.
Just just so I can understand.
It's got kind of maybe I should think about modeling that ramp.
Yeah that was just standard cautionary language around anthem, because as you know we haven't set stabilized rent for them, yet and we weren't prior to coverage. We were hopeful to do that at the end of this year setting that rent maybe pushed back depending on you know how how long the kobin situation last.
Currently we are projecting that they'll continue to pay as we as we have disclosed in the supplemental and give the approach. We took in studying rent with anthem. We didn't want to go into a situation where are they were falling backward. So we reset the rents based on.
Their projections in allowing we weren't sweeping all the cash flow. So we allowed in some cushion on that as well as there was ever growing occupancy.
Okay. Okay.
I'm sure about people behind me here, so I'll hop off than others ask questions. Thanks.
Yeah.
Our next question will come from color Silverstein with them Burke. Please go ahead.
Hi, everybody. Thank you for having me and thank you went for the comments earlier that was very helpful.
I'm curious about anthem here as a memory care, operator, primarily I was occupancy or admissions fared for this kind of care versus your assisted living portfolio.
[noise] like on its current.
Early on and the a pandemic anthem did some voluntary admissions bands just trying to get understanding all his Lin indicated earlier in her remarks in isolation among memory care residents can be more challenging. So we did see because of a self imposed mission ban on certain communities that occupancy.
And come down, but we've talked you see in an uptick I'm a little bit on that since they did they self imposed admission Ben and I would say anthem falls within the range about I provided in my prepared remarks as far as occupancy changes, so they're not outsized compared to others in the portfolio.
Okay. Thanks for that them back to senior lifestyle in the supplemental I think you're expecting about 900000 per month in risk going forward.
I'm wondering the event that you have to restructure the we if you find this would be a meaningful target and then you've got that you have to dispose of those properties. I know you mentioned that price discovery is a bit of a challenge right now, but I mean, how would you I would you address that situation what would what would be your strategy to dispose of them.
I'd be willing at all options right now regarding the senior lifestyle portfolio between you know looking a re tenanting building selling some so it's really going to be the process that falls out as far as what's the best option for us which may until some buildings remaining was in senior lifestyle, possibly so we're in a process of identifying potential par.
These are to come in and take over operations on certain building, but we're going looked at as a collective stride as you see what what provides the most a benefit for LTC and shareholders. You know part of the solution could be looking oh shorter duration leases on some buildings to where we provide maybe more of a rent assistance drilling.
A a limited time, where I knew operator can come in and implement changes.
And then we can assess that at that point in time to look at what rent would be on the stabilized spaces. You know this is something we did on to thrive buildings. A previously when we transitioned we did two year lease.
To give the operator runway to look at it so that may be a component of how we look to address retiring some of the buildings with senior lifestyle.
Okay, and then in a broad sense looking at rent coverage with and without the contribution from senior lifestyle I know your move them.
The footnote in the supplemental.
Could you provide any color of how this metric could look with one full quarter of impact from proven 19th.
Right now we have just the I'm the one quarter. So we've not that time front as evidenced by you know senior lifestyles cost of and the uncertainty would be and and but you will pay insulin at that time, it's a little bit hard doesn't use that as a trending mechanism.
Going forward. So I think looking about one quarter of coverage I think is a challenging metric to will go.
Yeah, and I think for the next couple of quarters.
On average is going to be that that the challenge and.
Wording is going to be to create or not create but I have it on the same basis across operators and some who got a government assistance and some who didn't and the different ways that operators might flow went through some light show at all at once and revenues.
Others might bring it in as you know matching increased expenses and decreased occupancy. So I am I'm not sure. If the next quarter of coverage is going to be as meaningful metric as perhaps it has been in the past.
Okay Fair enough and then last one from me wrapping a full together seems like you guys are sitting pretty comfortable on that payout ratio I mean, how does your calculus change for the dividend payout in the current environment or what would it make what would it take coverage reconsidering the current monthly payout.
So you know, we we've kind of targeted is 80% of fad and not that's conservative metric and I I think in today's environment. We're feeling very comfortable you know, having not conservatism, even assuming that decrease that and senior lifestyle rent. The 7.4, if you annualize.
But we're still have a 20 million dollar cushion to our current annualized dividend payout ratio. So we're comfortable with that we don't feel a need to make any adjustment.
Okay, right down and thank you very much.
Thank you Connor, we have time for one more question.
Our last question will come from too.
Consortium with Mizuho. Please go ahead.
Hi.
Good morning, everyone, just a little more onto your.
Good morning, everyone.
Well what was your lifestyle.
You guys.
It does.
For more right dispose going forward.
What are the.
Visit the kind of write off.
Hey are.
Cash when I think that so much flexibility in the world.
Yes.
Why was it just kind of sugar like where the deferral.
It really was a discussion with with the operator and what we want to do with that portfolio moving forward as to your questions. Why we didn't just grant deferrals in May and June versus delinquent rent. That's your question right tile.
Yeah, that's part of the course somebody there, but what's so unique about your lifestyle that.
Kind of just isn't rules meta where movers because rents but good.
Cross selling the assets worth it.
Budget, but where does right now is struggling because of the Goldman Sachs.
People are kind of working with all of them, Brian did anything like that.
For a minute this decision.
Our senior lifestyle as I can use that word.
Well I think one factor for consideration is that you know when do you made a comment in a pretty remarks about operator concentration and trying to manage that which outside of senior lifestyle and prestige, we've been able to accomplish that so.
Being proactive for the company in trying to utilize operative concentration as a risk component, we see being able to bring that concentration down as a positive for the company. We have not ruled out having senior lifestyle I'll stay in some of the buildings that remains an option, but we think reducing operator.
Concentration long term will be better for a company, where we don't have I'm trying to keep concentration for Kim below 10%.
Yes.
Is there any chance that lifestyle beanstock feel better <unk>.
Three months six months or no.
Tom all cash basis.
If.
You know contractual rent.
For them, well, if they'd be on cash basis or.
An extended period of time and tell you had confidence and the Collectability of future you know straight line rents in the future escalations, so but to the extent they were paying their contractual rent in cash that's what you would see reflected in a financial statement. So yeah, if they if their occupancy reflects.
Stabilized a contractual rent number then yeah, we could we would reflect that but we wouldn't.
The recording the future Escalations I think that's your question like starting to see right, but again I'm not that would take an extended period of time and you know collectability surety.
It's hard to believe fragile much higher now time I mean, as we know it's it's it's it's a much higher bar to get that certainty. So I wouldn't expect that you would see that for I mean I would.
At least a year or so you would need some good payment history.
<unk> to have that sure.
When the last one is for Lynn and Wendy.
Because the industry.
You had it sounds like not directly <unk> federal don't.
We need these two thing to ensure that Youre housing industry make it and then we'll do that she will remain key thing or messages, we would love to kinda good across.
<unk>.
A b C.
By the pulp.
This is Lee and I can take a first stab at that I think there are several things that I would put up the top of my last first is funding a funding for a number of things, but in my mind, one of the top priorities needs.
To be funding for rapid testing and access to that testing.
The second thing I would say is that we need to be prioritized for the vaccination when it is available.
And third I would point to liability protection.
I think that that's going to be a huge issue for the industry moving forward and that.
The fact that.
This disease.
Transpired in the way that it did before anyone was really aware of.
How it was transmitted and how it could be controlled with certainly beyond.
Many people's ability to control and that includes us.
Yes, I would agree with <unk> with Lynn on what is needed definitely early and accurate and short returns on the testing.
And as Ed Flynn said, we need more support from the government relative to the cost of that testing and I I believe also up the industry.
Not just the industry, but but the world needs some protection against the litigation because we can serve we can survive. This we can get back to to profitability and places lawyers can take us down.
For for instances that.
Nobody could have expected and nobody could have protected against and I think the litigation.
Proposals are not too.
Eliminate people, who have absolutely done the wrong thing it's up it's much more to protect people that they just didnt have the ability to predict this type of pandemic.
And that's why the.
I political statement for the [laughter].
Appreciate it Wendy funding access some protection, that's what we need funding acts writing protection.
There you go.
Well. Thank you all for attending and listening to us and I look forward to talking to after the third quarter.
And the stay well and stay safe. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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